Politics, Government & Public Policy: September 2008 Archives

GovTrack has a very cool map of Congressmen who voted "nay" on the bailout, projected so that all districts are equal in size.

A very even mix of red and blue, Central and Coastal.

The Corner quotes sources from Congressional offices who say that a huge majority of constituent letters are against the bailout.

Despite the announcement on Sunday that a bailout deal had been reached, I was pleased to see yesterday that the deal fell through. Good. The markets were down because people realized that the government wasn't about to pay $1 for assets that are probably only worth 50 cents. That's bad for the people who own those assets, but good for the taxpayers who were about to buy them at inflated prices.

Harvard professor Jeffrey A. Miron has written the best prescription that I've seen so far: the solution is bankruptcy, not bailout. I've been saying the exact same thing for weeks. Maybe I should be an economics professor?

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

Just go read the whole thing. It's concise and exactly right on every point.

I think perhaps Barack Obama doesn't understand what the idiom means: "dying in vain".

Overall I thought Friday's debate was rather milquetoast. Both did fine, and neither had any major embarrassments. I agree with McCain's positions far more than Obama's, and I think he elucidated them well. I felt like Obama was deceptive and was trying his best to appear far more moderate than he actually is.

But anyway, "dying in vain". After they both whipped out their bracelets from mothers-of-fallen-soldiers Obama said this:

Sen. Obama responded saying, "I've got a bracelet, too, from Sergeant - from the mother of Sergeant Ryan David Jopek, given to me in Green Bay. She asked me, 'Can you please make sure another mother is not going through what I'm going through?' No U.S. soldier ever dies in vain because they're carrying out the missions of their commander in chief. And we honor all the service that they've provided. Our troops have performed brilliantly. The question is for the next president: 'Are we making good judgments about how to keep America safe? Precisely because sending our military into battle is such an enormous step."

If I were McCain, I would have jumped in and said something like this:

"Senator Obama, you just said that none of our solders has died in vain. If you don't think their deaths were in vain, then that means you think our men and women have sacrificed their lives for some good and noble cause. You think their deaths have accomplished something of immense value for our country. Would you please explain what you think that is? What have our soldiers accomplished that makes their deaths worthwhile?"

That question would have won McCain the presidency on the spot.

Once again our government finds a way to screw over people who acted wisely and followed the rules, reaching into our pockets to hand our money over to fools who borrowed or lent more than they should have.

Congressional leaders and the Bush administration reached a tentative deal early Sunday on a landmark bailout of imperiled financial markets whose collapse could plunge the nation into a deep recession. ...

The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price. ...

To help struggling homeowners, the plan would require the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes.

So taxpayers, responsible homeowners, and people who were sitting out the bubble because they knew prices were too high get screwed.

The government buys up the bad loans and sells them cheaper than the banks were willing to, thereby transferring wealth to these failing companies to prop them up. Does anyone honestly believe that we're going to make a profit from these loans or the equity stake we get in these companies? Please. That's ridiculous. The loans are probably worth fifty cents on the dollar, so there's a lot of ground to make up before there's any profit.

Not only that, but people who bought houses they couldn't afford will now get their mortgages "renegotiated", so there's some free money for them, too. People who bought houses they could afford have to shell out money to help the idiots. Again.

My family works hard, lives frugally, any we deny ourselves many immediate pleasures to provide for our financial security. And the government just spits in our faces.

Way at the end of this excellent Politico article about the political logjam over the financial logjam is a nugget of good news that I haven't read anywhere else.

The cost debate illustrates just how nuanced the massive intervention will be. Paulson has often stumbled this week when trying to describe its intent, and the clearest voice has been Bernanke, a former college professor who casts the whole effort as an unprecedented experiment in “price discovery” that will add not just capital but also precious knowledge to jump-start the credit markets.

With the bursting of the U.S. housing bubble, mortgage-related securities are caught in a vicious downward cycle, commanding only “fire sale” prices, Bernanke says. The government purchases, through a series of novel auction mechanisms, will help the market value these assets, he says. And this could be the spark needed to get markets working and the economy’s engine turning over again.

This explanation is very different from the “bailout” imagery that surrounds the debate. And the great challenge for both sides has been to find some path in between these two poles — able to satisfy the anger voters feel toward Wall Street but also leaving enough room for Bernanke’s experiment to function.

"Bailout" makes me cringe, but I'd really like to learn more about this auction experiment. Reading these few paragraphs makes me much more optimistic. Why aren't the details of the plan being reported accurately?

