Over the past few weeks, the heads of the so-called “Big Three” American automakers have repeatedly gone to Congress to plead for a bailout.  At first media coverage focused on the (legitimate) outrage over the CEOs using separate private jets to come to DC.  Then, this week, we’ve had the circus of watching the same, now supposedly contrite, men arrive after driving 500 miles in hybrid cars.  Throughout, we’ve had the skepticism (and posturing) of Members of Congress, who are holding the country’s largest remaining industry (which, by one account I’ve seen, is responsible for generating jobs for 1 out of every 10 Americans) to a much higher standard than they did the crooks, con-men, and charlatans on Wall Street.

I hold no brief for the Big Three.  For decades now they’ve put short-term profits over long-term thinking.  They’ve sacrificed American strategic interests (and their long-term prosperity) in order to sell big, ugly, gas-guzzling SUVs and trucks.  They have decimated entire communities by outsourcing jobs either overseas or to other parts of the United States — mainly the South — where unions aren’t nearly as powerful.  They’ve proven themselves incapable of streamlining, restructuring, or retooling in a way to make themselves more competitive.  They have brought their problems on themselves, and on one level they deserve to die.

But this is crazy.  We’ve just dumped at least $500 billion into a series of ratholes — AIG, Citi, Bear Stearns, etc. — that contribute no real value to the economy other than to move money around.  But now, we are told, we should not spend significantly less to save hundreds of thousands of people from joblessness.

Does anyone seriously believe that the collapse of the auto industry won’t have a cascade effect?  The first to go will be the auto parts infrastructure that feeds these behemoths.  Then other businesses (large and small) no longer will have the customer base to sustain themselves. (Does anyone seriously think that, say, Wal-Mart will keep stores open if nobody is buying anything?)  Finally, local and state governments will no longer have the tax base necessary to sustain a range of public services.

If there is an equation for a second Great Depression, it has to involve destroying the economy of an entire region in the name of teaching some fat cats a lesson.

As I’ve watched this spectacle, I’ve wondered why Congress isn’t asking the people most affected — the workers — to testify.  This new ad by UAW isn’t a replacement, but it’s an important step toward moving beyond the CEOs to see the real face of the bailout:

I’m a Michigander by birth (though I was raised in Florida).  When I was a kid, there were two iron laws in our family:  go to church and buy American cars.  To this day, when Molly and I return to visit family (she’s also from Michigan), the overwhelming majority of cars on the road are either American-built or American-owned.  Michiganders — even those who don’t work (directly or indirectly) for the automakers — are fiercely loyal to and protective of what they recognize is the foundation of their economy.

We’re not merely talking about the death of an industry here.  We’re talking about the end of a dream and a way of life.  It is the autoworker, after all, that exemplified the potential of mid-20th Century America — a place where you could work a blue collar job, earn a nice middle-class living, and put your kids through college.  It is the Midwest, after all, that was, until the 1970s, the economic engine that drove prosperity throughout the United States.

Abandoned Fisher Body Plant, Detroit

Much of that already is gone.  Here’s what I wrote a few months ago while visiting Michigan:

When I was a kid, my dad was the editor of The Saginaw News.  When we moved there (the summer of 1966), Saginaw was still a fairly prosperous city, with two major plants — Saginaw Steering Gear and Gray Iron Foundry (later Central Foundry) — providing a large number of people the chance to live a middle-class existence.  It was a tradition that everybody worked in one or the other at some point. My brother spent several summers working at one, and my then-brother-in-law started on the line and eventually ended up as an executive after GM helped put him through college.

But the automakers weren’t the only source of prosperity:  Wickes Lumber, a legacy of the years when Saginaw was one of the great lumber processing towns, remained a major employer, and several other large companies contributed as well.  The downtown was in fairly good shape, with several large department stores, including Morley Brothers and Heavenrich’s, as well as the Saginaw Hotel and the newspaper, serving as anchors.

