Monday, August 04, 2008

Re-cess-sion - Presidential Campaign Redux

Okay. Some off-the-cuff thoughts.

So we all know the economy is in the tubes. We covered earlier what that might mean for lawyers, and to see how big-law is being affected, one need look no further than ATL's coverage. And there's been the endless litany of press coverage. But what about the Presidential campaign.

Talking earlier about the implications of the now full-blown recession for the campaign trail - indicating that it *should*, in theory, be both the critical issue and provide a huge boost for Barack Obama, seeing as John McCain's plan for the economy sits somewhere between non-existent and non-nonsensical.

Paul Krugman, in his column today, examined this:

Incidentally, it’s surprising that the lousy economy hasn’t yet had more impact on the campaign. Mr. McCain essentially proposes continuing the policies of a president whose approval rating on economics is only 20 percent. So why isn’t Mr. Obama further ahead in the polls?

One answer may be that Mr. Obama, perhaps inhibited by his desire to transcend partisanship (and avoid praising the last Democratic president?), has been surprisingly diffident about attacking the Bush economic record. An illustration: if you go to the official Obama Web site and click on the economic issues page, what you see first isn’t a call for change — what you see is a long quote from the candidate extolling the wonders of the free market, which could just as easily have come from a speech by President Bush.

The "free market" is nothing more than a massive joke on feeble-minded libertarians and free market ideologues when it comes to the current recession. Consider a brief, simplified version of the mortgage-backed security crisis that partially explains the current fix. Companies took advantage of lax/non-existent regulations in the housing industry to get the sub-prime ball rolling. If the regulations ("restrictions on private ordering" if you will) were stricter, the predatory sub-primers don't get off the ground, period.

Anyway, the companies make this risky investment and enjoy the profits for a while, until the whole thing explodes, and they lose all their money - - - so the system works - - - except that it doesn't, really, because these companies - "quasi public" insitutitions as Krugman puts it - get bailed out by the Federal government, kind of like what happened with the savings and loan industry. Point: In this 21st century situation, there is no option of a "free market" economy (unless your suggesting that Bear Sterns / Freddie Mac/ Fannie Mae shouldn't get the bailout), there's only the option of regulating things beforehand or after they goto shit. All Obama needs to do is point out how the Bush administration - (with whom McCain has virtually identical views on the economy) encourage the lax regulation that helped start this mess in the first place. But, (see above) he doesn't really.

We get the feeling that what's happened is that a lot of this talk is getting obfuscated by McCain's promise to be a true fiscal conservative. Balderdash. A Republican preaching "fiscally conservativism" is like a street whore preaching abstinence (which R's also wrong-headedly advocate). Somehow, everyone has forgotten how this three-trillion-dollar war which Bush and McCain started took the Clinton surplus and turned it into a huge deficit.

Obama needs to dig in on this issue. In addition to higher taxes on the wealthy to fund a rebuilding of our national infrastructure, he needs to make tighter economic regulation of . When the debates come, it's time to ridicule McCain's (lack of) knowledge of economics (and numerous other subjects, such as foreign policy and computers).

Previous coverage:

Oh Noes! A Recession, Or, A Time for Someone Who "Doesn't Understand" Economics?
The Recession and You (Law Weekly)


FFJ said...

If individuals took more responsibility for their own decisions and didn't sign loans they had no chance of being able to repay over the longterm this crisis would not have happened either.

Rule 12 (f) said...

Yea, blame the victims of predatory lending. You can't expect people without much education or access to sound financial advice to understand the terms of a complicated mortgage. Blame the lenders and profiteers, not the plebs.