Expediency, Morality and the McCain Economy

Last week, I picked on the Democratic candidates, for their failure to accurately diagnose the causes of our present economic crisis, or to offer effective proposals for dealing with it. Since then, both Obama and Clinton have sharpened their critiques. There's a lot to praise in their speeches, and a fair amount to criticize. But sometimes it's worth pausing to remember that, for all our internal debates, the gaping chasm between Republicans and Democrats on these issues makes our own divisions all but vanish in comparison. So let's take a good look at the economic address McCain delivered on Tuesday to prove his sound grasp of the issues.

He begins with a classic McCain line, a reminder of why so many Americans find the man's approach to politics refreshingly honest:

Let's start with some straight talk: I will not play election year politics with
the housing crisis. I will evaluate everything in terms of whether it might be
harmful or helpful to our effort to deal with the crisis we face now.

Fantastic stuff. A no-nonsense approach to the crisis. The trouble is that he repudiates it in the very next line:

I have always been committed to the principle that it is not the duty of
government to bail out and reward those who act irresponsibly, whether they are
big banks or small borrowers.

Here's the rub. McCain starts by promising to apply a basic standard of expediency. He'll weigh his policies solely in terms of their effectiveness in responding to our present crisis. Then he reframes the issue in moral terms. Those who have acted irresponsibly will get their just deserts - the government won't intervene to help them. There's just one problem with that - what happens an effective response to the crisis serves to aid those who acted irresponsibly?

Enter the McCain double standard:

Government assistance to the banking system should be based solely on preventing
systemic risk that would endanger the entire financial system and the economy.

Let's translate that. When banks and other financial institutions behave irresponsibly, McCain's saying, he'll bail them out if allowing them to fail seems likely to cause collateral damage. In other words, when his two principles come into conflict, he'll choose expediency over morality - not because the banks deserve to be rewarded for their sins, but because failing to act could endanger the interests of innocent parties.

And when it comes to the millions of ordinary Americans facing foreclosure?

In our effort to help deserving homeowners, no assistance should be given to
speculators. Any assistance for borrowers should be focused solely on
homeowners, not people who bought houses for speculative purposes, to rent or as
second homes. Any assistance must be temporary and must not reward people who
were irresponsible at the expense of those who weren't.

Suddenly, morality trumps expediency. McCain is focused on punishing the guilty. When it comes to the financial sector, he suggests our guiding principle ought to be the intent of our actions - so long as we act in the furtherance of the general good, we can overlook incidental benefits to the guilty parties. But when it comes to homeowners, his overriding concern is the effect of our actions - if policies would, in part, deliver relief to people who behaved irresponsibly, they must be rejected, even if they offer the most effective response.

Undergirding this double standard is a very particular understanding of the origins of the present crisis, which McCain traces to two specific problems. The first of these was the creation of a speculative bubble in housing. "Some Americans bought homes they couldn't afford," explains McCain, "betting that rising prices would make it easier to refinance later at more affordable rates....and those homeowners are now facing the reality that the bubble has burst and prices go down as well as up." But it's not all 55 million mortgage borrowers in America whom McCain blames for our present troubles, but rather the 4 million whose lenders have foreclosed or who are more than 30 days late with their payments and so considered delinquent. The other "51 million," he says, "are doing what is necessary -- working a second job, skipping a vacation, and managing their budgets -- to make their payments on time." Note the implication. If the other 4 million had just worked a little bit harder and tightened their belts a little more, we wouldn't be facing this mess.

That borders on delusion. I'm sure there are some examples of profligacy leading to foreclosure. But for the most part, the folks facing foreclosure are doing everything they can to stave it off. They may take third jobs, in addition to the second jobs they were already working just to make ends meet. Forget vacations - they're spending less on food, or their children's clothing. And in most cases, it's still not enough. When the first balloon payment hits after two years, when the adjustable rate starts to float, when they get hit with an unexpected medical bill, when a spouse gets laid off in the faltering economy - they still fall behind on the payments. Their attempts at home ownership were doomed the moment they signed their loan papers, and their hope of escape was sealed by the declining market. And yes, they certainly deserve to be blamed for their original mistakes in borrowing as they did. But the 4 million already falling behind - and the millions more who certainly will in the coming year, absent intervention - aren't in trouble because they're taking too many vacations, or because their family budgets are bloated and wasteful. They're in trouble because they can't afford to repay the loans they signed, and in many cases, because they can no longer sell their homes for enough to repay their loans, either.

McCain demands, later in the speech, that henceforth, borrowers "should be able to understand easily the terms and obligations of a mortgage" and that "every lender [must be] required to meet the highest standards of ethical behavior." But it's not clear why such reforms are necessary - after all, he never claims that borrowers weren't able to understand the terms of the deals they were signing, nor that lenders failed to meet the standards of ethical behavior. All the lenders were guilty of, says McCain, was growing "complacent," enjoying "a false sense of security," and lowering "their lending standards." The lenders erred, in short, by failing to be on guard against those unscrupulous borrowers.

But that's just one cause of the crisis. There's also the turmoil in the financial markets, the result of "an explosion of complex financial instruments that weren't particularly well understood by even the most sophisticated banks, lenders and hedge funds." These instruments "weren't always managed wisely because people couldn't properly quantify the risk or the value of these bets." As a result of complexity and a basic lack of transparency, "the initial losses spawned a crisis of confidence in the markets."

Let's line those two explanations up, side-by-side. In the housing market, millions of ordinary Americans displayed remarkably little financial sophistication by taking out irresponsible loans, offered to them by a variety of lenders and then packaged and resold by our most sophisticated financial institutions. The borrowers alone are to blame for this mistake. But in the financial market, the problem was that everything grew too complicated, and none of the analysts, brokers, or executives really had any idea what it all meant or how to manage it. So these experts, these financial wizards, piled on risk without understanding what they were doing. It's not clear to McCain that anyone should be blamed for this.