By the time we moved to Ann Arbor (August 1973), the rot already was evident  There were multiple causes:  the 1967 Detroit riots (and 1968 riots elsewhere) caused many whites in the city to flee to the surrounding township; the first mall (Fashion Square) opened outside the city, leading many businesses to move out of downtown and leading those that tried to stay to fail; Wickes consolidated its offices elsewhere; and, of course, the energy crisis, which, combined with competition from Japan, began the Big Three’s long, slow decline (Central Foundry relocated in 1977).

Today, downtown is almost completely empty, most industries are gone, and only the continued presence of Saginaw Steering Gear keeps the city going.  That’s only one story.  Despite its occasional exaggerations, Michael Moore’s Roger and Me is a fairly accurate picture of Flint’s decline.  And there are far too many others.

To let the auto industry die would be to witness the epic failure of Saginaw — and all the other cities and towns that are only barely hanging on as it is.  These workers (and the cities they live in) will face the economic equivalent of Katrina.  If anyone thinks this month’s job loss figures are bad, just wait until the automakers go under.

There are plenty of ways to structure a bailout so as to ensure that it accomplishes not merely the existence of the Big Three, but their reinvention.  These include mandates on changing leadership, a significant paring of lines and models, a cutback on gas-guzzlers, subsidization of alternative technologies, the retooling of plants for other projects (such as high-speed rail), and even some sort of leveraged support that would allow the companies to restructure without actually calling it bankruptcy.

So enough already.  Congress needs to stop moaning about the people running these companies and start thinking about the hundreds of thousands who will suffer if we don’t do the right thing.  Bush needs to do the right thing by signing whatever Congress puts in front of him.  And President-elect Obama needs to speak out more forcefully in favor of a solution.

We can’t afford the consequences of inaction.

Photo:  Derek Farr via Flickr, used under a CC 3.0 license

Related posts

• The Big Three Bailout: The View from Michigan
• Michigan Diary: Unfree(p) and Unfair
• Detroit Exhales
• Death Knell?
• What He Said

Unless something unexpected happens in the next nineteen days, the American people will elect Barack Obama to be the next President of the United States, and will do so by a large enough margin for him to have a mandate to address the numerous problems caused by that disaster known as the Bush Administration.

The challenges will be immense.  And should Obama stumble, Sarah Palin will be waiting in the wings.

Palin already is laying the groundwork for a run in 2012.  And given her actions over the past two months, it is a safe bet that she will do anything and everything in her power to win.

The key question is not whether she will challenge Obama in four years, but rather what kind of race she will run.   Is Palin merely another ambitious politician willing to say and do anything to get elected, or are we witnessing the emergence of a genuinely anti-democratic populist — a successor to such notorious figures as Charles Lindbergh, Father Charles Coughlin, Huey Long, Strom Thurmond, Senator Joseph McCarthy, and George Wallace?

If the past two months are prologue, Palin represents a significant threat.  She favors demagoguery over democracy.  She celebrates her own lack of judgment and experience as her best qualifications for the office she seeks.  She slanders Obama and other opponents, suggesting that they are willing to sell out America.  She uses her supposedly folksy background to attack the media and elites as out of touch with average Americans.   And she plays to the mob, appealing to and encouraging the most reactionary, angry, hateful, and racist elements of our society.

These are Palin’s people, the worst angels of our nature.  They are ready, willing, and determined to follow her regardless of what happens on Election Day.  The Palinistas are far less interested in electing McCain than they are in putting the Sarahnator one step away from the White House (and, they hope, in it soon).  They will never accept an Obama presidency, and should McCain somehow pull off a miracle, they will count the days until Palin is able to push him aside and assume power herself.

It would be easy to suggest that Palin is little more than a demagogue, that she would not move the United States away from its democratic traditions.  And in fairness, we are still too early in Palin’s career to determine whether she is a genuine threat.

But do we really want to take the chance?