With Alcee Hastings in the news again for attempting to rally blacks and Jews against Sarah Palin with some offensive rhetoric, it's worth remembering this Congressman's history.

ABC News' Teddy Davis Reports: Florida Democratic Congressman Alcee Hastings pointed to Sarah Palin on Wednesday to rally Jews to Obama.

"If Sarah Palin isn’t enough of a reason for you to get over whatever your problem is with Barack Obama, then you damn well had better pay attention," said Hastings. "Anybody toting guns and stripping moose don’t care too much about what they do with Jews and blacks. So, you just think this through."

Is Hastings comparing Jews and blacks to mooses? (Meese?) You decide for yourself what the heck he means.

While you're pondering it, don't forget that Hastings used to be a federal judge until he was impeached for bribery and perjury by a Democrat-controlled Congress. Yeah, and then the Democrats decided to put him in Congress (and on the House Permanent Select Committee on Intelligence!). Is it any surprise that Congress is a continual embarrassment to our country?

Bryan Wildenthal has the best proposal I've seen yet for federal intervention in the ongoing mortgage crisis. If there must be intervention, why not use taxpayer money to bail out homeowners instead of investment banks?

So, instead of the massive moral hazard -- and general unseemliness -- of putting taxpayer money on the line to bail out Wall Street banks and brokers at the top end of the pyramid, why not aim at the broad BASE of the pyramid?

The money is there. I mean really, isn't it funny how when political leaders and powerful interests like Wall Street REALLY need cash, they somehow find a way to pull it out of the federal government's [ahem]?
To put it more politely: They just stick taxpayers with the bill. ...

America's population is about 300 million. Divide by 4 (typical household size) and you get maybe 75 million households. Even that doubtless overstates the number of owner-occupied homes covered by bank mortgages, with a value less than, say, $1 million or so (we should exclude the very wealthy -- if the $5 million La Jolla mansion is about to be foreclosed, I say tough luck -- John McCain, of course, would make $5 million the cutoff, having suggested that anyone under that is middle class -- whatever). And remember, you have to exclude the homeless, renters, nursing home residents, all the dependents who live in each mortgaged home, etc.

So, maybe 50 million owner-occupied homes, of middle-class or lower value, with mortgages? Close enough for government work.

Divide $1 trillion by 50 million and you get $20,000 -- not to be sneezed at! Over two years, that could cut almost $1,000 off every single monthly mortgage check in America! That amount of mortgage relief targeted directly at the millions of American taxpayers and homeowners of middle incomes and modest means would be an ENORMOUS shot in the arm to the economy (dwarfing the piddly recent "economic stimulus" checks). And it SHOULD mostly solve a crisis supposedly rooted in overextended mortgage lending, and securities built shakily on same.

I like the idea because I'm a homeowner/taxpayer that didn't borrow more than I could afford to pay. Why should I have to bail out idiots who lost their risky gambles without getting anything for myself? Plus, it makes more sense to feed the money into the bottom of the system rather than the top.

Todd Zywicki, one of my favorite economists, has written a damning indictment of Congress. It makes me squirm.

One interesting aspect of the recent government bailouts has been the complete irrelevance of Congress. The operation and decision-making seems to be run almost entirely by the Secretary of Treasury and Federal Reserve. Congress appears to lack the ability, the will, and the decisiveness to play any role except spectator, as a handful of senior executive branch officials have nationalized major portions of Wall Street.

What is further interesting is that Congress is not missed in the slightest. No one is clamoring for a greater role for our elected representatives in dealing with these problems. I haven't heard anyone saying, "We really need to get Congress more involved in this. They'll know what to do." ...

Put more generally, Congress's ridiculousness has increasingly caused it to forfeit its status a co-equal branch of government. 40 or 50 years ago it might have been plausible to imagine Congress addressing important public policy issues like entitlement reform or health care reform (I'm not saying they would have done it, but it seems like it was more plausible then). Serious people were in the Senate then--Taft, Johnson, etc. Today, however, the idea that serious solutions to pressing social problems might originate in Congress is hard to suggest with a straight face.

Also fascinating: the People know that Congress is useless... that's why the branch's approval ratings are in the single digits. Zywicki doesn't suggest a way to fix it, but I think a good place to start would be to repeal the 17th Amendment.

(HT: Instapundit.)

Michelle Malkin quotes a correspondent who explains the technical details behind the "hacking" of Sarah Palin's Yahoo email account. I think it's fascinating that the political crowd is now technically sophisticated enough to be interested in such an explanation.

I don't know where it will close, but this is the first time I've seen Intrade bettors give McCain a greater than 50% chance of winning the Presidency.

