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McCain Still Does Not Understand the Economy |
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WASHINGTON (By Daniel Gross, Newsweek)
September 30, 2008
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It is clear the Wall Street chaos is
poison for John McCain whose poll
numbers have eroded throughout September
as the financial crisis picked up pace.
Sen. John McCain, who interrupted his
campaign to deal with the crisis,
claimed — via his surrogates — that he
wielded great influence in improving the
deal and making it palatable. Then he
left town as it collapsed. The
volatility in the markets doesn't seem
to be doing much for the more volatile
John McCain in the race.
Every time the market falls a few
hundred points, Obama seems to pick up
support. On Intrade, where the price of
McCain's presidential contracts have
slipped to their lowest levels in
months, traders now give Obama a 60
percent chance of winning.
Obviously, Republicans were motivated in
no small part by political calculations
— short- and long-term. But it's really
hard to figure out what those
calculations might be. Yes, incumbents
of both parties — especially those
incumbents facing tough re-election
campaigns — don't want to be on the hook
for this vote. But consider the big
picture: Despite all the hemming and
hawing, investors and analysts seem to
think there will eventually be a deal —
because there has to be. So, let's say
that the House Republicans manage to
draw out the process for a few more
works. Maybe the final deal will be less
costly to taxpayers — say, $300 billion
instead of $700 billion. And maybe they
will succeed in stripping some of the
measures that corporate America and Wall
Street find abhorrent (like limits on
executive pay). Even in that best-case
scenario, is there any reason to think
that GOP politicians will be rewarded
for their intransigence?
The bill could have passed if more
Democrats had voted for it. But Speaker
Nancy Pelosi and co. were able to bring
along 60 percent of their caucus. Why
did so many House Republicans bail? Some
say it's because Pelosi hurt their
feelings by pointing out that
Republicans were in charge when things
went to hell. It also could be that a
lot of them got religious on fiscal
matters. Of course, having
approved an expansion of Medicare,
massive increases in all sorts of
spending, and huge tax cuts that led to
the addition of trillions of dollars in
public debt, this is a strange moment to
stand on principle.
Maybe we don't need much of a
private-sector financial system after
all. That's the conclusion that most
House Republicans, and a minority of
House Democrats, seem to have reached in
voting down the $700 billion bailout
bill on Monday. Maybe it's best that, in
a few weeks, there will be essentially
two large banks left in the country,
JPMorgan Chase and Citigroup. After all
it has done, perhaps that's what the
financial sector deserves.
Was the bailout bill killed by malice or
by incompetence? It's hard to argue
against incompetence, since it has been
so rampant, especially on the Republican
side of things in Washington. The
congressional leadership and the White
House clearly lacked the heft — or the
energy — to whip recalcitrant members
into line. "I don't understand why
President Bush didn't go to members of
his party and say vote on this," Maria
Bartiromo wondered on CNBC Monday
afternoon.
In the meantime, the chaos they've
created by coming to the table and then
throwing a fit works to their
disadvantage. Each time a deal is close
to done and then gets scuppered, the
market and its many participants freaks
out. Huge quantities of wealth are
destroyed. The markets fell about 8
percent after today's stunt, likely
wiping out close to $1 trillion in
wealth. In so doing, they're turning off
whatever base the party had left on Wall
Street and likely closing off a huge
source of campaign cash. Asked for his
evaluation of what took place today,
Lawrence Fink, the CEO of asset
management giant Blackrock, said: "Major
disappointment came from the Republican
side." A Republican congressman who
shows up for a fundraiser in Manhattan
this week is likely to get tarred and
feathered. In some congressional races,
I suppose financial dislocation and bank
failures could plausibly be good news
for Republican challengers — but only if
the challengers can pin them on the
incumbent Democrats.
Finally, I've found a lot of the
analogies between the present situation
and the Great Depression to be way off.
But there's one area in which the
analogy might hold true. Just as
happened in 1932, it's possible that the
Republicans' incompetence and
bullheadedness in managing a financial
crisis could lead to Democrats
controlling both the White House and
Congress.
