Democracy Takes its Lumps

Democracy’s reputation has taken quite a beating over the past eight years. It began with the chaotic situation in Florida in 2000. What happens in a democracy when an election ends up tied? I suppose our way of sorting it all out could have been much worse—think Kenya after the tie in their elections. Still, the breakdown in Florida opened the door for Putin to claim that Bush had no business lecturing him about democracy when the 2000 election was decided by the Supreme Court.

Following his tainted victory, Bush then proceeded to lay bare the underlying fragility of our democratic system during war time, as our elected officials abdicated their responsibility and silently rubber-stamped Bush’s “imperial presidency” agenda. Americans found themselves in the strange position of watching their beloved democracy invade another country without provocation and torture its prisoners, bringing into question the ability of our system to push back against power-hungry leaders.

And now the failure of the financial rescue package in the House of Representatives has revealed yet another weakness of our democratic system, which is strangely opposite from the previous problem of Bush’s “imperial presidency.” This weakness I’ll call the “vacuum presidency,” combined with a healthy dose of “the tyranny of the uninformed majority.” When there is no leadership at the top (in this case because of Bush’s lame duck status combined with rock bottom approval ratings), then the power of government really does shift to “the people.” Congressmen who are worried about re-election don’t have the political cover they need to make unpopular decisions. They must, therefore, bow to the will of the majority of their constituents, who in this case are not well-informed enough to understand the consequences of passing or not passing the $700 billion “bailout” bill. The problem here is not, as many of us “elites” like to lament, the “ignorance of the electorate.” This ignorance is to be expected, especially considering the complexity of our current crisis. That expected ignorance is why we elect politicians in the first place—so they can represent us and make the tough decisions that need to be a made, based on what is best for the country. But with a Bush presidency power vacuum, Congress cannot think of “country first,” only “re-election first.”

So now we have a situation in which a group of ideological free-market zealots have teamed up with a group of lawmakers from both parties worried about re-election to kill a much-needed bill that is fundamentally misunderstood by the public. This bill is not a “bailout.” The government is buying assets that have the potential to increase in value. Congress is not writing a $700 billion check to Wall St. The degree to which the $700 billion ends up being a bailout depends upon the price the government pays for these assets.

As I listened to the press conference before the bill came to a vote on the floor of the House, I felt extremely proud to be represented by Nancy Pelosi, Barney Frank, Christopher Dodd, and Harry Reid. All four of these Democratic Party leaders are supremely intelligent and patriotic Americans. For the first time in a long while I thought to myself: “if this bill is good enough for these fine leaders, then it is certainly good enough for me.” It is a shame that more Americans don’t feel that way about those who govern our country. There are plenty of blameworthy explanations for this lack of faith in our leaders: corruption in government, partisan gridlock, Bush Administration incompetence, and a culture of distrust of “elites” and “intellectuals.” Whatever the cause, our democracy took another hit this week.

I wouldn’t be surprised if “illiberal democracies” such as China and Russia continued their resurgence—not only in terms of their relative power in the world, but also in terms of the reputation of their authoritarian brand of government, as our brand of democracy, in the eyes of the rest of the world, becomes more suspect by the day.

There's Still Hope For Florida

I was so not a fan of Sarah Silverman...until now.

http://thegreatschlep.com/site/index.html

I have a suggestion

Come Wednesday, it's going to matter a lot more who is the Treasury Secretary, so it's a question we should be asking about McCain and Obama - who would they appoint? Krugman points out this morning that McCain's frontrunner is Gramm (though you have to wonder about how likely that is now, given how controversial he would be and what a record he has of opposing regulation). But who would Obama pick?

I'd like to throw Jon Corzine's hat in the ring. He's clearly qualified and capable, and it seems like a good idea to give unlimited omnipotent power to someone who is used to being democratically accountable.

Milestone

A nice benchmark today: Gallup, Rassmussen, and Research 2000 all have Obama at 50%. We haven't seen that at any point so far. I haven't gone over the rules recently, but I think that's the number you generally need to get to to win in a majority-rules system.