If Palin really does represent a move toward anti-democratic populism, she already is far more dangerous than any earlier demagogue.  She’s not merely some nutjob with a radio following, or a regional figure who failed to move onto the national stage.  She’s the Republican nominee for Vice President of the United States.

No previous anti-democratic figure — not even Strom Thurmond in 1948 or George Wallace in 1968 — ever had a serious chance of getting elected.    Palin does.  And given McCain’s medical history, there is a real chance she would be President before the next election came around.

Change genders, and Palin is a modern day evocation of Senator Berzelius “Buzz” Windrup, the anti-hero of It Can’t Happen Here, Sinclair Lewis’s alternate history of America under a fascist dictatorship:

Oh, he was common enough. He had every prejudice and aspiration of every American Common Man. He believed in the desirability and therefore the sanctity of thick buckwheat cakes with adulterated maple syrup, in rubber trays for the ice cubes in his electric refrigerator, in the especial nobility of dogs, . . .in being chummy with all waitresses at all junction lunch rooms. . .and the superiority of anyone who possessed a million dollars. He regarded spats, walking sticks, caviar, titles, tea-drinking, poetry not syndicated in newspapers, and all foreigners, possibly excepting the British, as degenerate.

But he was the Common Man twenty-times-magnified by his oratory, so that while the other Commoners could understand his every purpose, which was exactly the same as their own, they saw him towering among them, and they raised hands to him in worship. . . .

That’s Sarah Palin:  fake small-town rhetoric combined with an unquenchable thirst for power.  And like Windrup, she has attracted a cabal of back-room intellectuals who intend to use her to achieve their own ends. What’s not clear is whether Palin is, like Windrup, little more than a figurehead, or if she actually has the ruthlessness to manage those who would make her queen.

Given the fact that we still do not know how bad things will get over the next few years (and even though they are unlikely to be as bad as the Great Depression, they surely will be worse than anything most of us have ever seen), there is a very real possibility that an Obama Administration may not reverse the disastrous situation that Bush has left us. That is the premise of Lewis’s novel — that Roosevelt’s best efforts weren’t enough and things were much worse at the end of his first term.

If history does not repeat itself — if Obama is not able to tackle the problems we face — then hope, change, logic, and cool will not be enough to sustain him.  Again, Lewis:

The conspicuous fault of the Jeffersonian Party. . . was that it represented integrity and reason, in a year when the electorate hungered for frisky emotions, for the peppery sensations associated, usually, not with monetary systems and taxation rates but with baptism by immersion in the creek, young love under the elms, straight whisky, angelic orchestras heard soaring down from the full moon, fear of death when an automobile teeters above a canyon, thirst in a desert and quenching it with spring water–all the primitive sensations which they thought they found in the screaming of Buzz Windrip.

Sarah Palin is ready.  Should things get worse over the next four years, her folksiness and rhetoric may start appealing to more than just the far right.  If she turns out to be all that I fear, then John McCain may be remembered best not for his own career, but for his role as an American Paul von Hindenburg.

Related posts

• Why McCain’s Attacks Won’t Work
• Thought for the Overnight
• This Year’s “Truthiness”
• The Margin Call
• Snapshot: Politicians and the Bailout

My dad, James P. Brown, is a regular columnist for The Sarasota Herald-Tribune, writing mainly on local politics.  He spent most of his career in newspapers, and later went into politics, serving four terms as Mayor of Longboat Key, Florida.  His column this week looks at the differences between 1929 and 2008, particularly in terms of press coverage.  I thought it worth sharing with readers of Undiplomatic.

Way back in my early newspaper days I did a lot of jobs for The Jackson [Michigan] Citizen Patriot, among them handling special promotions.  One project was setting up a booth at the County Fair.  What brings this up now is the queasy feeling I’ve been getting these last few weeks reading all the ‘negative’ headlines and stories about the economy.

Why do we have to write all this stuff?  Even as a newspaper man I couldn’t help asking this.  Are we just making things worse, feeding fear, generating further downtrends in the market?  Can’t we focus on the positive?