You read that correctly. John McCain believes that Joe Average needs to be punished for his irresponsible speculation, buying a home by signing a mortgage he didn't fully understand, thereby shouldering risk he failed to manage properly. But John Banker, who irresponsibly speculated by creating and trading in complicated securities he didn't fully understand, thereby shouldering risk he failed to manage properly? Well, if it helps the economy, he should be bailed out. Not only that, but since his irresponsible speculation and ineptitude have drained his bank's reserves, we need to replenish them by "removing regulatory, accounting and tax impediments to raising capital." And then, because the credit crisis has severely shaken our economy, we need to respond by "reducing our corporate tax rate" and "eliminating the Alternative Minimum Tax," so that neither John Banker nor his employer will be unduly restrained from seeking to maximize their profits by fear that the government will make them share.

I'm not arguing that we should blindly bail out borrowers, or that intevening to shore up financial markets is a mistake. Clearly, we need to weigh any response carefully. But I do think we need a single, consistent standard. We need to acknowledge that there's more than enough blame here to go around - that borrowers, brokers, lenders, banks, investors and regulators all behaved with breathtaking irresponsibility. And then we need to take appropriate action, ensuring that the damage doesn't cascade through the economy. It's immensely gratifying to moralize, but weathering this crisis will require making difficult choices and compromises. There's no room for inflexible, rigid approaches.

Not to worry. McCain offers us these comforting words:

In this crisis, as in all I may face in the future, I will not allow dogma to
override common sense.

Of course not. Dogma is what the other guy believes. Sticking inflexibly to your own irrational views? That's just plain common sense.

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E Pluribus, Unum

Four years ago, Barack Obama burst upon the national stage with an inspirational address, decrying those who would seek to divide the nation. "There's not a black America and white America and Latino America and Asian America," he thundered, "there's the United States of America."

Yesterday, an embattled Obama articulated a far more realistic vision of the role race plays in our society. He acknowledged that there is indeed a black America and a white America. That a racial divide runs so deeply through our nation that we fail to credit or understand each other's grievances. That anger on either side of that divide is so real, and so profound, as to have produced a racial stalemate.

And yet, precisely because of that dour realism, this second speech was far more compelling than Obama's debut. To understand that apparent paradox, it's worth considering what Obama actually said about the state of race in America.

First, let's sketch the broad contours of the debate into which he was inserting himself. There are those on the left who contend that race is chimerical, a tool used by elites to divide the working classes. On the right, culture has largely supplanted genetics as the explanation of choice for racial disparities, in either case, rendering the problem all-but-intractable and absolving society of blame. And, as Obama himself pointed out, in the broad American center silence has been the rule - resentments fester just below the surface, but are rarely voiced in public. Into that void stepped the junior senator from Illinois.

As is his wont, Obama drew upon the most compelling elements of each of these visions, without succumbing to their excesses. He echoed the classic leftist critique of political and business leaders who exploit racial divisions to distract "attention from the real culprits of the middle class squeeze." And he affirmed the right's insistence on the danger of "becoming victims of our past" and the need for "taking full responsibility for our own lives."

Then he went a step further. "Trinity," Obama said "embodies the black community" in all its richness and all its shortcomings, and he is as much a part of that community as it is of him. And buried in that is a radical claim about the nature of America. By speaking of the joys of communal life and the strength he draws from his Christian faith, Obama was making the case for the importance of the particular amidst the universal. That's why he chose to read aloud from his memoir a passage describing his sudden epiphany that Trinity was built upon a foundation of collective experience. That much, one suspects, Reverend Wright would have applauded.

But Obama was not finished: "Our trials and triumphs became at once unique and universal, black and more than black." There, in a single sentence, is the essence of Obama's insight. Our identity as Americans neither elides nor erases our other affiliations. Quite the contrary. It is our strong grounding in our own particular communities and traditions that allows us to unite around our shared American values. That's why the young community organizer on Chicago's South Side struggled to connect with his audience until he found a church of his own - a particular community to ground him, and to allow him to reach for the universal. It's why communities of faith and of ethnicity, of shared values and activities, have always formed the basis of our vibrant civic life. When Obama speaks of "binding our particular grievances...to the larger aspirations of all Americans," he's simultaneously arguing for the importance of particular identities, which provide the basis for mobilization, and for the primacy of shared national goals. We are a United States of America because, instead of simply denying or suppressing our differences, we choose to build upon our unique identities in the pursuit of a more perfect union. E pluribus - out of the particular - Unum - we construct the singular.

And that's the second key insight that Obama offers. Differences need not be divisive. They can provide the basis for cooperation as readily as the grounds for animosity. In fact, Obama may be uniquely positioned to make this argument, born into a family "of every race and every hue." He reminds us that our separate communities blur at the edges, that they are fluid things, that they overlap and intermingle. That if we choose, our tragic racial history can at last be consigned to the past. That America is not static. That "our America can change. That is true genius of this nation."

It is, in the end, a subtle shift - but no less profound for that. If four years ago, Obama asked us to subsume our particular identities in the furtherance of collective goals, yesterday, he called upon us to harness our particular needs in the service of national aims. A call to unity that asks us to draw upon our separate identities is far more likely to provide a lasting basis for cooperation than one which relies upon our forgetting our differences. With his speech in Philadelphia, Obama finally offered a vision of unity that was sufficiently mature and sophisticated to be more than inspirational - it was convincing.

Crazy Like an Uncle

Fox News ran a typically sensationalistic report last night on the Reverend Dr. Jeremiah A. Wright, Jr, retiring pastor of Obama's own Trinity United Church of Christ. The ostensible news hook for the story was a sermon delivered by Wright on January 13, which the network suggested may have violated the church's tax exempt status. Let's get that out of the way up-front. Wright never uttered the magic words "endorse" or "vote," which would have been clear violations. If discussing the candidates were grounds for the revocation of nonprofit status, whatever the rules may technically say, then the IRS would first have to clear a substantial backlog, revoking the 501(c)(3) status of thousands of other churches before it got to Trinity.