Debate Reaction

McCain did much better than I expected. He had some good emotional moments, particularly the whole bracelet moment. More importantly, he kept focusing on ways in which he disagreed with Bush. This will make it harder for Obama to effectively carry out his main plan of attack--that McCain is 4 more years of Bush.

For Obama, he clearly knew his stuff and delivered his ideas well. I think we will have to try to make a greater emotional connection with voters next time around. Less "cerebral," as they say.

All in all, I don't think the first debate changes much. I had hoped that McCain would stumble, but he didn't. Palin, however, could very well deliver an embarrassing performance. We'll find out next Thursday...

A debate that wasn't about 25% of the federal budget

This is all just too much all at once! If John McCain can’t pay attention to the politics and the policy at the same time, how can the rest of us?

I was very disappointed with both candidates tonight with respect to what they would do about the financial crisis. I’ve been trying – and failing – to get a post up on just exactly what is going on. For now, this is the best I've found.

I do think, though, that there are at least two of no-brainers:

1) No one – or almost anyone – is going to jail over this. But if you want to look for wrongdoing, it appears that you can find it at the ratings agencies. Like everything else about this crisis, it’s complex, but the ratings agencies had the wrong incentives if they were calling these subprime mortgage-backed securities AAA. Our government needs to do something about that.

2) You can’t just give a mortgage on any terms to anyone. This is unequivocally an area where we need more regulation.

Why not say those things?

In any case, I do want to say this. Facing what we’ve been told is a historic crisis demanding immediate action on a massive scale ($700B is equal to one quarter of the federal budget; for comparison, I learned yesterday that our annual aid budget to Israel is around $2B), Harvard’s President Faust did a smart thing yesterday in pulling together a number of economic, financial, and legal experts to help us with our self-governing responsibility to understand this thing. Because the fact is, when taxpayers turn over $700B to one person with no strings attached and instructions to fix an urgent and critical problem that is as opaque to most of us as what’s under the hood of our cars, well, pretty soon you don’t just have a financial crisis, you have a democratic crisis.

UPDATE: How neglectful of me. In case you are not in the habit of clicking through to the comments, Pickle Reader Emily left this:

that economic panel is really interesting. highly recommended and available without a login at.

http://post.harvard.edu/haa/html/index.shtml

Cynicaler and Cynicaler

I'm going to try to get a few posts up over the next few days about, you know, the upside-down-ness of everything, but as an opening shot across the bow, let me pose a question.

Early this afternoon, it looked like congress was on the verge of an agreement (which, by the way, I don't think I support.) Then it fell apart, as congressional Republicans revolted. So here's my question: Is this sabotage to McCain can swoop in and fix it?

Financial Crisis Reality Check

Let’s all take a deep breath, shall we? Let’s look out the window and remind ourselves that the sky, in fact, is not falling--though you’d think it was if you’ve been following the hyperventilation competition going on in Washington. Financial crisis! Halt the political campaigns! Cancel the debates! Another Great Depression is coming!

I’m sorry, but I don’t buy it. Yes, America is in the middle of a financial crisis that is causing the banking system to seize up. But if you take a closer look at why the financial system is in so much trouble, you realize that all this Great Depression talk is way overblown.

To better understand what’s going on, let’s dive head first into some economic nitty-gritty.

The root of the financial crisis is that banks aren’t lending out enough money. Without enough lending in the system greasing the wheels of capitalism, the whole economy comes to a grinding halt and eventually goes into the tank. Banks aren’t lending out enough money because the amount of bank capital on their books has shrunk considerably of late, and the amount of bank capital governs how much money they can lend. Capital has shrunk because the hundreds of billions of dollars of mortgage-backed bonds owned by the banks are worth much less than what the banks paid for them. Basically, these mortgage-backed bonds were bad investments, thereby making the banks “poorer.” But even poor banks can write-down the cost of their bad assets, recapitalize by raising money from new investors, and start over. This write-down process makes the original investors (stockholders) in those banks lose money, but it does not bring the system to a halt because the banks go right back to their good old lending ways once they recapitalize. The problem that we face today is that banks are unable to recapitalize themselves because no one is willing to pony up the dough necessary for the banks to hit the “restart” button. The reason for this is that no one knows, with any degree of certainty, how to value the “toxic waste” mortgage-backed securities that are responsible for shrinking the banks’ reserves because of the complexity of the securities. If the value of these assets turns out to be much lower than what the banks currently estimate the price to be, then the banks will end up being an endless black hole of successive write-downs, and thus a terrible investment for someone thinking of buying in to the restart process. The sovereign wealth funds that invested in Merrill and Citigroup many months ago learned this lesson the hard way.