That’s what took me back to that 1950s Jackson County Fair booth.  I had decided to paper its walls with copies of headlines and front pages of the century’s biggest stories.  One of these, I decided, was the Wall Street crash of 1929.

Over and over I went through the paper’s files for 1929.  I couldn’t find a single headline that even hinted at the collapse of the stock market that was to shake the world.  Not a one!  As the days progressed, though, there were plenty of stories about “Things looking up” or “Buying surge predicted.”

It was a different age, for newspapers as well as the world.  Editors were “responsible” people; many felt it was their job to build up the economy, not proclaim its weakness; to decide what was “good for readers”, not necessarily what they needed to know.

The obvious moral:  sticking your head in the sand doesn’t work for the purveyors of news any more than it does for everyday citizens.  To try to hide what’s happening, to sugar-coat, will if anything make the situation worse.

All of which stirs another memory – the famous putdown of Dan Quayle in a vice-presidential debate when he compared his career to the late President Kennedy’s: “Believe me, Senator,” said Lloyd Bentsen, his opponent, “I knew Jack Kennedy and you are no Jack Kennedy.”

Well, I’m old enough to have lived through the Great Depression and, believe me, what’s happening in this country  is bad, yes, but it isn’t even close to what the 1930s were like.

There was no social security then, no Medicare, no employer financed retirement and health insurance.  A fifth of the population that often was forced to live on the charity of others.  Today, their children have a pretty darned good life.  We didn’t have nearly as many foreclosures because very, very few could afford to buy a home.  And, prior to 1933, we operated under a government that truly stuck its head in the sand and lived on the promise that “prosperity is just around the corner.”

Unemployment officially was 25 percent; in the real world it was closer to 50 percent.  What is it today, 6 percent? Then thousands of men roamed the country in boxcars looking for work.  No one had ever heard of insurance for bank accounts and, as failures piled one on top of the other, millions of families lost what little savings they had.  It’s a crime the way today’s stock market found its way around regulation, but then, there essentially was none.  Margin buying wiped out hundreds of thousands of people.  Broken men leaping out of skyscraper windows became a symbol of the times.

My family – five of us — lived in a two-room cabin in a tourist court with community shower and bath, subsisting on what my mother earned setting hair for 25 cents for a finger wave – and felt lucky to have that much.

And month after month all that was reported in thousands of newspapers was “Things Looking Up” or  “Buying Surge Predicted.”

As grim as today’s headlines make you feel, in news as in life  maybe honesty really is the best policy.

Related posts

• What He Said
• The Worst Angels of Our Nature
• The Real Face of the Big Three Bailout
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Ezra Klein nails the current crisis.  It’s not just economic, it’s political.

Above all, though, this is a failure of politics. Like with global warming, with health care, with the national debt, with immigration. It is further proof that we have a calcified political system incapable of responding to either long-term threats or short-term crises. The electoral and partisan incentives have made actual action too dangerous and rendered obstruction everyone’s easy second choice. And in politics, you just about never get your first choice. And so the Republicans killed this bill. Without their cover, the Democrats couldn’t save it, because politically, they couldn’t take ownership of it.

It’s easy enough to imagine a society running atop a stable economy even when it has an unhealthy politics. And it’s simple enough to see how an unstable economy can be calmed through concerted action by an effective political structure. But an economy in chaos and a political system in paralysis? What happens then?

What happens then, Ezra, is stalemate, crisis, disaster.  We’re entering territory we’ve only seen twice before in American history: 1859-1861, the greatest political crisis this country has ever seen, and 1929-1932, the greatest economic crisis this country has ever seen.

The only question is whether the next President can do what Lincoln and Roosevelt did:  provide the leadership necessary to end the crisis and get the United States back on track.

And which of our two current candidates does anyone seriously think can do that?