Tom Spaulding has the best take on the Obama-pigs-lipstick scandal.

Obama poked fun of McCain and Palin's new "change" mantra.

"You can put lipstick on a pig," he said as the crowd cheered. "It's still a pig."

"You can wrap an old fish in a piece of paper called change. It's still gonna stink."

"We've had enough of the same old thing."

... BTW, If McCain had characterized Obama's secretiveness regarding Ayers and Wright as "Trying to get the fried chicken recipe from Colonel Sanders", or described Obama's Marxist environmental programs as "Like watermelons...Green on the outside, Red on the inside", would that be simply using a "turn of the phrase" and would McCain not be attacked by libs?

But I think the McCain camp could have handled this smarter by not asking for an apology. Why not say something like "If Obama wants to call Sarah Palin a pig in lipstick then that's up to him. We don't think that's the kind of change that voters are looking for."

And David Harsanyi knows what pisses me off:

The feds will rescue anyone, it seems, except those suckers who dutifully mail their mortgage checks in on time every month.

I go to work every day, whether I feel like it or not. I paid my way through school. I take care of my own problems. Stupid me.

These reliable citizens, in fact, soon will be propping up the for-profit businesses of Fannie Mae and Freddie Mac (not to mention Bear Stearns) in the de facto nationalization of a huge chunk of the mortgage industry.

Stockholders of Fannie and Freddie, for decades, have profited from an implicit taxpayer guarantee on their business, while pretending that such a pledge didn't exist.

Well, it does. We know this because as a reward for a feeble job done, executives may walk away with $15 million in severance pay.

You? The bailout allegedly will cost taxpayers approximately $200 billion. And, as you know, federal projections are always on target.

I say: screw them. Let Fannie Mae and Freddie Mac collapse. Would the bottom fall out of the economy? Good. We'd recover in a few years, and we'd be wiser for it. What's more, the people who made such dumb decisions would never be trusted with anyone else's money again.

Instead, the government grabs a shovel and scoops money from my pocket and gives it to idiots.

The Left has completely lost it. Stick a fork in 'em.

Why is Obama sinking in the polls? Because the media is biased towards Republicans.

So what is this house advantage the Republicans have? It's the press. There is no more fourth estate. Wait, hold on...I'm not going down some esoteric path with theories on the deregulation of the media and corporate bias and CNN versus Fox...I mean it: there is no more functioning press in this country. And without a real press the corporate and religious Republicans can lie all they want and get away with it. And that's the 51% advantage. ...

But most importantly we should bring up re-regulating the media and who owns it and what that conflict of interest is a lot more. By pretending there's no conflict of interest we're failing to alert the public that they're being lied to or given a looking at a coin at the bottom of a pool slanted truth. Every time a pundit or elected official is on any TV news program it should be a polite formality to mention that GE has made such and such billions off the war in Iraq by selling arms or that Murdoch is a right-wing activist with a clear stake in who wins and who taxes his profits the least. Disney, GE, Viacom, and Murdoch -- all want profits and the candidate and agenda that will get in their way the least.

I mean, seriously. Seriously. There are people on the Left who actually believe that the media is biased in favor of Republicans.

That's insane enough, but just in case you aren't yet convinced we're in Bizarro-world don't miss the fact that self-described "liberals" see only one solution to this perceived bias: clamp down on free speech!

It's kinda sad, like watching a possum twitch after it's hit by a car. I can only hope that the remaining fragments of the Democrat party can regroup after November and come back in a few years with a newly rational political philosophy that doesn't depend on the lunatics that are their current base.

(HT: Gateway Pundit.)

VDH is right on the money! Good grief, please, stop nominating lawyers!

In the Democratic primary, winner Obama, runner-up Hillary Clinton and third-place finisher John Edwards were all lawyers. In 2004, both Democratic nominees, John Kerry and Edwards, were lawyers. Al Gore, who ran in 2000, left law school without a degree and went into politics. His running mate, Joe Lieberman, was a Yale-trained lawyer. Mike Dukakis, the 1988 Democratic presidential nominee, was a Harvard-trained lawyer and ran with lawyer Lloyd Bentsen.

In fact, every Democratic presidential nominee for president and vice president in the last seven elections -- except Gore who dropped out of law school to run for Congress -- has been a lawyer. ...

So, what's wrong with the Democratic nominee once again being a lawyer? After all, legal minds are trained to think precisely and evaluate both sides of an issue.

The problem is that lawyers usually do not run companies, defend the country, lead people, build things, grow food or create capital.