But the real news in the report was an incendiary clip of the Reverend Wright in high dudgeon, framing the election in starkly racial terms. "Jesus was a poor black man who lived in a country, and who lived in a culture that was controlled by rich white people," he says. Perhaps enough to raise some eyebrows, but pretty much par for the course at Trinity. What followed was not. "It just came to me within the past few weeks, y'all, why so many folks are hating on Barack Obama." Unlike Hillary and Rudy, he says, Obama doesn't fit the mold of elites. Hillary has never experienced racial discrimination, he argues, and can not know what that's like. "Hillary ain't never been called a Nigger!" he shouts. "Hillary ain't never had her own people say she wasn't white enough." It's not in the clip I link to above, but Fox reports he even took a direct shot at Bill Clinton: "Hillary is married to Bill, and Bill has been good to us. No he ain’t! Bill did us, just like he did Monica Lewinsky. He was riding dirty."

First, let's be clear about what's being said. Wright is targeting those in the black community who were inclined to support Hillary. The sermon was delivered less than a week after Obama's loss in New Hampshire, but well before the Illinois primary, and his frustration is almost palpable. His argument, such as it is, is that Obama (like Jesus) knows what it is to live in a society that turns its back on him and his kind. That Hillary cannot know that. That there is no reason for blacks to feel indebted to the Clintons. And so, at least by implication, that it is incumbent on black people to support Obama and not Hillary.

I understand the man's point, but the fact remains - this is every bit as divisive and polarizing an argument as that advanced by Geraldine Ferraro. If it is wrong to suggest that gender alone entitles a candidate to votes, that the experience of being a woman in a man's world is uniquely difficult - then it is also wrong to suggest race play a similar role. Wrong, polarizing, and ultimately self-defeating.

Indeed, Obama's campaign was quick to recognize that these remarks were beyond the pale. Campaign spokesman Bill Burton issued this response:

Senator Obama has said repeatedly that personal attacks such as this have no place in this campaign or our politics, whether they’re offered from a platform at a rally or the pulpit of a church. Senator Obama does not think of the pastor of his church in political terms. Like a member of his family, there are things he says with which Senator Obama deeply disagrees.

That, I'm afraid, isn't going to cut it this time. Obama may not think of Wright in political terms, but it's quite clear that the converse is not so.

It's worth exploring the relationship between Obama and his pastor in somewhat greater depth. Here's Senator Obama, in perhaps his most affecting explanation of that relationship:

It is true that my Pastor, Jeremiah Wright, who will be retiring this month, is
somebody who on occasion can say controversial things....It is also true that he
comes out of the 60s; he is an older man. That is where he cut his teeth. That
he has historically been interested in the African roots of the African American
experience...
He is like an old uncle who sometimes will say things that I
don't agree with. And I suspect there are some of the people in this room who
have heard relatives say some things that they don't agree with...
And as I
said that last point I would make is that you know my Pastor is going to be
retiring over the next month. So my general view, and the reason that I raise
this, this is always a sensitive point, what you don't want to do is distance
yourself or kick somebody away, because you are now running for President and
you are worried about perceptions, particularly when someone is basically
winding down their life and their career.

I find myself empathizing with Obama, and admiring his instincts. He doesn't want to denounce a man who played a crucial role in his own life, who was a friend and a mentor when he needed one, just because it's now expedient to do so. He understands that Rev. Wright hails from a different generation (what, in another context, he labeled the Moses Generation) and Obama's entire candidacy is premised on the notion that that generation's day has passed, that it is now time for the next generation to take the reins of leadership, to transcend the divisiveness of earlier battles, to move us forward to a better future without neglecting the sacrifices of the past. I'm even sympathetic to the problem of a controversial spiritual leader. Who among us attends religious services with regularity, and hasn't squirmed in the pew from time to time, as the pastor or preacher or reverend or rabbi gives voice to a thought with which we adamantly disagree? Perhaps even a thought that is politicized or prejudiced? Or hasn't had an elderly relative do the same?

That's why I've always moved the scurrilous, conspiratorial e-mails to the trash bin on my computer. I was content to know that Obama was attracted to Reverend Wright and his church for the "cultural community" that they embodied; for their recognition that not just material interests, but also "hopes and dreams and...ideals and...values" motivate actions; and yes, for their Christian faith. If there's a single theme to Obama's intellectual achievements, it's been his ability to sieze upon powerful words and themes, lifting them out of their original context and reframing them to be inclusive and uplifting. Thus, Rev. Wright's fiery sermon on "The Audacity to Hope" in a racialized world becomes the title of Obama's serene meditation on the possibilities of transcending political and racial polarization. That seems to hold true more broadly. It's how Obama is able to credit the honorable motives of his opponents even as he disagrees with them. It's how Obama took the best of what Reverend Wright had to offer - community, inspiration, rebukes for his congregation's shortcomings - and set aside the anger and divisiveness that seemed to him relics of an earlier time.

The problem is that, with just weeks to go before he stepped down and removed himself as an ongoing issue, Reverend Wright crossed the line. Obama was succesful in his efforts to distance himself from Wright's opinions on myriad other subjects; he simply said he disagreed. That won't work for Wright's opinions on Obama. If these sorts of attacks have no place in our political dialogue, then a generic denial by a campaign spokesman isn't going to cut it. Obama himself will need to forcefully and clearly reject the logic of Wright's claims, the tone of his remarks, and the words that he used. Then he has to take the most painful step - he needs to distance himself from Wright.

There's a lot of glee on these boards this morning regarding the Ferraro debacle. I don't share it. Ferraro has left us weaker, as a party and as a nation. "I don’t think identity politics has served the Democratic Party well. I think it’s been an enormous distraction," Obama said in response to her comments. As usual, the man had the right words for the occasion. But now that one of those closest to him has made statements that are at least as divisive and egregious, he needs to find similarly powerful words to express his rejection of those statements.