Related posts

• A Crisis in Confidence, Not Liquidity
• The Worst Angels of Our Nature
• The Real Face of the Big Three Bailout
• The Margin Call
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Three observations about the current mess.

1.  Last night, Bush looked scared, lost, and out of place.  As my wife Molly put it, he was reading words put into his mouth rather than expressing his own thought.  For all our mocking of Al Gore as Mr. Roboto eight years ago, no President has ever looked as wooden as Bush did last night.

But it was not merely a question of performance.  Bush looked small — a sad little man out of his depth, more Willy Loman than Atticus Finch.  It was a pathetic exercise in ass-covering and special pleading.  Where others have risen to an occasion, Bush sank into the depths of his own failure.

2.  It is easy to regard our current mess as a question of insufficient liquidity.  Although the past two weeks’ event are clearly the product of the current Administration’s disastrous economic policies, what we’re really facing is a crisis in confidence.  That’s why the Paulson-Bernanke decision to turn this into one of the biggest crises in American history was so devastating:  it created the conditions for a collapse of confidence in the American economy.

If bankers continued to believe the economy was sound, they would lend.   If foreign investors still thought the United States as a good place to put their money, the failure of a few large firms would do no more harm to our economic prospects than the Chrysler bailout, the collapse of the savings and loan industry, or the Enron meltdown did.

Credit isn’t drying up because there’s no money; it’s disappearing because people are afraid — scared to lend, scared to buy, scared to do much of anything at all.  In the end, the Paulson plan (or the Dodd plan or any other proposal for that matter) will succeed or fail not because it pumps money into the system, but because it restores confidence.

What is required of leaders in times like this is not merely policy prescriptions, but also reassurance.  Think about 9/11.  For all we may despise him now, Rudy Giuliani — not Bush, I would note — demonstrated that kind of leadership.  For about a week, Giuliani became almost a second President, offering Americans the comforting words they so longed to hear — words that Bush, whether unwilling or unable, never himself got around to saying.

In the current crisis, we have yet to see anyone play a similar role.  Bush has been a disaster.  McCain’s abrupt decision to “suspend” his campaign looked more like political panic than economic stewardship.  Obama has been so cool, calm and collected that he looks detached.  Paulson and Bernanke have turned into the Panic Twins, and no one in Congress has stepped to the plate.

3.  I could not help contrasting Bush’s speech last night with one delivered during  an even greater crisis.  On March 4, 1932 (the official date of Inauguration Day had not yet been moved to January), Franklin D. Roosevelt gave his First Inaugural Address, three years after the Great Crash of 1929 had plunged the United States into the Great Depression.  It was a desperate time, far worse than what we face now (at least as of now), the country teetering on the edge of chaos, despair, and the collapse of democratic government.

In response, Roosevelt gave what is one of the greatest inaugural speeches in American history (surpassed, perhaps, only by Lincoln’s Second), helping to calm American fears and start the long hard road back to prosperity — a process that lasted until the end of  the Second World War, nearly sixteen years after the Great Crash.

Despite the fact that it would take over a decade for the United States to recover fully, Roosevelt’s speech that day was a turning point, if not in terms of economic growth, then in terms of Americans’ willingness to bear down and try to fix what was ailing the country — and in terms of saving our democratic form of government.

In this environment of fear and political posturing, I think it would be useful to recall what real leadership looks like.  The following are excerpts; you can read the entire speech here.

I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our people impel. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper.

So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.

In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.

In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. . . . Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it.

Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. . . .The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.

Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live. . . .

If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we can not merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective. We are, I know, ready and willing to submit our lives and property to such discipline, because it makes possible a leadership which aims at a larger good. This I propose to offer, pledging that the larger purposes will bind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife.

With this pledge taken, I assume unhesitatingly the leadership of this great army of our people dedicated to a disciplined attack upon our common problems.

Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors. Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form. That is why our constitutional system has proved itself the most superbly enduring political mechanism the modern world has produced. It has met every stress of vast expansion of territory, of foreign wars, of bitter internal strife, of world relations. . . .

