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Sarah Palin and John McCain on AIG
This was "unscripted", from Sarah Palin:
Disappointed that taxpayers are called upon to bailout another one. Certainly AIG though with the construction bonds that they’re holding and with the insurance that they are holding very, very impactful to Americans so you know the shot that has been called by the Feds it's understandable but very, very disappointing that taxpayers are called upon for another one.
That's via Andrew Sullivan. It's the phrase "very, very impactful" I object to. The point about construction surety bonds is actually correct, as indeed AIG did issue them and it doesn't seem that any regulation or state authority will make good those guarantees (readers, correct me if I am in error but I can find no record of such guarantees). That means a lot of people bought insurance against adverse construction events and will be left without that protection.
Of course this matters less at lower levels of construction.
The real lesson of this quotation is that the Republicans have no good language for discussing recent events. They're not allowed to say anything that sounds like "showing sympathy for Wall Street," so they have to find someone else to show sympathy for but they can't turn to traditional Democratic rhetoric about how an unregulated capitalist economy is failing us. Citing the construction bonds is like worrying that the financial crisis will postpone the retirement of many professors. Yes that is true but it's odd (though not unprecedented) if that's the first thing that comes to your mind or for that matter to your talking points.
Here is John McCain on the crisis, again unscripted, from The Today Show:
LAUER: So if we get to the point middle of the week as we heard in that report where AIG might have to file for bankruptcy, they're on their own?
McCAIN: Well...quote, "on their own"...we have to - we cannot have the taxpayers bail out AIG or anybody else...this is something we're gonna have to work through -- there's too much corruption, there's too much access, we can fix it, I believe in America - we can have a 9/11 commission such as we had after 9/11, 'cause this is a huge crisis and we can come up with fixes and we can make sure that every American has a safer future and that is to make them know that their bank deposits are safe and insured.
Here is more of the session. He did worse than she did and that's after decades on the national scene.
Posted by Tyler Cowen on September 18, 2008 at 09:50 AM in Political Science | Permalink
Comments
I thought both answers left much to be desired. It is easy, however, to sit on the sidelines and take pot shots at those forced by the course of events to say or do something about those events. Real life is far more messy and complicated than theoretical models.
Posted by: RW Rogers at Sep 18, 2008 10:05:38 AM
I actually suspect that on this issue, Palin might be the most knowledgeable of the four. Governors, as a rule, need to understand debt instruments and insurance in order to do their jobs, whereas legislators just need to sound like they do.
That said, I think it's clear that right now, all the candidates are basically fumbling around to (a) sound like they can do something to solve the problem (b) without actually stating the problem, or the possible solutions, because (c) they really don't understand the problem, and there's a high probability of saying something really stupid if they get too specific.
I actually think this is a perfectly rational course of action, as is my response of shutting off the TV and waiting until Monday, when the people who actually know what they're talking about will have had a chance to take a deep breath and figure out exactly what our options are.
Posted by: Independent George at Sep 18, 2008 10:12:12 AM
My narrative would be "It's not always pretty, but the way our system works is when people get greedy or stupid, they get smashed. Sometimes if they are too greedy and stupid, we (the gov't) help the resolution process. We try to help the workers transition, but the decision-makers responsible lose. That's what is happening. The flexibility and resilience of the American system allows us to keep getting up after we've been beaten down, just like I was beaten while in captivity (Okay John, enough already). Like I said, it's not pretty, and the uglier it is, the faster we can work out of it. In other words, we aren't trying to put lipstick on this pig. We want it ugly and nasty and none of the fat cats are getting away without getting muddy."
I keep getting the feeling that Obama is toast. He really has nowhere to go from here. He can't do anything other than pander. McCain can't win by pandering, but McCain can differentiate himself if he's smart enough to commit himself to a bold strategy. I think we'll start seeing the "old" McCain come back in the waning weeks of the campaign when the moderates start paying attention and the base is committed. Crisis doesn't favor Obama. We'll see who are the pigs and who are the chickens, because the pigs are committed while the chickens are only involved.
Posted by: Andrew at Sep 18, 2008 10:29:56 AM
I knew it. Vote Palin09
Posted by: votePalin09 at Sep 18, 2008 10:37:57 AM
We have mountains and mountains of bad debts in the banks and in the government. There is absolutely no mystery here about what has to happen- losses have to be recognized and finally settled and cleared, but no one really wants to do that. They just want to pass the hot potato around, and the prudent taxpayers will end up holding it like always. And if the system survives this crisis, the stage for the next, even larger one will be set, and the play will likely start in 8-10 years.