It's not that the Clinton campaign, or for that matter, conservatives or the media, have gotten in his head, or that Obama's too weak, or that he needs to prove his manhood. Not every incendiary remark made by a supporter is a test of a candidate's ability to withstand attacks, to hit back, to give as good as he gets. Sometimes, those remarks are a test of what the candidate believes, and of the ideas he's prepared to embrace, even implicitly, in his pursuit of power. It's a test Clinton failed with Ferraro. And without denouncing these remarks, Obama fails it twice. He loses on a tactical level, because a campaign that splits along racial and gender lines is a campaign he loses. And he loses on an ideological level, because he has devoted his political life to convincing Americans that those divisions are less important than the things we share in common.

This one's not going away until Obama puts it to rest. So, Senator, what do you have to say?

It's the Economy, Stupid

I think it's fair to say that, as of this morning, economic concerns have fully and firmly eclipsed other issues in the presidential race. We're likely already in recession; the Federal Reserve is taking unprecedented steps to bail-out the financial markets; consumers are reeling from higher prices; and this may only be the tip of the iceberg. But you wouldn't know it to listen to our presidential candidates, who have remained resolutely oblivious to the nature or extent of the present crisis. For the most part, they continue to recite the poll-tested bromides that have dominated economic policy discussions on the left for much of the past decade. When they turn to the economy, the candidates compete to denounce free-trade pacts and decry excessive corporate pay. It's tough to believe that they're changing the minds of uncomitted voters that way. If the Democrats are going to prevail in November, they need to explain to voters how the Republican Party managed to derail the world's most powerful economy - and then they need to convince them that Democrats have a plan to get it back on track. But even a cursory review of the rhetoric on the trail reveals how poorly the candidates have performed at that essential task.

Let's start with Obama. A speech he delivered last month in Wisconsin lays out his approach in a fair amount of detail. It begins promisingly enough by assigning responsibility for the present disastrous state of affairs in clear and direct language:

We are not standing on the brink of recession due to forces beyond our control.
The fallout from the housing crisis that's cost jobs and wiped out savings was
not an inevitable part of the business cycle. It was a failure of leadership and
imagination in Washington - the culmination of decades of decisions that were
made or put off without regard to the realities of a global economy and the
growing inequality it's produced.

But what are those decisions? Obama simply recites the standard litany of Democratic complaints: tax cuts, trade deals, Iraq, corporate lobbying, CEO pay, and outsourcing. The mortgage crisis, he argues, was simply "the straw that broke the camel's back." You'll forgive me, senator, if I don't join you in blaming NAFTA for this recession. Obama seems to have mistaken the peripheral for the central, and the central for the peripheral.

Hillary, remarkable though it may seem, has been even further from the mark. She, too, starts by assigning blame:

[T]he problem with our economy is not the American people. Instead, the problem
is, in part, the bankrupt ideas that have governed us for the last seven years.
They have rewarded the very few at the expense of the many.

But it's tough to tell, from her speeches, precisely what's gone wrong - just that it's all Bush's fault. The speech almost immediately turns into a laundry-list of popular policy proposals, many with their own catchy names. The highlights include suspending foreclosures and adding green-collar jobs in the short-term, and then looking forward by addressing the energy crisis, investing in infrastructure and education, expanding unionization, reforming the tax code and health care, and encouraging saving for retirement. It's all part of her Economic Blueprint for the 21st Century. And they may all be worthy notions, even if the particulars are debatable. But other than suspending foreclosures, none of them is more than remotely connected to the present crisis.

So let's detail what neither candidate seems willing or able to say on the stump. The present crisis is indeed the result of decades of poor decisions made by successive administrations, compounded by the specific policies embraced by President Bush and his appointees. But it's not (mostly) about any of the problems listed by the two candidates.

We face our present crisis because the government chose to abdicate its regulatory responsibilities in favor of blind faith in the marketplace. Seventy-five years ago, after the worst financial catastrophe in our nation's history, FDR oversaw the passage of an extensive regulatory regime intended to insure that such a collapse could never happen again. Over the subsequent decades, as the financial system evolved and banks found innovative ways to evade these regulations in the pursuit of profits, those rules were updated in an effort to keep pace with the changes. Then, during the Reagan administration, there was a fundamental change of course. Instead of trying to keep up with changes, regulators began racing in the opposite direction, hurrying to remove regulatory hurdles in the interests of growth.

The theory was simple. Spreading risk over a broader array of institutions and investors would serve to diminish the exposure of individual banks, thus accomplishing by market forces what once required regulation. These institutions could then offer an array of innovative products that would benefit consumers. The theory was also spectacularly wrong.

The result was a failure on two separate (though related) levels. The first failure has become evident over the past couple of years. A frenzy of irresponsible lending and borrowing, fueled by structural innovations like the securitization of mortgages, fueled a spectacular real estate bubble which is now collapsing. That led to the second failure, which is now being revealed in spectacular fashion. Financial institutions assumed risks they neither accurately assessed nor fully understood, while outdated rules and passive regulators failed to curtail their excesses. Now the music has stopped.

Two particularly vivid incidents can serve to illustrate this two-tiered failure. In 2001 and again in 2004, Office of the Comptroller of the Currency successfully pre-empted the attempts of state regulators to reign in some of the worst excesses of the marketplace, arguing that only the federal government had the right to intervene. It will come as little shock to learn that OCC is a classic captive agency, receiving 96% of its funding from the banks it's supposed to be supervising. Its primacy affirmed, OCC sat on its hands, refusing to act until it was far too late.

The second incident is unfolding this morning. Investment banks like Bear Stearns became, in effect, lending institutions - buying up mortgages and repackaging them for sale, thus effectively setting the standards for loans in the marketplace. Banks have long been subject to extensive regulation, in part on the theory that since the Federal Government effectively guarantees their deposits, it ought to have a say in how they shoulder risk. This weekend, we learned that taxpayers will also foot the bill for the collapse of investment banks. Alas, there is no similar regulatory scheme in place to limit their risks.