If this year Democrats were looking for populist candidates from diverse backgrounds and training who talked and thought differently from those of the past, then why didn't they nominate someone who was not trained in writing legalese and working the government legal labyrinth?

Lawyers are great when they're needed, but at this point they certainly don't bring a "fresh perspective" to Washington! The District of Columbia (277 lawyers per 10k residents) has almost 15 times as many lawyers per capita as New York, the most-lawyered state (20 lawyers per resident).

So yeah, skin color and genitalia are one dimension of diversity, but maybe it's time to think outside the lawyer-box. I guess when your only goal is to run for office so you can boss people around fix our broken country, it's hard to imagine any other path.

Until McCain's selection of Palin I didn't think the 2008 presidential elections could get even more fun and exciting, but man, I was wrong! Even aside from the strong possibility of a Republican victory in November, this election season has been hands-down the most entertaining, fascinating, and brilliant that I can remember. That said, here's my recollection of past elections -- straight from my probably-faulty memory.

1988: I have a vague memory of seeing Dukakis in a tank, but my most vivid recollection is of a joke: Don't park your Bentson under a Bush or Quayle might Dukakis on it. This was the height of comedy for a politically engaged 10-year-old.

1992: I was completely shocked that Bill Clinton was able to defeat Bush the Elder, and even as I watch the results on election night I was sure that somehow whatever mistakes had been made would be rectified by morning. I mean, c'mon, Bush had just won a wildly popular war! I don't remember thinking about the breakage of "read my lips, no new taxes" at the time.

1996: I seriously thought Dole could win, but by about a month before the election I knew he wouldn't. Pretty boring election season. I remember liking Kemp as Dole's running mate, but now I don't know why. I also remember thinking that Dole's experience as a ski trooper made me think of James Bond, and that Dole should have been given more acclaim for that, because it was awesome.

2000: I never thought Gore had a chance. I really liked George W. Bush in 2000, and I was excited to vote for him. Al Gore was a robot, and I knew people were sick of Clinton and the Democrats.

2004: Howard Dean was amusing, but the election season was otherwise pretty boring. Bush cruised to victory once Kerry was nominated.

2008: The. Best. Ever. I wasn't excited about McCain or any of the other Republican prospects until Palin came on the scene. Now it's fair to say that I'm "energized".

Once she got into it, Sarah Palin's speech was fantastic. She was funny without being catty, and strong without being screechy -- the anti-Hillary. There were several great lines in her speech, particularly the bit about how being a mayor is kinda like being a "community organizer" but with actual responsibilities, and she delivered her lines with confidence and power. I was grinning the whole time.

Hillary must be losing sleep over the possibility of running against Sarah Palin in 2012....

Additionally, Rudy Giuliani set her up brilliantly. His speech was spot-on, and it was evident that he was having a lot of fun with the crowd. Nice job, Rudy. Putting "America's Mayor" on right before Palin was a stroke of genius.

Half the time when I read one of Spengler's articles I think he's taken a good idea too far to be actually correct, but oftentimes he turns out to be right anyway. Here he argues that Barack Obama's insecurity has lost him the election.

Obama will spend the rest of his life wondering why he rejected the obvious road to victory, that is, choosing Hillary Clinton as his vice presidential nominee. However reluctantly, Clinton would have had to accept. McCain's choice of vice presidential candidate made obvious after the fact what the party professionals felt in their fingertips at the stadium extravaganza yesterday: rejecting Clinton in favor of the colorless, unpopular, tangle-tongued Washington perennial Joe Biden was a statement of weakness. McCain's selection was a statement of strength. America's voters will forgive many things in a politician, including sexual misconduct, but they will not forgive weakness.

That is why McCain will win in November, and by a landslide, barring some unforeseen event. Obama is the most talented and persuasive politician of his generation, the intellectual superior of all his competitors, but a fatally insecure personality. American voters are not intellectual, but they are shrewd, like animals. They can smell insecurity, and the convention stank of it. Obama's prospective defeat is entirely of its own making. No one is more surprised than Republican strategists, who were convinced just weeks ago that a weakening economy ensured a Democratic victory.

Spengler attributes the decision to deny Hillary the VP slot to Michelle Obama's hatred for the former First Lady -- a hatred Barack Obama could not resist given his own insecurity and his devotion to his wife. Perhaps. And perhaps the choice of Biden will indirectly cost Obama the election. We'll have to wait and see.

But, as always, Spengler's perspective is worth reading and pondering.

Along the same lines, Obama wouldn't go on Fox News because he was afraid of "unfair" coverage.