For the trust reposed in me I will return the courage and the devotion that befit the time. I can do no less.

We face the arduous days that lie before us in the warm courage of the national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike. We aim at the assurance of a rounded and permanent national life.

We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.

So how about it Senator Obama?  If John McCain does not show up tomorrow night, it’s your chance to give a speech that could reassure the nation, one that would match if not surpasses the best you’ve given in the past.  It might do more to restore confidence than anything that’s happening in Washington.

And if that isn’t enough incentive, it also just might win the election for you.

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In case you missed it last night, here’s the video of the full Couric interview:

To me, the crucial part comes at the end:

COURIC: You’ve said, quote, “John McCain will reform the way Wall Street does business.” Other than supporting stricter regulations of Fannie Mae and Freddie Mac two years ago, can you give us any more example of his leading the charge for more oversight?

PALIN: I think that the example that you just cited, with his warnings two years ago about Fannie and Freddie - that, that’s paramount. That’s more than a heck of a lot of other senators and representatives did for us.

COURIC: But he’s been in Congress for 26 years. He’s been chairman of the powerful Commerce Committee. And he has almost always sided with less regulation, not more.

PALIN: He’s also known as the maverick though, taking shots from his own party, and certainly taking shots from the other party. Trying to get people to understand what he’s been talking about - the need to reform government.

COURIC: But can you give me any other concrete examples? Because I know you’ve said Barack Obama is a lot of talk and no action. Can you give me any other examples in his 26 years of John McCain truly taking a stand on this?

PALIN: I can give you examples of things that John McCain has done, that has shown his foresight, his pragmatism, and his leadership abilities. And that is what America needs today.

COURIC: I’m just going to ask you one more time - not to belabor the point. Specific examples in his 26 years of pushing for more regulation.

PALIN: I’ll try to find you some and I’ll bring them to you.

Wow.  Just stunning.  Unbelievable.  She would have been better off admitting up front that she didn’t know rather than letting Couric ask her three times and then admitting she didn’t know.

This is not merely bad.  It’s Bush-looks-good-in-comparison bad.  This is Tina-Fey-is-gonna-have-a-field-day bad.  This is at-least-you-foreign-policy-interview-doesn’t-look-as-bad-now bad.

There really are only two explanations for this.  The first is that she’s stupid.  I honestly don’t think that is the case.  The second is that they didn’t prep her on the economy, or she didn’t read the briefing books.  Were they so focused on improving her foreign policy props this week that they forgot to brief her on the current meltdown?

Actually, there is a third possibility:  she’s cratering, to use a favorite McCain phrase.  The pressure is too much and she’s freezing.

Regardless of which one of the three scenarios is the most accurate, this can’t help McCain.  If his current ploy to suspend the campaign doesn’t work, he’s pretty much dead in the water.

Related posts

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TPM scores early footage of Katie Couric’s interview with Sarah Palin:

Wait a second.  Didn’t McCain say something yesterday about not supporting the bailout?  Or at least hinting that he might not support it?  And now Palin says that we need to support it or we’re going to face a second Great Depression?  Do these guys even bother to pursue the most basic message coordination?

Does anyone in the McCain campaign still think that Sarah Palin has the qualifications to be President?  Does John McCain?  There was, after all, this little item from earlier today:

McCain then looked around the room and gestured as if to welcome questions. The AP reporter shouted a question at Gov. Palin (“Governor, what have you learned from your meetings?”) but McCain aide Brooke Buchanan intervened and shepherded everybody out of the room.

Palin looked surprised, leaned over to McCain and asked him a question, to which your pooler thinks he shook his head as if to say “No.”

As Steve Benen over at The Washington Monthly notes,

Look, “What have you learned from your meetings?” is an easy one. It’s not a trick question, or a “gotcha” question, or even a question intended to do test Palin’s limited understand of international affairs. She could have easily said something like, “I’ve been encouraged by how much support the United States continues to enjoy around the world.” No muss, no fuss. It’s not rocket science.