So let's return to the campaign trail, to explore the remedies being proposed by Obama and Clinton in response to the present crisis. To his credit, Obama has gone further than Clinton in focusing attention on the problem of irresponsible lending and borrowing. His platform highlights two particularly useful proposals: the STOP FRAUD Act, which would crack down on some of the most abusive lending practices; and the HOME score, which would provide a simple metric (like an APR) for borrowers to measure the costs and obligations to which they are agreeing, empowering them to act more responsibly. Both candidates have proposals to limit foreclosures. Hillary wants to do "everything possible to ensure that we don't lose any more homes" to foreclosure, calling for a 90-day moratorium, a five-year adjustable-rate freeze, a $30 billion fund for local communities, and a package of similar measures. Obama proposes bankruptcy reform (which would effectively pressure lenders to be more proactive in restructuring loans) and a generous mortgage tax credit targeted at lower income households. Most economists are agreed that Hillary's bailout would trade the possibility of short-term relief for the certainty of long-term problems; the verdict on Obama's proposals is more split.

It's easy to get wrapped up in the debate over these specifics, but that debate omits what the candidates have left unsaid. Both remain firmly committed to the notion that homeownership is an unequivocal good that ought to be enjoyed by the broadest possible number of Americans. That's the sort of thinking that landed us in this mess in the first place.

So here are two heresies that both candidates need to embrace if they're going to address the present crisis and convince voters that the Democrats have faced up to our economic problems, and have the solutions we need:

Regulation is what makes free markets function:
Every speech the candidates deliver this spring must include this essential theme - We're plunging into a recession because Republicans removed the regulations that make our economy run smoothly. And, of course, its corollary: We can rebuild our economy by standing up to special interests, and passing rules to make the markets run freely and fairly. There's no need to shy away from this sort of talk. Most Americans understand instinctively that's something has gone horribly wrong, that financial institutions have behaved with breathtaking irresponsibility, and that it shouldn't be allowed to happen again. John McCain, to the extent he pays attention to the economy at all, tends to embrace the gospel of the free markets. He and his party are largely responsible for what's gone wrong; Democrats can make a compelling case that they can set it right.

Sometimes, homeownership is a nightmare, not a dream:
When ownership can only be achieved on terms that rely on rising prices or the prospect of future wealth to finance the deal, then families are better off renting. By extension, some families are now in homes that they can't afford and shouldn't have purchased. We don't just need policies that will prevent foreclosure - that amounts to denial, and will perpetuate this mismatch of resources and obligations. We need to develop mechanisms to ease the painful adjustment, enabling families to extricate themselves from ill-advised loans without either fully absolving them of responsibility for their decisions or sentencing them to financial ruin, and without precipitating a further collapse in the market. We need to admit that home prices were artificially inflated, and aren't going back to where they were anytime soon. And then we need to change the huge array of federal homeownership incentives to embrace a more reasonable goal - equal access to homeownership for all who can afford it.

There's still time to make this economic case. Each candidate can frame it in the terms with which they are most comfortable. Obama can speak of the failure of leadership in Washington, which has allowed special interests to defeat regulation, and preyed upon the aspirations of Americans. Hillary might unveil seven discrete proposals, all part of her New American Dream Plan, designed to reform the financial industry and homeownership. I'm not going to detail the specifics. Reasonable people can disagree over both the precise nature of the failures and the proper remedies. The whole point of a campaign is to hear the candidates articulate their own understandings of the crisis, and to lay out their particular solutions. So far, however, all we've heard is silence and denial. And that's not going to put anyone in the White House.

Transforming the debate requires three simple steps. The first is to pin blame where it belongs - not on NAFTA or the decline of unions or an inequitable tax code or an unaffordable war, but on a failure of regulation and on policies that fueled a housing bubble. Then the candidates need to stop pretending that everything will be fine again, and speak a truth most Americans already know and are ready to hear - we've had a binge, and we're going to have a long, painful hangover. And that will set the stage for a message that can win in November - policies and proposals to set us on a path toward renewed and responsible growth, consistent with our values and consonant with our aspirations.

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Convention Math: Clarifying the Caucus-State Confusion

Josh put a post up in the wee hours of the morning examining the intricacies of delegate selection in caucus states. The main thrust of the piece was that since delegates have yet to be fully allocated in the caucus states, there's still significant room for on-the-ground maneuvering, which might ultimately lead to swings as large as "twenty to thirty" new delegates. I'll admit that there's still some uncertainty regarding a portion of these delegates, but much of the speculation in the post seems rather more breathless than the facts appear to justify.

Now one of the things I love about Josh is that he's always careful to hedge when he wanders beyond the bounds of his own expertise, and he flags those elements of his posts that are speculative or that rely on information obtained from others. It's probably a vestige of his academic training, but whatever the cause, it elevates him above a lot of other bloggers who are considerably less careful concerning facts. So it's not Josh with whom I'm taking issue here, but rather, the sources he cites in his post.

There's also been a fair amount of speculation along similar lines in recent days. The Associated Press put out a story back in February focusing on the caucus issue, particularly the process in Nevada; diarists at DailyKos have been waxing incandescent about the goings-on in Colorado; Iowa is still up in the air; and right here at TPM Cafe we've seen some conspiratorial thinking about Texas. So it would seem to be time for yet another long-winded, overly detailed post detailing the surpassingly strange Democratic nomination process.

Let's start by noting that not all caucus states are created equal. They fall, broadly speaking, into three general categories (plus Texas, which as usual, does things in its own special way). In the first category, nothing's definitively settled until the state convention (e.g., AK, CO, IA, ME, and NV). Most of the room for maneuver comes in this small handful of states, which will ultimately hand out 162 pledged delegates. In their systems, hundreds or thousands of delegates elected at the precinct level, many of whom have little prior experience and are all-but-unknown to the campaigns, have to show up at the caucuses at the next level and vote the way they pledged in order for the initial results to be translated into strength at the state conventions. We're already seeing some signs that in Colorado the Clinton campaign is enjoying somewhat more success at this task than Obama's folks.

