Whoppers: The Candidates’ Competition

March 31, 2008

You can feel the increasing intensity of the campaigning. All three are locked into an “I’m better than you are” contest of self promotion. Less and less time goes by between salvos between the politicians. This week though was unusual in that the candidates seemed to be on a tangent in which each tried to show that he or she was a better prevaricator and master of quackery than the others.

This effort to show that each candidate was capable of distortion and mendacity was probably set off by Bush’s announcement that he was going to Europe Monday to explain to people there why it was a good idea to participate in our Mid-Eastern wars.

The opening salvo was launched by Clinton who said that she had bolted out of an airplane, dodging bullets with her eleven old daughter, to bring permanent peace to the Balkans.

McCain — seeing the challenge to his standing as the foreign policy czar and apparently not satisfied to rest with his recommendation that we all take a Sunday stroll through Baghdad markets — announced that the surge was working and repeated this as casualties mounted and al-Maliki directed our troops into the heart of the civil war.

Obama, knowing now that his advantage lay in his African ancestry, said that JFK had brought his father to the US, a Chappaquiddickian account of history.

John Edwards said that he thought the two Democrats were equally able to spin a good yarn and couldn’t pick between them.

McCain was given a good boost when Robert Bennett said that he would not comment on McCain’s sincerity and several Republicans questioned McCain’s sincerity as a conservative, suggesting that his courtship of the right over the last year was one huge imaginary tale.

Washington State: Haven for Special Interests

March 30, 2008
It is my impression that Washington, more than perhaps any other state, is led by special interests. My impression is based in part at least on my law practice which focuses on real estate and business, so my awareness of this influence is pretty much confined to those areas.Let me give you a few examples of what has given me the impression that special interests are more influential here than most other places.
Perhaps my most shocking moment practicing law occurred when, during oral argument before the State Supreme Court, a representative of the insurance industry pointed to the justices and told them that his people were closely looking at how each one of them voted on this case and the insurance industry would be heard from come election time. (I am paraphrasing here but this message was loud and clear.) I thought that this was a truly shocking insult to the integrity of the court, but the justices said nothing.
In the area of construction law Washington is I believe the most repressive with respect to consumer rights. Did you know that if a building or bridge collapses six years after it is permitted, there is absolutely no recourse against anyone in the construction industry, including builders, suppliers, architects, engineers, even surveyors and anyone one else claiming to be in the industry? Condominium owners have no recourse if their building collapses four years after it was permitted (although this is a little murky). In Washington, at least with respect to being able to enforce warranties and representations, all the talk about the useful life of structures is bogus. After six years (four for condos) no one is responsible.This is the result of Washington’s statute of repose, which is jokingly said to have received that name named because people had to be asleep for the legislature to get the law through.
Other states have statutes of repose. These were pushed through state legislatures by an unprecedented lobbying effort on the part of the insurance and building industries in the 1960’s. Washington’s four year statute for condos and six years for absolutely everything else is extremely rare among the states and may be the shortest of any state. If you buy a new condo you should know that you are stuck if anything (however disastrous) goes wrong four years after the permit was granted, which is ofter about two or so years after it is filled.
To give you a sense of the influence of the building lobby, in Washington say a school building collapses six years after completion and kills a child whose watch stops for no good reason. There would be no recourse against anyone in the construction industry but the parents could sue the watch manufacturer for the cost of the watch. Personal property here has a twelve year (or the useful life of the product) statute of repose.
Perhaps the best indicator of the exalted state of special interests here is that when three sitting justices of our State Supreme Court announced last week that they were seeking reelection, the newspaper interviewed not a law professor or someone who practices before the court, but a representative of B.I.A.W., the building industry lobby.

McCain on the Mortgage Crisis is a Reactionary

March 29, 2008

Would someone explain to me the difference between Herbert Hoover or Calvin Coolidge and John McCain. Hoover of course focused his attention, such as it was, on keeping business free of regulation. His “just wait and see” approach saw us into the Great Depression.

