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Wednesday, October 1, 2008

 

 

See if any of this sounds familiar:

"What was there to hamper the furious onward march of business? Not the government, whose regulatory officials and commissions seemed to be napping...What was destined to halt the forward progress of business was the fact that (Wall Street) had become bemused with paper values - with the piling up of speculative or artificially generated wealth which had little relation to the production of goods...The irresponsible actions of men who did not stop to think they were constructing a caricature of the capitalist system were paving the way for disaster...Who could have halted the disaster? (The Republican regime) was apparently too wedded to the idea that government must keep its hands of business."

So wrote historian Frederick Lewis Allen, looking back at the root causes of the 1929 Wall Street crash. What followed, of course, was a marked shift in the political winds. Four years later, the voters gave Franklin D. Roosevelt a mandate (however ill-defined) to do something about the economy. As Allen would later write, laissez-faire capitalism was out and federal oversight of the markets was in - thereby eradicating the old order "in which everybody's economic fortunes were determined by the action of buyers and sellers in the open market, with the government standing aside."

We appear to have reached a similar juncture today. The modern conservative movement - founded on a philosophical hostility to government - has largely exhausted itself, thanks to the excesses of those cowboys who were allowed to roam free, constructing a caricature of the capitalist system. A new chapter in our national saga is at hand. Many Americans, including swing voters, are not necessarily fans of strengthened government intervention (indeed, as we well know, the government screws up a lot), but, as in 1933, Americans look to government in times of serious crisis.

This is one of those times - and most polls suggest that this sentiment is buoying Barack Obama's prospects. For instance, it's particularly noteworthy that, in the latest Quinnipiac survey of battleground states (released this morning), Obama is now leading John McCain by eight points in the state of Florida. I repeat, Florida. Florida is McCain's make-or-break state. The key statistic concerns the economy. When asked to choose the candidate who could best handle our economic woes, Floridians favored Obama by 14 percentage points; independents favored Obama by 17 points.

There are durable stereotypes in American politics. Maybe, in a normal year, the "liberal" tag would be hurting Obama, as it tends to hurt most Democratic presidential candidates. Same goes for the "soft-on-terrorists" tag (formerly, the "soft-on-communism" tag). But not this time; indeed, Obama's Florida numbers actually got better after the first presidential debate, despite the fact that McCain tagged him as the most liberal senator. The problem for McCain right now is his party label. When the economy is seriously distressed, voters tend to favor government action, and they view the Democrats as the party of government. That perception was formed during the Hoover-FDR years, and it has persisted ever since. Voters generally don't trust the Republicans to govern wisely during an economic crisis; indeed, McCain is also burdened by the record of the Bush administration, which has demonstrated that this generation of Republicans can't even govern competently.

Republicans are stereotypically viewed as the free-market party, and when the markets go seriously awry, Republicans generally suffer. Voters perceive this even without knowing all the supporting evidence, including: GOP activist Grover Norquist's ambition to shrink government and "drown it in the bathtub"; the Reagan administration's decision to relax provisions of the Depression-era federal oversight law that was designed to regulate the big financial firms; the 1999 GOP-sponsored legislation (supported by McCain) that removed the last shackles of that federal oversight, thereby allowing the financial industry's Ponzi schemers to run wild.

And on Monday of this week, we had the House Republican conservatives, behaving like those Japanese soldiers who stayed in the bush to fight another day, refusing to believe that their war was already lost. Granted, the bailout bill had flaws, and the predictably inept Bush administration sold it badly. But two-thirds of the House GOP members voted no primarily in fealty to their outmoded principles, the belief that the government should leave the markets alone. The same principles that got us into trouble were apparently deemed ideal for getting us out.

Ideological rigidity works in tandem with willful amnesia. They seemed incapable of remembering what happened nearly two decades ago, when the savings & loan banking industry collapsed (as a result, naturally, of a deregulation climate). In response, the federal government stepped in, established an agency called the Resolution Trust Corporation, and cleaned up the mess at a taxpayer cost (in today's dollars) of  $200 billion. We essentially socialized those bank losses, and we survived.

David Brooks, the New York Times columnist and troubled conservative, said it best yesterday about the House conservatives: "It has been interesting to watch them on their single-minded mission to destroy the Republican party...With this vote, they've taken responsibility for this economy, and they will be held accountable. The short-term blows will fall on John McCain, the long-term stress on the existence of the GOP as we know it...What's sad is that they still think it's 1984. They still think the biggest threat comes from socialism and Walter Mondale liberalism. They seem not to have noticed how global capital flows have transformed our political economy" - and that this new reality requires "the steady and powerful hand of some public institutions."

Some kind of rescue plan is still likely to pass. And regarding the potential long-term political fallout, conservative commentator Ross Douthat writes: "This is still George W. Bush's economy. Republicans who think the public will blame the Democrats, and specifically a President Obama, if the bailout is massively unpopular come 2010 or 2012 are almost certainly kidding themselves. Whether it succeeds or fails, the bailout seems likely to be remembered as the last great fiasco of the Bush Era, not the first big-government fiasco of a new liberal moment, and there's very little the Republicans can do to change this."

The last great fiasco of the Bush era...with similarities to the fiascos of the Hoover era. The national zeitgeist is shifting, and if Obama wins this election, conservatives will be forced to seriously reexamine their precepts. It will no longer be enough to declare hostility to government, or to assume that cutting taxes is a sufficient government action.

As conservative thinker (and former Bush speechwriter) David Frum argues in his new book, "There are things only government can do, and if we conservatives wish to be entrusted with the management of government, we must prove that we care enough about government to manage it well."