But that's just one category. The second uses the actual vote tallies at the precinct level to apportion its district-level delegates, some two-thirds of the pledged delegation. The caucuses also elect delegates to state conventions, sometimes via a multi-tiered process, who then choose the statewide delegates (or, in the case of Washington State, it's the district-level delegates to the DNC who make the selection). So it's possible that poor attendance or faithless delegates could affect the apportionment of the statewide delegates in these states, albeit unlikely. Overall, 95 of the pledged delegates in these states are already locked down by binding rules, and 51 are technically still in play (KS, NE, WA, WY).

The AP story glosses over the third category - states in which the allocation of every pledged delegate is determined by the initial vote, and in which all that's left for the state conventions (where they are held) is to determine the identity of the delegates, not their allegiances (e.g, AS, HI, ID, MN, ND, VI). There are 129 pledged delegates from these states, all of whom will be allocated in accordance with the vote tallies.

Texas, of course, is sui generis - its rules mandate that the delegates selected at the county/senate district conventions reflect the presidential preferences of voters at the precinct level, but then allow those delegates to vote as they please at the state convention. And of course, there's an outside chance of some shenanigans in the Lone Star State because the vote tallies at the precinct level, though binding, weren't centrally recorded. But on the whole, the incomplete tallies we have are likely to be highly predictive of the ultimate allocation of the 67 pledged national delegates, both because we have no reason to presume them to be an unrepresentative sample, and because only the (much smaller number of) delegates to the state convention are allowed the freedom to vote as they please. That makes it easier for the campaign to vet the folks they'll back for those slots, and to keep tabs on them moving forward.

So when Hillary blithely uses the term caucus delegates, she's lumping together some radically different processes. The 72 pledged delegates from Minnesota, for example, are no more in doubt than the 72 pledged delegates from Missouri - all were fully allocated on February 5. (That's reason enough to conclude that's she's challenging their legitimacy, and not making a procedural distinction.) None of the 45 from Iowa, however, have yet been allocated. To be sure, it's always wise to take any of these tallies with a grain of salt before the totals are officially certified. But I can't see any valid reason to distinguish between Minnesota and Missouri at the moment.

If you add up all the caucus-state delegates, you find that 224 have been locked down, with 280 technically still in play. But it's in the first of our three categories, among the five states with 162 delegates, that we're most likely to see swings. Let's dismiss the notion that "twenty to thirty" delegates might be in play - the only way to get a tally anywhere close to that number is to count the 14 Iowa delegates that Edwards' share of the vote suggested he would claim. And it's not at all clear that his backers intend to relinquish those slots. The Colorado experience is instructive in this regard - one county showed a five-point swing toward Hillary, another a four-point gain, and a third ran true to the precinct results. A two- or three-point swing statewide for Hillary would enable her to take a delegate from Obama; a five- or six-point swing would allow her to take two. And that in the largest of the undetermined states. We're just not talking about huge numbers of delegates, and it's unclear that the dynamic will favor Hillary across the board. Of course, there's another dimension to these defections. If Hillary or Obama were to garner more than 50% of the state convention delegates in any caucus state, including those in which the pledged delegates are already locked down, they'd be able to win that state's UADs. But the margins in the caucus states make that even more unlikely than a significant swing in pledged delegates.

The bottom line is that the possibility of faithless delegates is the sort of process story that makes political reporters and insiders salivate, but is extremely unlikely to happen. (I'll qualify that by saying that if the race is effectively over by the time state conventions meet, as it was in 1984, we could see some substantial number of defections.) Both sides, to be sure, have to turn out their supporters and do their homework in selecting higher-tier delegates. But there's no indication that either campaign will fail egregiously in that task, and despite all the jockeying, we'll probably see less overall delegate movement here than we saw in the primary state of California.

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The Perils of Indecision: How Clinton Cost Herself the Race

Hillary Clinton's latest gambit is raising eyebrows across the political spectrum today. In an interview with Newsweek, Clinton explained that the electoral math:

...doesn't look bleak at all. I have a very close race with Senator Obama. There
are elected delegates, caucus delegates and superdelegates, all for different
reasons, and they're all equal in their ability to cast their vote for whomever
they choose. Even elected and caucus delegates are not required to stay with
whomever they are pledged to. This is a very carefully constructed process that
goes back years, and we're going to follow the process.

There's so much packed into that short paragraph that it's necessary to unwrap it at some length. Let's begin with the latest Clintonian coinages of elected delegates and caucus delegates. It's a clear effort to advance the notion that the primary contests are inherently more legitimate than caucuses. I've done my best to bat down these sorts of invidious distinctions before, but it seems each week the Clinton campaign rolls out a new means of adding up the votes to produce a clear edge for Hillary. Rather than recapitulate those arguments, I'll simply say that the rules vary more between some primary states than they do between some of those states and firehouse caucus states, making these groupings rather arbitrary; that any representative system will fail to produce a perfect translation of the popular vote; and that complaining about the rules only when they prove inconvenient is hardly an honorable tactic, and can only serve to undermine the legitimacy of the eventual outcome. At any rate, I suspect that caucus delegates will soon be consigned to the same fate as automatic delegates, a nomenclature that even Clinton has evidently already abandoned.

The real stunner here is Clinton's blithe assertion that pledged delegates and superdelegates are "all equal in their ability to cast their vote for whomever they choose." For the most part, she's absolutely right about that. But it's not an idle observation, it's an apparent appeal for their support. And that's a line which no recent candidate has been willing to cross - enticing delegates pledged to support a candidate to abandon that pledge. In the next breath, Clinton vows to "follow the process." There's a narrow legalism to this approach, a willful disregard for the spirit of the rules coupled to a faithful adherence to their letter.