There are two very obvious fiscal problems facing us now: the cost of the war and the mortgage crisis. His answer to rapidly broadening deficit created by the war is to say that we will continue it for 100 years if we have to and he will lower taxes for the middle class. This so called straight talking maverick promises even greater deficit spending on war, as I understand it, and no end in sight. He has no answer for the burden this puts on our economy as more and more of our money is spent just servicing the debt created by five years (an counting) of war. (Remember that one of our stategies when the Soviet Union invaded Afghanistan was to foment radical Islam so that so the fight could continue long enough to bankrupt the Soviet Union. Why are we immune from this?)

While accepting a downward spiral of national debt, McCain said that irresponsible homeowners are getting their just desserts when 4 million of them are facing foreclosure. He further suggested that the ones in trouble are the people who refuse to get second jobs. He did suggest that we might consider giving consumers more Truth in Lending disclosures, a proposal that he voted against a few months ago and one that everyone (including McCain a few months ago) acknowledges would be of no meaningful assistance in the current crisis and unlikely to avoid similar problems in the future. He did come out though in favor of bailing out financial institutions which bought heavily into bad mortgages if their troubles presented a “systemic” threat.

This mortgage crisis is serious. It, according to the Economist, involves 1.1 trillion dollars. McCain seems to be saying “Wake me up if our system starts to collapse.” The Economist, which was taken seriously by Republicans before the party was hijacked by ideologues, suggests that regulation is appropriate, that a systemic fix is in order as unregulated investment banking presents a risk of serial bailouts. It also suggested the government might buy some of the subprime debt because it could be acquired at a fire sale discount. The government could then work with the home owners and might very well profit be the investment.

Isn’t McCain proposing that we do exactly what we did in the late 1920’s?

Change What Senator Obama?

March 28, 2008
Political speeches are intended to appeal to people and they are not terribly reliable as policy statements or even as expressions of sincere sentiment. (In 2000 Bush was the self-proclaimed “uniter.”) I found Obama’s speech about race to be sincerely moving and I see it as something of historic significance. Nonetheless I am growing impatient for him to provide more content to the notion of change that he talks about.

He certainly describes a rather dramatic change in approach from the current administration and, accepting that he really intends to withdraw from Iraq promptly, he proposes a meaningful change in foreign policy. Eisenhower said that the toughest fight of the president was trying to restrain the military and Obama talks as if he will engage in that fight, which would be a meaningful change. Eisenhower said that he would not have been able to prevail in his fight had he not been the leader of the allied forces in World War II, suggesting that even in the 1950’s the fight to restrain the military was not an easy one. It would be interesting to see how successful Obama is in carrying this out . McCain has said nothing I’ve heard to indicate that he would oppose the wishes of the Pentagon in any regard.

It is in terms of domestic policy that Obama’s notion of change is unclear. My impression is that he is trying to position himself as a Clinton (Bill) Democratic, fiscally conservative. On health care, and the financial crisis he is more conservative than Hillary Clinton in terms of government intervention. Like Bill Clinton and Republicans before Reagan, he posits that one of the chief domestic issues is getting the nation out of so much debt. As far as I know most economists (such as Alan Greenspan, who sees Bush’s economic policy as disastrous) and for that matter businesses outside the defense industry agree that a more conservative fiscal policy, such as the Democrats propose, would be a good thing.

My sense right now is that if Obama can successfully deal with the Pentagon he would change foreign policy, but that domestically there would be little change in governmental programs. I should say that I do not view the health insurance proposals of Clinton and Obama as dramatic policy shifts. Maybe there should not be a dramatic change; maybe the system just needs improvement, not serious change. Kucinich’s single payer program was a significant shift, but apparently it is conventional wisdom that a dramatic shift would not be attainable or perhaps is not desirable.

I understand that part of the process of getting elected is avoidance of policy statements that will alienate a segment of the population and the trick is avoid saying anything too definite so as to avoid alienating anyone. Just the same I personally would feel better knowing exactly what policy Obama would champion.

Clinton’s Bad Day.

March 28, 2008

It appears that the curtain is going down on the Clinton campaign. With no realistic shot at winning a majority of delegates from the primaries and caucuses and no realistic shot at winning the popular vote, Clinton’s hopes are pinned on winning over the superdelegates. This strategy likely involves taking the battle to the convention where political infighting could be used to best result.