 

  

Posted by Dick Polman @ 11:19 AM  Permalink | 93 comments
Comments   
Posted 11:41 AM, 10/01/2008
Mr. Smith
And so we take one huge step toward becoming European. At least we have straight teeth, and our women shave their legs...
Posted 11:47 AM, 10/01/2008
bon
This is very well written Polman, but mostly nonsense. The free market is still the political focal point of the Republican party. (You should also take note that Obama and Hillary both claimed to be supporters of the free market in the primary, even though they are not. This means that rhetorically, it still sells.) I wish I were Milton Friedman so I could explain to you why this happened and why capitalism and the free market are still the best bet. I am not so I will simply say that the free market has made this country prosperous beyond our wildest dreams. We cannot allow one bad, and hopefully fleeting, moment to make us forget that. That is the very picture of shortsightedness.
Posted 11:50 AM, 10/01/2008
yoda
Bush's last fiasco - we can only hope. He still has 3 1/2 months left to make his mess bigger...
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Posted 12:11 PM, 10/01/2008
CD75
Obama and the dems are using the same "fear and scare" style of politics that Bush used with the war on terror. The problem is at the end of the day you lose credibility. If Obama is elected president he has set the bar so hight for himself that things will really "change" and when they do not, he and the dems will be in the same spot 2 years from now that the repubs are in. Don't get to giddy yet dem backers.
Posted 12:13 PM, 10/01/2008
CD75
If Obama wins the presidency, the expectations he has created will be so high that he has doomed himself to failure.
Posted 12:14 PM, 10/01/2008
vc bear
Wishing for more regulation might give you a real supprise. Obama and our political class reach out to tell us more government policy will provide a "better world". The reality is regulators are just placid goverment bureacrats who don't do much. Explain to us the fact that the PA state insurance commission can let Reliance fail and have no idea that the insurance company was in that bad a shape. Explain the bust of the most recent telecom act and the failures of the FCC. Worst most recently I was at the Securities and Exchange commission when they annonced the agreement with CITI on its penalties for the securitizatio of mortgages. They carted out the staff that did the deal and talked about how wonderful they were doing the peoples work. The last question was a simple one. How did you miss the problem in the first place and why were you sitting on your hands? There was a defining silence in the room. I watched Bill Donaldson give a talk after he left the SEC. Here is one of the most moral men on Wall Street. In the Q&A he was asked a question. Should hedge funds be regulated? His response I am not sure what a hedge fund is? Ask for more regulation.. Obama dosn't have a clue what he is talking about,
Posted 12:18 PM, 10/01/2008
Rauol Duke
And what is so bad about being European? Would you prefer Mexican? If we leave the Republicans in charge what we will become is a third world country. I would prefer to remain American but if the choice is between Europe and Central America or South America, I would choose Europe. Canada would be the better choice.
Posted 12:22 PM, 10/01/2008
liberal
One step toward being European? Is that such a bad idea? It's funny, nobody seems to realize that in some ways our country is more socialist than the European mainstream. For example, most of their motorway/autobahn/autoroute system is managed by private companies, something that seems anathema in the US. And of course we have the state liquor monopolies. Etc. The europeans seem more attuned to which things are done well by the government, and which are not.
Posted 12:32 PM, 10/01/2008
jmc
Nothing about the Community Reinvestment Act, nothing about the 2004 hearing in which Republicans warned about Fannie and Freddie, and Democrats (particularly Barney Frank) who denied up and down that there was any problem at all, and nothing on the 95 Democrats who voted against the bailout. Do you have a shred of journalistic integrity Polman?
Posted 12:55 PM, 10/01/2008
herheineystinkhole
Eeeew, mostly the usual Moose-mounting Repugs here today .... boring. Bye!
Posted 12:56 PM, 10/01/2008
SteveMG
In the speculation about the near term future of the economy one analyst supposed this will be a long recession, but shouldn't get worse than that because of the the % of GDP taken up by government and health care spending. (It may have been on Charley Rose, but I saw so many experts lately they are starting to run together). The problem with that assumption is that when govt revenues go down during a recession, combined with the finite patience of the foreigners who subsidize our deficits, AND when health care benefits are lost from layoffs and shutdowns, those two sectors won't contribute their share.
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Posted 01:02 PM, 10/01/2008
frankg962
You wingnuts trying to lay this all off on Fannie and Freddie are killing me. Let's see, this bailout is aimed where? Wall Street. Hmm and where did Paulson work before becoming Sec Treas? Goldman Sachs on Wall Street. No nothing fishy there. You know if it looks like a duck and quacks like a duck, it probably is a duck. For those of you too young to remember the days of federal regulation of Wall Street, it really wasn't that bad. Warren Buffett and others found ways to make millions honestly during that period. This made me think about something else though and if anyone had any constructive thoughts on it I would love to hear them. Milton Friedman, I believe, won the Nobe Prize for economics by claiming that a company had one responsibility, to make money for shareholders. Now prior to his postulate, most people who opened businesses acted as a citizen of the community where they did business. In other words, most businesses prior to the late 70's felt that they had at least two responsibilities, to shareholders and to the communities where they did business. It seems to me that the adoption of Friedman's philosophy is part of what has brought us to this "market knows best" moment. Anyone else have a thought on this?
About Dick Polman

Cited by the Columbia Journalism Review as one of the nation's top political reporters, and lauded by the ABC News political website as "one of the finest political journalists of his generation," Dick Polman is a national political columnist at the Philadelphia Inquirer. He is on the full-time faculty at the University of Pennsylvania, as "writer in residence." Dick has been a frequent guest on C-Span, MSNBC, CNN, NPR and the BBC. He covered the 1992, 1996, 2000, and 2004 presidential campaigns.

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All commentaries posted before April 18, 2008, can be accessed at www.dickpolman.blogspot.com.