In this case, I rather doubt Clinton is contemplating a serious run at the pledged delegates. Those folks have been carefully vetted by the campaigns, and are unlikely to prove faithless in any significant number. It is, instead, yet another effort to soften the ground for the superdelegates. She is attempting to reframe the debate. It's not that Obama will enter the convention with a triple-digit pledged delegate lead, Clinton's suggesting; rather, when 4,048 delegates convene in Denver, we shouldn't consider any of them really committed to either candidate. All the delegates are ultimately free to vote as they please. So if when the votes are cast, Obama happens to garner more support among pledged delegates and Hillary a decisive edge among the superdelegates, then that's just the way things fall out. No one overturned a pre-existing outcome - it was all up in the air until that final vote. Her caucus vs elected distinction likewise seems aimed at persuading superdelegates that if they squint hard enough, they can still see Hillary holding on to some sort of lead, and that their votes for her would really be ratifying the popular will and not overturning it.

But as easy as it is to pick on Clinton for her endless attempts to reframe the process in her own favor, I think that such an approach misses something significant in her argument. Hillary is genuinely, thoroughly distrustful of the caucus process. At the urging of her advisors, she swallowed her misgivings and campaigned in Iowa. Her defeat in Iowa left her feeling burned, and confirmed her doubts. She had, reports the Washington Post, "become allergic to caucuses, deeming them unfair." That aversion, as much as anything else, is the reason why Clinton now finds herself facing an all-but-insurmountable chasm among the convention delegates.

For that reason alone it would be important to understand the origins of Clinton's self-defeating disdain for caucuses. It's not solely an instrumental position, nor (contra the Post) is it an expression of her pique at being spurned in Iowa. The truth is more nuanced. Hillary was not willing to roil voters in those states when her nomination appeared inevitable by using her substantial clout on the DNC Rules Committee to eliminate caucuses, nor to mandate changes to their procedures, back when the primary rules were being debated and enacted. When she thought she could win in Iowa, she poured time and resources into the state, never uttering a word about her dislike for its process. In Nevada, she held her fire until the Culinary Workers endorsed her rival, and then focused her ire on the at-large caucus sites, which (somewhat ironically) were designed to remedy many of the inequities she decried. But it seems fairly clear that her distaste for the caucus system is genuine, and deeply rooted.

My problem with Clinton's present approach is that she has crossed over from critiquing a system she dislikes to attempting to subvert it. It's instructive, in this regard, to recall her response to an earlier electoral controversy. In the fall of 2000, it became clear that although Al Gore had won the popular vote, he was likely to lose narrowly in the electoral college. At the time, more than a few activists suggested a simple means of reversing the outcome - persuade three electors to switch their votes. The most prominent advocate of this solution was Mario Cuomo, who observed: "Why should [Gore] concede as long as it’s still possible that electors might change their mind, which they’re free to do?"

But Cuomo was pretty much alone among prominent Democrats. Gore himself repeatedly said that he would not encourage any electors to switch their votes. It remained, for the most part, an expression of grass-roots frustration. Senator-elect Hillary Rodham Clinton entered the fray just a few days after the election. On Nov. 10, she told an upstate NY audience:

I believe strongly that in a democracy, we should respect the will of the
people. And to me that means it's time to do away with the Electoral College and
move to the popular election of our presidents. And particularly in this
situation where we have a popular vote total that favors the Vice President, I
think it sends a message to everyone. Many of us who have run for office in this
last election have spent a lot of time telling people their votes would count.
... We need to make it clear that your vote counts and that the total votes cast
for a person running for president in our country should determine the outcome.

Let's set aside, for a moment, the delicious irony of a woman about to take her seat in the United States Senate, perhaps our system's most extreme expression of republican distrust for popular democracy, decrying the inequities of a system that stands in the way of the people's will. We'll set it aside because, as best I can tell, Clinton was perfectly sincere. Then, as now, she distrusted processes that failed to embrace the popular vote. For all that, she never took the next step. She never crossed the line and encouraged electors to switch sides. In fact, less than two weeks after her initial assault on the electoral college, she backtracked on a pledge to make its abolition the subject of her first bill, calling the idea unlikely to be successful and opting to focus instead on reforming the electoral machinery to ensure more accurate vote counting.

Back in 2000, Clinton seemed to understand that the integrity of our Democratic system is more important than the outcome of any given election. The time to challenge its legitimacy or to reform its byzantine processes is between elections, not halfway through them, or after their results appear to be distasteful. In her seven years in office, Clinton never did follow through on her initial pledge to discard the electoral college. Her work on voting reform never extended to the primary system. She never pushed the DNC to change its guidelines. She never spoke out before Iowa against the caucuses, nor did she choose to boycott the process in that state. Last week, she decided to (once again) swallow her objections and to campaign full-bore in Wyoming, even as she continued to mock the caucus system there.

This morning, The New York Times ran a remarkable piece on the dissension within the Clinton campaign:

Mrs. Clinton accepted or seemed unaware of the intense factionalism and feuding
that often paralyzed her campaign and that prevented her aides from reaching
consensus on basic questions like what states to fight in...

One pundit they quote was considerably less charitable:

It’s a legitimate question to ask: Under great pressure from two different
factions, can she make some hard decisions and move ahead? It seems to just
fester. She doesn’t seem to know how to stop it or want to stop it.

Hillary's approach to the caucus system suggests that Thurber is closer to the mark. Had she trusted her own instincts, and either pushed the DNC to change the rules or skipped Iowa entirely, she'd probably have locked up the nomination by now. If, instead, she'd followed Ickes' advice and competed vigorously in caucus states, the outcome would have been the same - smaller margins for Obama producing a Clinton lead. But by vacillating between the two approachs - by competing in Iowa and Nevada, then not in other caucus states, then again in Wyoming - Clinton has transformed her nomination from inevitable to improbable.

But it's not her failure as a manager that's ultimately to blame for her defeat. Clinton knew her own mind on the subject, and voiced her opinions as far back as 2000. Had she followed through on her misgivings, she would have won. Had she set them aside to fight the election on its own terms, she would have won. Instead, she vacillated. Not because her staff pulled her in opposite directions, and not because she was unaware of the conflict. Those were the symptoms of her indecision; we ought not mistake them for its cause. She vacillated because she did not know her own mind. And that inability to choose a position and stick to it will ultimately cost her this race.

