Sunday, September 28, 2008

The First Presidential Debate

The presidential debates are all a matter of managing expectations. The first debate was no exception. I expected Senator McCain to stumble a lot and to lose his temper at least once. He did neither. He exceeded my expectations. I expected Barak Obama to dance verbal rings around his opponent, landing light jabs all along the way. He did not. He barely met my expectations. I agree with those who called the contest a draw.

But the fact that Obama failed to exploit McCain’s missteps does not mean the opportunities were not there. Example: Senator McCain made much of the fact that he, the proven warrior and world-affairs expect, would not leave Iraq until we could leave in victory. As he saw it, the rookie Obama wanted out, the sooner the better, no matter the conditions on the ground. An old pro like McCain knew better; he would stay in Iraq until his generals said it was safe to leave.

But, Obama could have pointed out, President Bush and Secretary Rice both tell us repeatedly that Iraq is a sovereign country, which means the exit plan is really up to them, not President McCain or his generals. Or is this too naïve?

Or take Senator McCain on Pakistan’s General Musharraf. When Obama mentioned that we seemed to support a dictator because “he was our dictator,” McCain defended the General by saying that everybody knows that Pakistan was a failed state when Musharraf took over. Leaving aside the obvious question (wouldn’t any would-be dictator simply declare his country to be a failed state?), General Musharraf remained president from 1999 to 2008. Couldn’t he have turned the country over to civilian authority sooner? But Senator Obama did not pounce here either, because, I guess, pouncing is not his style.

But there were opportunities lost on the other side, too. Senator Obama again castigated companies who moved jobs offshore and promised a tax system that would favor companies that kept jobs at home. A sharper, quicker Senator McCain might have pressed his opponent to flesh out his plan. U.S. companies have hundreds of thousands of overseas employees; will we insist that those jobs come home? Suppose there is a backlash against our exports? Or worse, against our Treasury bonds? And by the way, does Senator Obama really mean to rewrite Nafta, even if Canada and Mexico like it the way it is? How, precisely, would Senator Obama turn back the tide of globalization?

Senator McCain obviously favors a more “muscular” approach to foreign policy, particularly with respect to Russia, China, and Iran. He seems to embrace the neo-con line, and although that may play well at military posts and Legion halls, I’m not sure it’s much of a vote-getter in a national election. Senator Obama’s protectionism and Senator McCain’s hawkishness are of a piece, and neither inspires much confidence.

On style points, I think his handlers should tell McCain to lose a bit of his edge. He did not blow a gasket, but just underneath the forced smile I sensed that he was often seething. And Obama needs to add a bit of “no more mister nice-guy.” Just a bit. The man is cool, and that will be a huge advantage if he becomes president. But in debates, you win by scoring debating points.

Tuesday, September 23, 2008

This Time It Is Different

Most economic commentators who parade before the CNBC cameras tell us that the market will come back because (1) recessions in the past have lasted so many months on average, and based on that we may expect a recovery in early 2010 (2) the Dow Jones Industrial average has in previous bear markets declined by such-and-such a percent, and based on that we are almost at the bottom. History is the great teacher, and history tells us that a new up cycle will soon make everything all right.

Readers of this blog know that for the past year I have been warning everyone to stay clear of the stock market. Go back, if you must, and reread The Fed Caves (8-18-07), The “What, Me Worry?” Economy (7-26-07), The Great Buying Opportunity (4-12-07), Overmalled (10-29-07), The Next Bubble (2-21-07), The End of the Game (7-14-08), and Calling a Spade a Spade (4-7-08). I am not an economist, so I got it right. Economists, almost by definition, worship economic history.

What makes this time so different? China, for one thing, makes it different. China not only as competitor, but as financier. The people who are hastily cobbling together the $700 billion bailout plan initially decreed that only U.S. banks could be bailed out. Then someone whispered that if we stiffed China and other sources of sovereign wealth they might be reluctant to lend money to us. Oops.

After years of hectoring China and Russia for an economic system that smothered innovation, they got the message. They and others decided to play the game, and they are good at it. They are not so good at human rights, so now we hector them about Tibet and Georgia. But not too loud, because we need their money (China) and oil (Russia).

A few years after Tiananmen Square, I found myself in Beijing, talking with a bright young college graduate who had been present at the student uprising. I wanted to know whether in her opinion the country could revert to the old system, stamping out entrepreneurism, “There is no chance,” she said. “There is no turning back now.”

So here we are, with China and Russia, two former communist adversaries, both racing down the capitalist track, while the United States is about to nationalize much of its financial system. They move to the right, while we abandon what is left of laissez faire and turn leftward. The Administration tells us that we have no choice, that if we don’t rescue the banks we face Armageddon. (The parallels with the “mushroom cloud” scenario that provided the rationale for invading Iraq are obvious.) High drama in Washington and New York, the stuff of action films starring Denzel Washington.

Congress will oblige, because most Congressmen accept the fact that they don’t understand the arcana of modern finance - but Paulson and Bernanke do. Hank Paulson is regarded as a financial guru, because he was once Chairman of Goldman Sachs, the largest and most successful investment banker on Wall Street. You might think, after recent events, that fact in itself would disqualify him, but you’d be wrong, unfortunately.