This strategy is being actively opposed by the party chiefs, who have dealt Clinton strong blows recently. First, Nancy Pelosi urged supredelegates to vote for the candidate with the most delegates from primaries and caucuses. Then Howard Dean, the party chairman, said that he hoped that the decision would be made by July 1 at the latest, more than a month before the convention.

Today with the forthcoming primary in Pennsylvania in the spotlight Bob Casey, one of the two senators from that state, endorsed Obama, while Senator Pat Leahy urged her to withdraw. Also today the Gallup Poll announced that nationally Obama enjoys nationally a 8% lead over Clinton.

Clinton fought back against the Pelosi edict by having several billionaire supporters write a letter to Pelosi which seemed to suggest that if she did not withdraw her proposal they might withdraw party support. This was not a smart thing to do for two reasons. First, it called attention to the divisive, polarizing aspect of this nomination process, exactly the thing the party wants to avoid. Second, it took away from whatever ground Clinton had gained in coming across as a populist leader. The letter made Clinton look like an insider attempting to subvert a democratic process with money. This is exactly what she has been trying to avoid with talk about change and appeals to everyday Americans.

This splintering of her message was probably inevitable as she seeks to appeal to the grass roots voters while trying to win the nomination through the superdelegates. This is certainly not an enviable position to say the least.

Clinton’s “Populist” Proposal Finds Support with The Economist.

March 26, 2008

Among Clinton’s proposals for the current mortgage crisis is her endorsement of the bill sponsored by Barney Frank and Christopher Dodd, which would give the FHA the ability to guarantee and purchase high risk mortgages. Obama alludes to better regulation. Mr. McCain’s approach seems to be “I think the crisis over. Let’s wait and see.” The Economist is much less laizes faire than Mr. McCain and recommends a couple of the Democrats’ suggestions. It suggests that this might be a good opportunity for the government to buy assets of limited marketability at a big discount, as suggested by Clinton. In line with Obama it says that bailouts of badly run investment banks must come with strings attached in the form of regulatory control to reduce the likelihood of further need for public support.

McCain, I think, in just furrowing his brow and urging restraint is losing whatever chance he has to show leadership in this crisis. As Clinton noted, the circumstances call for something more than platitudes mouthed by Herbert Hoover. The economy is certainly going to be a central feature of the campaign this fall, so why has McCain conceded initiative to the Democrats?

This mortgage crisis is not a trivial matter. The Economist estimates that the loss will be about $1.1 trillion, significantly more than the savings and loan scandal.

The Mortgage Crisis: a Campaign Issue on Which Clinton Steps Forward

March 26, 2008

As we come down the home stretch in the primaries, Clinton may be hitching her wagon — at least in part — to the mortgage crisis. It was my impression that because of her stance on the war and her association with the conservative social policies of her husband, she lost much of the support from the left. Over the campaign she has moved her position on the war so as to try to make it indistinguishable from that of Obama. (At least according to their websites there is actually a rather clear difference between the two with Clinton wanting to keep permanent military bases in Iraq with attendant commitments and she all but authorizing an attack on Iran by voting to designate part of its army a terrorist organization.) During the campaign she has also distanced herself from the domestic policies of her husband by increasingly appealing to populist sentiment.

This approach has crystallized in her proposals with respect to the mortgage crisis. She has proposed that a $30 billion fund be created to assist homeowners in crisis and is clearly approaching this from the mortgage consumer side. She proposes a 90-day moratorium on foreclosures and would freeze the interest rate on adjustable rate subprime loans. This should play well in industrial states with upcoming primaries.

Clinton has seemed to be generally consistent in this regard. At least since August she has focused on the need for consumer relief while Obama has emphasized the need for regulation of the industry. Since Edwards left the race she has adopted some of his proposals (this is part of her move to the left) in advocating a moratorium and freeze on subprime interest rates. To further buttress her populist confides, Clinton borrowed from Barney Frank and Christopher Dodd in recommending that the Federal Housing Administration be given enhanced power to oversee and perhaps to guarantee or purchase defaulted loans.

Obama is clearly fixed toward the center, advocating a conservative response to the crisis. He now proposes a smaller fund for homeowners ($10 billion) and offers a lot of talk about restraint and vague talk about regulation.

On this issue Obama and McCain appear to be closer to each other than either is to Clinton, although Obama certainly sees himself as closer to Clinton than to McCain.