Morning in America

October 22, 2008, Chantilly, Virginia. (Joe Raedle, Getty Images.)

Only in America

Politico's Ben Smith reports on a medical student's early voting experiences in Evansville, Indiana:

For me the most moving moment came when the family in front of me, comprising probably 4 generations of voters (including an 18 year old girl voting for her first time and a 90-something hunched-over grandmother), got their turn to vote. When the old woman left the voting booth she made it about halfway to the door before collapsing in a nearby chair, where she began weeping uncontrollably. When we rushed over to help we realized that she wasn't in trouble at all but she had not truly believed, until she left the booth, that she would ever live long enough to cast a vote for an African-American for president.

Only 12 more days.

Name Calling

So the McCain-Palin campaign has now devolved into a rancid whirlwind of name calling: "terrorist," "socialist," "Muslim," etc. If you have even one neuron in the upper brain regions firing, there's no logic, and nothing is consistent. It's a cruder version of Hillary Clinton's late primary strategy, and it simply isn't working.

What I think many pundits have so far missed is how profoundly disruptive a GOP loss (much less a rout, which looks possible) will be to the party. Starting in 1968, the modern Republican Party has had one go-to-market strategy: the Southern strategy. The Southern strategy depends on non-thinking, ignorance, hate, and division. It's profoundly un-American, but it has been enormously successful for decades. The only exceptions have been conservative Southern Democrats (Carter and Clinton). This year is the strategy's grand finale.

You can already see signs of disbelief. There are going to be a fair number of hardcore cult members, the folks who still approve of President Bush's job performance, who might experience something resembling a political nervous breakdown. And as we approach the last days before the election, you already see signs of that breakdown. An African-American Democrat is poised to live at 1600 Pennsylvania Avenue. He will be their president, our president. And when you've been doing everything possible to avoid all facts and evidence for so long, it'll be a shock to some. Their world is changing, our world is changing. And it's wonderful.

Brownshirts and Hoods

The McCain-Palin ticket continues its descent into the gutter.

Critique of the GOP Backbenchers' Plan

CNBC reports on a new Republican plan aimed at addressing the U.S. credit crisis. In general terms I'm happy there's a competing plan for the simple reason that more plans mean more gridlock and less likelihood of passing the Paulson/Bush/Leadership plan, ceteris paribus. I prefer no action to that awful plan, and Harry Reid just managed to make that plan even worse. DeFazio's No BAILOUT Act is still my favorite choice. Surely Congress can at least agree to raise the FDIC deposit insurance limit to $250,000, which is the heart of that simple plan.

The new GOP plan has some silly and even dangerous elements, and many elements are simply expressions of dogma rather than practical steps to solve current challenges. For example, the GOP plan calls for allowing corporations to apply losses in 2007 through 2009 back 5 years, so they can claim a refund. Why reward companies who are losing money? If I managed a profitable business, I'd be livid! That particular element is eerily similar to bad Japanese policy, propping up money-losing companies which should fail. Another example: suspending the capital gains tax for two years. That would only exacerbate selling pressure on assets, and at exactly the wrong time. We should be indexing capital gains and tax them at equal rates to ordinary income, to encourage long-term investment and discourage speculation. Repealing the Humphrey-Hawkins Full Employment Act would have no effect on the Fed (which obviously ignores the Act already) but might heighten anxieties among workers who would suddenly feel even more concerned about losing their jobs. Such fears would depress consumer spending, again at exactly the wrong time. And do Republicans really want to go to the voters in November and say they championed abolishing full employment? Seriously?

Where are the public hearings, by the way? Shame on the House and Senate leadership (majority and minority) for not insisting on public hearings before even thinking about a $700B bailout. Fortunately everyone in the House and one third of the Senate is about to face the wrath of America's voters on November 4th. The whole rotten and corrupt cabal deserve every bit of it. Have you written your congressman and senators yet?

"No BAILOUT" Act: A Sensible Bill

Representatives DeFazio, Edwards, and Kaptur have introduced the "No BAILOUT" Act as an alternative to the $700B Paulson/Bush Wall Street bailout plan which failed in the U.S. House. I am very happy with the No BAILOUT Act, especially the increase in FDIC insurance limits up to $250,000 which has essentially universal support and which would protect a lot more small businesses that are simply meeting payroll each month.

My only minor quibble with the bill is suspension of "mark to market" rules. Currently financial institutions must value their assets according to what they would fetch if sold now. Try to sell your house in the next 5 minutes. Would you get a lot less money than the house is worth? Of course you would. Most assets are, to some degree anyway, illiquid. But allow, say, 90 days to sell and that house price is much more reasonable.

The bill sponsors and I may be thinking of the same thing here, but there should be some reasonable valuation for these assets. And I think 90 days is about right. That is, assets should have a value equal to their liquidation value within the next 90 days. Said another way, "mark to market" should be "mark to the 90 day market." Now, establishing those values in non-functioning markets could still be difficult, but conceivably there could be a secondary market which helps establish these values. Also, there might be short-term "relief valves" that the SEC establishes. I think SEC should be allowed to declare "asset valuation freezes" if they observe that markets are not functioning. Such a freeze could be for 30 days, roughly similar to the short-term short selling suspension that the SEC declared recently. However, any such freezes should be as narrowly tailored as possible (by geographic area, market segment, corporate entity, etc.)

All that said, the No BAILOUT Act is an outstanding piece of legislation at this moment in time, and I urge both Democrats and Republicans to support it. If the Paulson plan, or anything remotely like it, comes back up for a vote, all Congressmen should kill it again.

As an aside, while I overwhelmingly support Barack Obama, shame on him for surrounding himself nearly exclusively with Wall Street executives and others who deserve ample blame for the current mess. As one example, Dr. Laura Tyson is an Obama advisor on the economy and financial markets who also sits on the Morgan Stanley Board of Directors. Conflict of interest? You bet, and it's outrageous, especially considering Obama's otherwise decent stance against lobbyist influence.