The situation is just as dire as Messrs Paulson and Bernanke paint it, but the solution they propose is a stake in the heart of capitalism. The United States has turned a corner, and, as my young Chinese friend said, there is no turning back. Who knows where it will lead, when retirees depending on “defined contribution” pensions find their nest eggs gone, when the government owns millions of foreclosed properties for which there are no buyers, when unemployment jumps because companies can no longer finance expansion, when hundreds of thousands of troops come home looking for jobs that aren’t there?

We are headed inevitably to a world where the government will be the employer of last resort, the financier of last resort, the health-care provider of last resort, the mortgage provider of last resort. This time it really is different.

Tuesday, September 16, 2008

Of Thee I Sing, Baby

In 1932 the blockbuster Broadway musical was Of Thee I Sing, with a score by George and Ira Gershwin and a libretto by George S. Kaufman. Actually, it opened at the Music Box Theater the day after Christmas, 1931 – great timing, inasmuch as it was a spoof of presidential politics, much on the national mind in 1932. It had a run of 441 performances and won the Pulitzer Prize, the first musical to do so.

The plot: If elected, presidential candidate John P. Wintergreen promises to marry the winner of a First Lady contest. A femme fatale, Diana Devereaux, walks off with the prize by sleeping with the judges, but Wintergreen nonetheless marries his true love, Mary Turner, a wholesome lass who wins Wintergreen’s heart by baking incredibly tasty corn muffins.

Wintergreen is elected and subsequently impeached (he is a lovable rogue, the Bill Clinton of his era), but Mary saves the day by declaring that she’s pregnant. Who, after all, would dare impeach an expectant father?

There’s much to love in the plot, including diplomatic squabbles with France and the bumblings of Vice-President Alexander Throttlebottom. Then there is that socko Gershwin score, featuring future standards like “Who Cares?,” “Love is Sweeping the Country,” and of course the title song. It was, all in all, a wonderful show, set, as I’ve mentioned, against the background of the FDR-Hoover presidential campaign.

It is time for another Broadway musical based on a political satire. I hereby offer the following outline:

Presidential candidate John P. Peppermint struggles to choose a running mate, the most obvious choices having various shortcomings. Then Peppermint’s brain trust suggests a contest, the winner to be the person who serves the best home-cooked meal. Several male veep wannabes do their best, but the prize goes to lovely Sara Lee, the governor of a desolate, remote, snow-covered State. Sara wins the contest by preparing a delicious caribou roast. But that’s not all; she shoots the caribou with her rifle and cleans it expertly. “That’s my kind of girl,” says John P. Peppermint.

Alas, Sara, it turns out, comes with baggage: As governor, she has used her power to fix a dog-sled race and to settle various personal scores. But, at the end of Act 2, just when it appears that all is lost, Sara announces that she will soon become both a new mother and a new grandmother. The race is over, for who can vote against such a woman? As the curtain falls, the entire cast celebrates the landslide victory by singing, “Of Thee I Sing, Sara.”

It needs work, but it has possibilities.

Thursday, September 04, 2008

"What Do We Do Now?"

Last night I was channel-hopping between the Republican convention and “The Candidate,” an old movie starring Robert Redford as a handsome young idealist (read liberal Democrat) running for a seat in the U.S. Senate against the incumbent, a much older, tradition-rooted (read conservative Republican) veteran politician. Redford starts off as a reluctant warrior, then gets the taste of the battle, then warms up to the standard political routine cooked up by his campaign manager, well played by Peter Boyle. He is shown at a series of whistle stops, spouting the same phrases – “We can no longer afford to pit black against white, young against old, poor against the less poor” – over and over, until he finds himself in the back seat of a cab, mumbling “poor against black,” “young against white,” “food against the foodless.” If winning requires inanity, then he will be inane, because he does not want to be a principled loser.

The hackneyed rhetoric could have come straight from Barak Obama’s speeches. But then, there was something eerily familiar about Sarah Palin’s lines, too. They were being mouthed in the film, not by Redford, but by Redford’s Republican opponent, Senator Jarmon, played by Don Porter. And Jarmon's audience in the movie, a sea of all-white, Rotary Club faces, looked just like the audience in St. Paul, patriotic to the core (with hints that the opposition would destroy all we hold dear). The Denver convention, on the other hand, was conspicuously multi-racial, just like the adoring audiences for Robert Redford. It was sometimes hard to tell which was the movie and which was the real convention. When Sarah Palin proudly proclaimed that “Senator McCain isn’t looking for a fight, but he’s not afraid of one, either,” the Republicans cheered wildly. Senator Jarmon delivered similar red meat, with comparable effect.

The movie and the conventions themselves have been reduced to cartoons. The virtuous young candidate, working tirelessly to save the planet from big, rapacious corporations, the heartless conservative, willing to see the poor starve in order to let the rich grow richer. The candidates try to play against type, but it is a losing battle. At least it was in the movie, for who in his right mind could vote against Robert Redford? Ah, but in 1972, the year of “The Candidate,” Richard Nixon, a cartoon conservative, defeated George McGovern, a cartoon liberal, in a landslide. You never know.

At the end of the movie, as the election returns confirm that Robert Redford has upset the incumbent senator, Redford turns to campaign manager Boyle and says, cluelessly, “What do we do now?” This November, I have a hunch that someone will say much the same thing. But I don’t know who.