The bottom line is that it’s the uncertainty that is the killer. Some banks are broke, yes. They simply have too much toxic waste on their books. But most banks will live to lend another day, so long as they can recapitalize their shrunken capital base. The $700 billion “bailout” bill making its speedy way through Congress this week will help clear away some of the fog so these assets can be priced and the recapitalization process can begin.

I don’t mean to suggest that the economy is in good shape. But I do feel pretty confident in saying that there won’t be another Great Depression. So let’s all take a deep breath…and get on with the debates! Enough with the panicking, already.

P.S. It now appears that the bill making its way through Congress has lost its momentum. If the bill ends up not going through, things really could get ugly. But I think a plan will go through...eventually. And the system will start to function again.

P.P.S. Click here to read a letter to the editor about the financial crisis written by David Richards (my father) published in the Financial Times a few days ago.

What We're Fighting For

Found on Chris Hayes' blog:

This can't be good...

It is hard to be hopeful about the future of South Africa's leadership on the continent. Thabo Mbeki's role in Zimbabwe as Mugabe's chief enabler, especially recently, has been shameful and decisive. Like many westerners, though, I am pessimistic about the kind of change that Jacob Zuma might bring to the leadership of the country when he succeeds Mbeki to the presidency next year. The cloud of corruption that surrounds him is worrisome, and reminiscent of a kind the sub-Saharan politics that South Africa once seemed poised to escape, and which it must escape if it is to lead the region out of hopeless poverty.

Last week, when a judge threw out charges against Zuma, it was reported that his supporters celebrated outside the courtroom by singing his signature song. Only today, in this report in the NYT that prosecutors are considering further action, was this interesting tidbit included:

"They cheered jubilantly outside court as their leader led them in his signature song, 'Bring Me My Machine Gun.'"

Electoral Math: Crunch Time Begins

Looking at some polls tonight, it occurred to me that the map is beginning to clarify a bit, and so it might be time to share my electoral math thoughts with Pickle Nation.

Everything you are about to read is preceded by the phrase “In a close election…” Maybe enough people will wake up at least one day between now and Election Day and say to themselves something like “Wait a second, why do I think that John McCain is something other than the unprincipled reckless liar that he has shown himself to be in the last 6 months?” or “Wait a second, there’s a reason I don’t think George Bush is a good President, and maybe I should vote like I’ve learned something from watching his slow motion multi-car pile-up of a Presidency,” and Obama will win with some breathing room. (Pickle Nation – my prolonged absence from these pages has been a result of despondent exasperation.) Maybe America will go all racist on us and McCain will run away with it. But if neither of those things happen, and it’s a close election, then…

I don’t have much hope for Obama winning Florida. And in a really close election, I’m not the biggest Ohio fan, either. Why? Well, I just haven’t noticed Democrats winning presidential elections there recently. This is the principle that has led me to the championship of my fantasy baseball league three times in the last four years.

But don’t despair. If I’m wrong and Obama wins either of them: ballgame. And what does he have to do to win if he loses those states? Hold on to PA, WI, MN, NH, and MI. OK, not so bad. Pick up IA and NM. Fine, those really belong over here.

Lose MO (Bellweather? More like Smellweather!) Lose IN (Never in play.) Lose KS (But he’s a little bit from there!) Lose MT (Insufficient Schweitzmentum.)