If you've enjoyed this, please share it with other readers by clicking the 'recommend this' link. You can find more analysis on my blog. As always, I welcome comments and corrections. And thanks to all who have responded for their feedback.

Convention Math: Remember the UADs!

A reader's comment on my last post sent me back to the ever-exciting topic of Unpledged Add-On Delegates (UADs). Those who have suffered through my previous explorations of the subject will recall that UADs are the forgotten superdelegates - the 76 bonus delegates awarded to the states. It turns out that they were dreamt up by Tad Devine in 1988, as a means of rectifying Jesse Jackson's gripe that he was winning states but only splitting their delegates. The original idea was that UADs would be awarded in each state as an extra bonus to the winner of the popular vote. Somewhere along the way, however, UAD allocation was largely divorced from the popular vote. Today, states follow a wide variety of methods for awarding their UADs (see my previous posts for more).

So who cares? Well, I do. And I hope you will, as well. But not, as best I can tell, the national media. The delegate calculators out there seem blissfully unaware of the UADs, lumping them in with the other superdelegates as if they're just sitting on the fence. Most projections I've seen do the same. This is problematic. To the best of my knowledge, only two UADs have been selected thus far, and so they're the only ones being included in most counts of superdelegates. But it's fallacious to think that the UADs will choose between the two candidates; rather, the UADs will all be chosen based on their public backing for one or the other. They don't fall into the pool of undecided superdelegates, and claiming they do makes that pool seem larger and more influential than it is - and, as it happens, makes a Clinton comeback seem plausible, when it's not.

Witness last week's fight over UADs in Alabama, one of the states in which the state executive committee makes the decision. Each campaign selected a single, loyal backer, and ran him as their candidate. Obama controlled six more votes than Hillary, and so his man won the slot. There was no sense in which this delegate was unpledged; in fact, he was vetted at least as carefully as any of the pledged delegates on Obama's slate. We're going to see the same in every state that awards UADs. Given that some of these will be awarded by a vote of a body whose composition is already a matter of public record - a state convention, the members of the DNConvention delegation - we can actually be as certain of these UADs votes as of those of their pledged peers, even if we don't yet know their names.

Here's a quick rundown of UADs in states that have already voted:

Clinton Obama Undetermined

IA: 0 0 1
NH: 0 0 1
NV: 1 0 0
SC: 0 0 1
AL: 0 1 0
AK: 0 1 0
AR: 1 0 0
AZ: 0 0 1
CA: 5 0 0
CO: 0 1 0
CT: 0 0 1
DE: 0 1 0
GA: 0 0 2
ID: 0 1 0
IL: 0 3 0
KS: 0 1 0
MA: 0 0 2
MN: 0 2 0
MO: 0 0 2
ND: 0 0 1
NM: 0 0 1
NJ: 0 0 2
NY: 0 0 4
OK: 0 0 1
TN: 0 0 2
UT: 0 1 0
WA: 0 2 0
NE: 0 1 0
LA: 0 0 1
ME: 0 1 0
DC: 0 1 1
MD: 0 0 2
VA: 0 2 0
HI: 0 0 1
WI: 0 0 2
OH: 0 0 2
RI: 0 0 1
TX: 0 3 0
VT: 0 1 0

TOTAL: 7 23 32

So the states that have already held their initial contests award 62 of the 76 superdelegates. About half of those delegates have been or will be selected by bodies whose allegiances are already known, allowing us to predict that Obama will take 23 UADs to Hillary's 7. Obama's substantial lead in the category is based on two factors - he's won many more states, and more of the states he's won use caucuses or other processes that allow us to predict the selection of UADs.

Now, there are good reasons not to attempt to predict how the remaining UADs will be awarded. The Alabama fight demonstrates that the Clinton campaign isn't about to cede UAD slots even in states it lost, and if it's going to fight, it seems likely Obama's camp will, too. In some states, that's unlikely to matter. It seems reasonable to suppose that all 4 New York UADs will go to Hillary. But do Massachusetts' senators and governor have enough clout on the state committee to secure both of that state's UADs for Obama? Perhaps. And will Hillary's institutional support in states like Hawaii bring her a UAD where it failed to deliver a caucus? Could be. These things bear watching.

Nevertheless, it seemed a worthwhile exercise to award all 62 of these UADs by giving the remaining 32 to the candidates who won their respective states. If you do that, Obama wins them 38-24. That suggests what a headache the UADs are likely to become for the Clinton campaign if she stays in the race. As things stand, they widen Obama's lead by 16 delegates; and if things play out along the most likely lines, that lead would still stand at 14. (The remaining contests are likely to have about as much impact on the margins in the UAD battle as on those of the rest of the delegate tally - which is to say, little or none.) To put that in perspective, Clinton leads the overall superdelegate tally this morning, 241-198. Add in the UADs whose commitment have been determined, and that shrinks to 248-221. Even if she enjoys some success at grabbing UADs from states that Obama has won, she faces an uphill battle - almost all of Obama's likely UADs are already locked down, and almost all of Hillary's have yet to be determined. And to offset each UAD in that Obama lead, Hillary needs to win another pledged delegate or superdelegate to her cause.

So add this to the long (and lengthening) list of reasons why the numbers just don't add up for a Clinton nomination. And every time you see a tally of the 794 superdelegates, look closely to see how it treats the 76 UADs. These procedural details matter more than most people think - by mastering them, the Obama campaign has built a clear lead despite the remarkably even split between the campaigns at the polls.

If you've enjoyed this, please share it with other readers by clicking the 'recommend this' link. You can find more analysis on my blog. As always, I welcome comments and corrections. And thanks to all who have responded, and to the GhostInTheMachine and IrishTrojan blogs for linking to these posts.