Posted by: Yancey Ward at Sep 18, 2008 10:42:40 AM
On an abstract level, it's surprising to me that the Republicans are doing so poorly talking about the economy. I guess the dominant narrative become "not enough regulation, too much greed" pretty quickly, which makes it hard to talk free markets up too much. Yay for economic populism! Also, I hate to say it, but I wonder whether having seven houses really does make it harder to project empathy. I see McCain being more hurt by this than Obama, but who knows? The whole election feels like a coin toss. Or maybe the effects of a butterfly flapping its wings in China.
I fervently hope that Obama's regulation talk is mostly pandering. It's easy to regulate. The hard (impossible?) part is making it effective and minimizing resulting rent seeking. People will try to game whatever you put in place. However, I am surprised to read about the SEC's leverage exemption in 2004 for the big investment banks. Will that turn out to be one of the less obvious causes of the crisis?
Posted by: Greg at Sep 18, 2008 10:57:50 AM
Is McCain that clueless? Or, is his high school answer the product of strategists telling him to speak to Johnny and Jenny Main Street?
Assuming McCain is that clueless, then who is worse for the economy: McCain or Obama?
Posted by: rcw at Sep 18, 2008 11:02:15 AM
If McCain weathers the storm, it will be more evidence that the Dem's can't pin the Bush tail on his donkey, and further attempts to do so are wasted opportunity.
The problem with the Demo' strategy aimed at saying McCain = Bush is the moderates don't believe it and the conservative base would like to.
Posted by: Andrew at Sep 18, 2008 11:03:59 AM
The elephant in the room for McCain/Palin is ... what killed the elephant.
Palin doesn't address it, and McCain puts it as "corruption." Well, I think he needs to complete the thought, and say that corruption was enable by lack of oversight, and a free-market pendulum which swung too far.
I've argued here and elsewhere, going back years, that a "regulated market economy" brought us American wealth and prosperity. I've regarded that as a moderate Republican position. The party strayed though. It is still impossible for "them" to say that even a "lightly" regulated market is necessary for long term health.
Posted by: odograph at Sep 18, 2008 11:06:36 AM
Andrew, it comes down to how much economics the voters have, or how much education the Dems can do. McCain has little footing for his position that "corruption" made this mess.
(Unless that is code for a re-regulated market economy.)
Posted by: odograph at Sep 18, 2008 11:08:55 AM
Andrew said: "Crisis doesn't favor Obama."
But of course it does my little republican friend. Economic crises are the democrats equivalent of 9/11.
Starting with Roosevelt's New Deal and ending with Clinton's "it's the economy, stupid" economic crises give the Democratic candidate plenty of opportunities to call up the party's past achievements and well known policies.
Obama just needs to hammer away at the fact that this crisis was caused by 1) DEREGULATION and needs to be fixed and is currently being fixed by 2) GOVERNMENT INTERVENTION/NATIONALIZATION.
The sweetest part is that Bush is doing the intervention part already, so McCain can't even rhetorically argue for the standard Republican talking point of letting the markets fix this by themselves.
Part 3) is where Obama proposes the "NEVER AGAIN - FINANCIAL SECURITY ACT of 2008" to regulate the financial system or even intervene in the housing market.
It doesn't even matter that some blame lies with the regular folks who have bought those damn overpriced houses, because you can't tell that to your voters.
Posted by: Oskar Shapley at Sep 18, 2008 11:18:19 AM
Shorter: The fact that it is impossible for Republicans to say in 2008 that the promise of bailout (explicit or implicit) must be bound to regulation and oversight is amazing.
They are trapped in cognitive dissonance. McCain/Palin have to sort of pretend that the Bush administration is a "them" doing the bailouts and not an "us." Again, amazing.
Posted by: odograph at Sep 18, 2008 11:18:50 AM
"The sweetest part is that Bush is doing the intervention part already, so McCain can't even rhetorically argue for the standard Republican talking point of letting the markets fix this by themselves."
I believe they do, Oskar. I believe (so far at least) they've been able to take the position that they wouldn't do the bailouts. They get a free-ride when Bush does them.
Posted by: odograph at Sep 18, 2008 11:21:07 AM
McCain's response is simply incoherent babble. It's obvious he has no grasp of the problem whatoever.
Posted by: Bernard Yomtov at Sep 18, 2008 11:27:37 AM
Odograph,
The problem is, the Dem's don't have the answer either, and everyone (who's not a Dem) knows it.