So where are we? We’re left with only what I would say are the most marginal states – CO (with 9 votes), NV (with 5 votes), and VA (with 13 votes). There’s kind of good news and there’s bad news here. The bad news is that all 3 violate my fantasy baseball rule – Bush won them all both times. But the good news is that without any of them accounted for, Obama has 264 electoral votes, which is 6 shy. This, of course, is only kind of good news and not just plain good news because NV has only 5 electoral votes, so, keeping everything constant, he basically needs to win either CO or VA.

That’s not a bad shorthand for where I think the math is right now: I think Barack will win the election if he can win either Colorado or Virginia, and it’ll be hard to win if he loses both. If you are looking for a state in which to volunteer and can get to one of those places, go.

Embracing Identity Politics

The intensity of my support for Barack Obama spiked up considerably after Palin’s mocking culture-war speech at the Convention, and then spiked up yet again after she revealed, in her recent interview with Charlie Gibson, that the two words “Bush doctrine” don’t really ring a bell for her.

How could anyone ever think Palin would make a good vice president? The answer, of course, is that I’m asking the wrong question. No one cares about her competence. What they care about is that Palin is “just like me.” Perhaps I shouldn’t be surprised that identity politics works so well (I worried about her “hockey mom” appeal in a previous post). But I nevertheless find myself shocked at the degree of hostility towards “elitists” expressed and the Republican Convention, and at the near hysterical response Palin has received on the campaign trail from the “she’s just like me” crowd.

Call me crazy, but when it comes to governing, I don’t give a hoot about “who the candidate is” or whether or not I think they identify with me. I care about what I think the candidate will DO, if elected. That is why I am constantly harping on the Democrats and Barack Obama for their poor policies on (deep breath) Russia/Georgia, Israel-Palestine, Iran, foreign policy in general, ethanol, “foreign oil,” wire-tapping, faith in the public square, and campaign finance, among other issues. The fact that Barack is a cosmopolitan city person who went to Harvard Law and drinks cappuccinos while reading the New York Times only factors into my support for him in so far as those things inform his policies and the decisions he makes.

[Side note: there is one exception to the I-don’t-care-who-someone-is rule. It matters if there is some symbolic significance wrapped up in “who that person is.” In other words, it does matter that Hillary and Palin are women, and that Barack is black.]

But this whole Palin phenomenon is really making it tough to resist getting dragged into the identity politics game. What makes me so upset is that I feel like Palin’s popularity is due, in part, to the fact that it seems like she just won American Idol. Marc Fisher explains: “In this hyperdemocratized society, the national conviction that anyone can succeed is morphing into a belief that experience and knowledge may almost be disqualifying credentials.”

This is crazy. And horrifying. We’ve had nearly 8 years of an anti-intellectual president who is proud of his gentlemen’s Cs, and who makes many decisions based on what his gut tells him rather than what his brain tells him. Please, can we elect someone based upon competence and not because we think we might enjoy having a drink with him?!

If Palin’s “regular gal” image, together with intense anti-“elitist” attitudes, end up putting McCain over the top, I think there is no other response but to embrace this identity politics bull. This, after all, is what happens when one identity group decides to attack another identity group. The line between the two groups hardens, even if one group never thought they were a coherent group to begin with. As illustration, in Ukraine after the fall of the Soviet Union, most Russian-speakers who lived in Ukraine did not consider themselves “Russians” at all. Many of them considered themselves “Soviets” first and foremost. But when the government in Kiev began making laws restricting the use of Russian language in schools, the “Russian” identity quickly came into being. It was not pre-existing, but emerged out of a response to perceived attacks from another identity group.

And so it is in America. I never considered myself a member of this so-called group “elitist.” But if much of America is going to vote against Barack Obama because he is in this so-called group, or for McCain/Palin because they are in the “just like me” group…well, then I guess I’ll have to band together with my fellow “elitists” and fight the good fight. It seems like the only way to defend ourselves against more bad governance.

So I say: “elitists” unite! Let’s take back this country of ours from those who want a another president who would be a good drinking buddy! Bring. It. On.

P.S.: The first order of business for team “elitist” is to abolish the Electoral College.