But, no. The McCain campaign apparently believes the Republican vice presidential nominee is some kind of child, under strict instructions not to speak. Palin has no doubt been receiving extensive briefings on a variety of subjects, and could probably handle a random question or two, but the McCain gang is so convinced of her incompetence, they’re just not willing to take the risk — even after a genuine media backlash has begun in earnest in response to the campaign’s heavy-handed approach.

If I were Sarah Palin, I would be furious.  The McCain campaign is turning her into the very parody they decried.

By the way, given the fact that McCain won’t even let Sarah Palin answer the simplest of questions, is her campaign suspended as well?  Or will she continue to draw big crowds and avoid hard questions?  It’s not like they need her in Washington to vote on the damn bailout.

Hat tip:  Daniel Larison

Related posts

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Is it me, or is the proposed bailout (whether the Paulson plan, the Dodd plan, a hybrid, or another version we don’t know about yet) sound increasingly like a really, really bad idea? I’m getting this queasy feeling in the pit of my stomach, like nobody — not Paulson or Bernanke, not Bush or Dodd or Frank or Shelby, not even McCain or Obama have any freaking clue what to do.

Lindsay Beyerstein over at Majikthise has many of the same doubts I’ve been having.

I’m troubled by the instant bipartisan consensus that the the government must bail out the investment banks. It reminds me of the run-up to the Iraq war when every discussion was framed in terms what should be allowed to happen before we invaded, not whether overthrowing Saddam Hussein could solve anything.

Remember that the Democrats are just as beholden to the financial services sector as the Republicans. It’s not coincidental that the options on the table all involve bailing out these companies. At this point, the Democrats are arguing for a bailout, plus executive pay controls, mortgage-related bankruptcy reforms, and maybe an economic stimulus package.

My question is this: What if the government were to take the $700 billion to $1.5 trillion set aside for the bailout and put that money into programs to help those hardest-hit by the meltdown and Americans in general[?]

For example, progressives often note that pension plans would be decimated without a bailout. If that’s the worry, why not invest in retirement security for our people directly? An extra $700 billion in the Social Security trust fund would cushion a lot of retirements.

These are our tax dollars. We can either invest them for our future, or we can buy a lot of worthless paper to bail out reckless banks. Ultimately, bailouts just set us up for more crises by proving, once again, that the government will cover the losses of big business.  Maybe a bailout is necessary, but I troubled that no one seems to be articulating the case explicitly or considering alternative options.

I don’t want this country’s economy to collapse, but do we have any guarantees that the bailout will prevent that?  Yesterday we had some indication of what might happen if the bailout does go through — oil had it’s biggest one-day jump ever, gold also went up significantly, and the dollar declined to a level close to its all-time low against the Euro.

If I’m not mistaken, those numbers were not the product not of jitters over a bailout not happening, but rather over fears that a bailout will happen. If we print $1 trillion in new money to fund the Paulson plan (and let’s not kid ourselves, that’s what we’re talking about here), we would seriously cut into the value of the dollar.  That in turn means that the price of commodities would skyrocket.  In other words, serious inflation.

But if we don’t pursue a bailout, the economy collapses, credit disappears, and, I presume, trillions of dollars of value disappear overnight.  That probably will bring on massive deflation, a run on banks, and the biggest economic crisis since the 1930s.

But wouldn’t the latter option at least leave us with the capital to try to restore the system?  Wouldn’t that $1 trillion then be available to fix the systemic problems in a way that dropping it into the black hole we’re calling the bailout can’t?

We have no guarantees that the bailout will solve the problems we face.  The people telling us it will are the same ones who, six months ago, went on national television and assured people, post-Bear Stearns, that the economy was sound.