At a secret meeting with Barack Obama three months ago, Fox News Chairman Roger Ailes says, he tried to clear the air with the Democratic senator by saying that his organization was determined to be fair but would not be "in the tank" for Obama's campaign.

During the sit-down in a Waldorf-Astoria hotel suite in Manhattan that included Rupert Murdoch, the network's owner, Obama expressed concern about the way Fox was covering him. "I just wanted to know if I'm going to get a fair shake from Fox News Channel," Ailes recalled him saying.

"Senator, you're the one who boycotted us," Ailes says he replied. "We're not the ones who boycotted you. Nor did we retaliate for your boycott."

If Obama gets elected maybe he can carry around a giant hanky just in case Ahmadinejad or Putin is unfair to him.

(HT: Kiddington Oh! and JW.)

I wrote my concerns about Sarah Palin as McCain's VP candidate earlier, but it's going to take a few weeks for the public to really get a feel for her as a person. Excitement is running high right now, but will the experience issue sink her like it failed to do for Barack Obama? We'll have to wait and see.

I believe that Kleinheider is correct in asserting that the Left doesn't understand the Christian conservative mind and is aggressively playing a losing hand by focusing attention on the unborn child of Palin's unmarried 17-year-old daughter (Bristol).

The Left will fight this battle as a political debate. They will argue that Bristol Palin proves their assertions about traditionalism. They will lay it out point by point. The evidence will be solid. And their case will make sense — in theory.

But this is not theory, and to a certain extent its not even politics, this is life. Steve Schmidt is not wrong when in reaction to the news he says, “Life happens.”

Life does happen. It happens again and again to people in rural America who go to church, work and pray hard. Everyday life happens. Despite their prayers, it happens.

The Left simply misunderstands the Cultural War because they believe that social and religious conservatives think they are perfect people. Rural, working class people know exactly who they are. The Left seems to think that they are somehow breaking the news to social conservatives that sometimes, even often, kids will have sex and get pregnant. Social conservatives know these things. They are not as divorced from reality as they sometimes get painted. ...

Conservatives know they are imperfect. Instead of embracing the imperfection and “giving up” they instead prefer to strive for something better.

The Left essentially "gives up" on morality by refusing to affirm standards that cannot be met. That's a critical difference between Christians and secular people. Rabid secularists crow when they catch a Christian in "hypocrisy" -- that is, failing to live up to the standards we espouse -- but they fail to comprehend that one of the core principles of Christianity is the certainty that we will fail. All of us. Frequently. But rather than doing what secularists do and lowering the bar so we can jump it more easily, we reaffirm the high standards and trust in God to help us leap higher next time.

As for the attitude towards Governor Palin, the early comments on this TalkLeft post asking when she'll drop out are fascinating. TalkLeft is a leftwing site with a primarily leftist readership, yet the first several responses to this post are incredibly supportive of Palin. Here are a few excerpts responding to the question "when will Sarah Palin drop out?":

I'm kinda thinking that she doesn't

I agree: not gonna happen

agreed- she will end up being a net plus

and all of the attacks on her and her family by the left are going to backfire. I am a liberal Dem and I am astonished that anyone is playing the experience card, when we have just nominatd the most inexperieced prez. candidate in 150 years. i can see the commercials alreay.

Right! Because even if Palin has far right views - she is REAL. And there is a HUGE shortage of real in politics today. And she has accomplished things, she has a lovely family - especially with the problems (because every family has problems), and she is strong. Obama isn't strong. He doesn't have passionate views on things. What are his opinions on things? Who knows? (Please don't tell me to go to his website to find out!) Neither does Biden or even McCain have stong opinions. They have been in Washington too long. Palin knows who she is. You may not agree, but she believes - and you have to respect that. Her views are not political, they are her life.

Palin won't ever drop out if Obama keeps this up..

Obama didn'd do himself any favors here.

Obama smiled and said Palin's town of Wasilia, Alaska had 50 employees. His campaign has 2500. The town's budget is about $12 million a year. His budget is 3 times that per month.

This is a level of excess which a seasoned politician, with any common sense, would keep to himself. But Obama sits there, and witlessly touts his CAMPAIGN'S superior manpower and financial prowess in relation to a small TOWN.

This episode of utterly tone-deaf braggadocio will, no doubt, end up in a GOP attack ad. Obama just doesn't get it.

And so on. It's quite amazing. Is the public impression of Palin already solidifying into "new and exciting" rather than "inexperienced token female"? If so, the elites in the media and both parties haven't gotten the memo yet.