Oskar,
I'm not a Republican, which, I think grants me some objectivitity. We'll see, but my view is that this crisis favors the steady hand. Maybe if the crisis were to drag on and malaise was the only certainty, as was the case with Hoover (and Carter) then doing something, anything, would hold sway. Obama could play this hand, but he's not. He keeps playing the change hand. In the midst of a crisis, voters want change like a hole in the head.
Lastly, these aren't really bailouts. They are workouts. There is still little spillover to the real economy. Obviously that could change fast. But you guys are still basically making the argument that McCain has to apologize for Bush and the whole Republican party and that Obama gets to right on the coattails of the Dem's stellar economic policy. I simply beg to differ.
Posted by: Andrew at Sep 18, 2008 11:36:29 AM
Has anyone done worse than the macroeconomists at the top 20 economic departments when it comes to anticipating and explaining what has been going in the macroeconomy over the last decade and a half?
No.
Even McCain seems like an Einstein next to the math scribblers.
Posted by: PrestoPundit at Sep 18, 2008 11:37:19 AM
As seen earlier at MR, Obama has most of the economists ("All your economists are belong to us."). I'd hope that they would steer him to a lightly regulated market economy. At this point I have more faith in that than a Republican position which really, honestly, looks like madness.
Posted by: odograph at Sep 18, 2008 11:42:21 AM
mostly pandering
"Pandering politician" is an oxymoron. And that goes for most Ds and most Rs.
As seen earlier at MR, Obama has most of the economists ("All your economists are belong to us."). I'd hope that they would steer him to a lightly regulated market economy.
Hope. For change. From a new set of philosopher kings. That is madness.
Posted by: fish on a bicycle at Sep 18, 2008 11:54:02 AM
But you guys are still basically making the argument that McCain has to apologize for Bush and the whole Republican party and that Obama gets to right on the coattails of the Dem's stellar economic policy. I simply beg to differ.
I don't understand why you differ. In what sense does McCain represent significant change from Bush? What are his major policy differences? His major philosophical differences? He's relying on the same (sleazy) campaign operators Bush used. How will his advisers differ from Bush's, other than perhaps in name, or maybe being worse?
Was Phil Gramm not a leading Republican voice on economics? Do you think he'd make a good Treasury Secretary?
And why shouldn't McCain be held accountable for Republican failures? He's been with Bush pretty solidly.
Posted by: Bernard Yomtov at Sep 18, 2008 12:32:38 PM
Blame the poor. They aren't paying their mortgages, and they aren't even paying their fair share of taxes.
Posted by: 9 at Sep 18, 2008 12:36:29 PM
Andrew,
For better or for worse, foreign affairs crises help McCain, and economic crises help Obama.
The public has a fairly clear view that each of them is better than the other in each of
these areas, and this prejudice will probably not change between now and Nov. 4.
BTW, Obama has been pretty low key on all this, but I would note that this is a point in
time where intelligence and knowledge may be useful. Obama, who was President of the Harvard
Law Review (elitist!) and a law professor at the University of Chicago (even more elitist!),
has behavioral economists aa his closest advisers who were much more open to this sort of
thing happening than the advisers of any of the other leading candidates. Did Phil Gramm
see this coming?
Posted by: Barkley Rosse at Sep 18, 2008 12:46:04 PM
It's hard to believe that people haven't realized that the appeal of Palin is that she has no legislative experience.
Posted by: aaron at Sep 18, 2008 12:52:17 PM
Odograph,
Your second link is great. I'd read the EDGE essay referred to there and I recommend it. But, a lot of the comments below it are on the mark as well.
Posted by: Andrew at Sep 18, 2008 12:57:35 PM
I'm not a Republican, which, I think grants me some objectivitity.
you? objective? i can tell when you're the author of a post before finishing the first sentence. you're that consistently biased.
Posted by: me at Sep 18, 2008 1:23:10 PM
"And why shouldn't McCain be held accountable for Republican failures? He's been with Bush pretty solidly.
Posted by: Bernard Yomtov at Sep 18, 2008 12:32:38 PM"
Because Bush wanted better regulation of the GSEs in 2003, warning of problems, and McCain called for the same in 2005, with the same warnings. Both times they were thwarted by the Democrats.
Now who are those who state Obama has a better economic plan? Is that Obama related to the Obama that has received more money in the last three years from Fannie and Freddie than any other politician (save Dodd) has in the last twenty? Moral Authoity anyone?
Posted by: Tom at Sep 18, 2008 1:25:11 PM