I had hoped today to attend a meeting put together by Steve Clemons that is looking at these questions.  Unfortunately, some obligations on the consulting side of my life prevented me from doing so.  One of the people I wanted to hear was my friend Leo Hindery, one of the smarter guys around on these issues and an economic advisor to the Obama campaign.  Yesterday, Steve released a portion of what Leo plans to say today:

As we all know, the Bush administration is asking Congress to let the government buy $700 billion in troubled mortgages, which would raise the statutory limit on the national debt to $11.3 trillion from $10.6 trillion. This $700 billion is over and above the $85 billion already committed to AIG, the $29 billion related to Bear Stearns, and the very conservative $25 billion associated with the bailouts of Fannie Mae and Freddie Mac.

The solutions being proposed are the most expensive combined bailout in the nation’s history and will sharply curtail the ability of the next president to push for tax cuts or new spending. And yet I believe they are not nearly enough, since they do not adequately cover the exposure associated with leveraged loans and, especially, the credit-default swaps market which has ballooned to a nearly unimaginable $45.5 trillion, from $900 billion in 2001.

This credit-default swaps market, which was developed by financiers who hired the best lobbyists they could to keep regulators away, is essentially nothing more than insurance on debt, but because there are now many more credit-default swaps outstanding than there are bonds for them to cover, it could potentially be a black hole of distress at least as large as the sub-prime mortgage crisis. Tens of trillions of dollars ago these swaps became nothing more than a way to gamble with almost no money down.

Leo clearly thinks that $1 trillion is little more than a shot in the dark  We’re standing on the edge of a cliff, throwing a rope over the edge, and hoping that it’s long enough to get us to the bottom.  But we really have no idea whether that’s true.

About eighteen months ago, I had dinner with Leo, Steve and a few others.  I told Leo that, sooner or later, we as a nation were going to face the equivalent of another margin call — some event that would demonstrate just how much trouble we were in.  Here’s a good short description of what that meant in 1929:

Margin calls played a role in the Great Depression. Speculators used leverage to play the market. They borrowed money, bought stocks, and put the stocks up as collateral. This only works when the stocks do not lose in value, so their price better go up. If it goes down, the value of the collateral will eventually fall below that of the loan. This is when the bank gets worried and sends you a margin call so that you close the gap.

Sound familiar?

Eighteen months ago I said that something would happen to produce a similar result.  I didn’t know what it was going to be  — an end to the real estate buble, a collapse of the dollar, another terrorist attack, China calling in its marker — but something was going to catch up with us and we would face real trouble when it did.

I think we’re there.  This is our margin call.  Not literally, of course, but the impact on the economy is going to be essentially no different from what happened in 1929.

If Paulson and Bernanke are wrong — again — and Hindrey is right, dropping $1 trillion now isn’t going to make a difference.  We would still have a meltdown, except we won’t have that $1 trillion available to fix the underlying structural problems that have caused this mess.

In addition, we would have a dollar worth considerably less than it is now.  We would still be dependent on foreign oil that now will cost much more than it does now.  We would still be stuck paying for a war in Iraq that is in the process of sucking an additional $1 trillion out of the economy. And we have no money to fix all the other problems we face — like a crumbling infrastructure, health care, a failing educational system, and social security and medicare insolvency, to name just four.

In other words, if the bailout fails to prevent the crisis, we would face an even worse scenario than what we do now:  massive inflation, a collapsing economy, and no way to fix it.  We’re talking Zimbabwe, Argentina, Germany in the 1920s.  That way lies madness and most likely dictatorship.

I’m not an economist, but it sure seems like we’re between a rock and a hard place here.  Tell me I’m wrong.

Tell me that these guys — the same guys who got us into this mess — know what they’re doing.

Tell me that we’re better off bailing these crooks out than we would be putting the money into saving social security and pension funds, investing in clean energy, fixing our infrastructure, developing a better health care system, and all the other things that are going to fall by the wayside if we use this good money to chase after bad.

Tell me.

I’ll try to believe you.

Photo: via Wikipedia, photo in the public domain

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