A Funny Thing Happened
On the Way to the White House
Thanks to The New Yorker, the subject of humor has dominated this week in the presidential campaign. Often when people talk about humor, the discussion is decidedly unfunny. An excellent example is an article in Politico.com called "McCain's Humor Often Backfires."
"To McCain's friends and supporters, the humor is a mark of his authenticity," writes Politico's Ben Smith. "To his detractors, some of the jokes are offensive and out of touch with contemporary mores":
What's undeniable, though, is that the humor, with its political risks and, to some, its charm, is intrinsic to John McCain. He is a man of a certain generation, with a machismo forged from his experience as a Navy pilot and an aviator, a candidate who is more comfortable in his own skin than with a teleprompter. . . .
Irreverence in the abstract is one thing. But McCain's specific jokes can be harder for some to stomach.
Example: In 1986 the Tucson Citizen reported that McCain had told the following joke:
"Did you hear the one about the woman who is attacked on the street by a gorilla, beaten senseless, raped repeatedly and left to die? When she finally regains consciousness and tries to speak, her doctor leans over to hear her sigh contently and to feebly ask, 'Where is that marvelous ape?' "
His spokeswoman said at the time he didn't recall telling the joke, something his current spokesman, Brian Rogers, reiterated to Politico.
Which reminds us of a joke. Two U.S. senators are sitting in a bar, and one of them says, "I drink to forget telling jokes."
"That's very sad," says the second senator.
"It could be sadder," the first senator replies.
"What could be sadder than drinking to forget?" asks the second senator.
"Forgetting to drink!"
Anyway, in McCain's defense, maybe you had to be there. At least one of McCain's jokes, however--in addition to being somewhat amusing, in our opinion--has yielded some useful information for foreign-policy makers:
McCain was also recently condemned by the government of Iran for suggesting that increasing U.S. cigarette sales to Iran could be "a way of killing 'em."
"We condemn such jokes and believe them to be inappropriate for a U.S. presidential candidate," said Iranian Foreign Ministry spokesman Mohammad Ali Hosseini. "It is most evident that jokes about genocide will not be tolerated by Iranians or Americans."
If Hosseini is on the level, Mahmoud Ahmadinejad's "joke" about wiping Israel off the map was nothing of the kind--a reason to support the candidate who favors a tougher line against the mad mullahs.
Obama's problem, meanwhile, is the opposite. He appears to be completely humorless. Not only that, but as we noted Tuesday, there has been very little humor about Obama, whose supporters tend to be very sensitive and angry. Now comes Andy Borowitz, with a (satirical) "list of official campaign-approved Barack Obama jokes." Example:
Barack Obama and a kangaroo pull up to a gas station. The gas station attendant takes one look at the kangaroo and says, "You know, we don't get many kangaroos here." Barack Obama replies, "At these prices, I'm not surprised. That's why we need to reduce our dependence on foreign oil."
We came up with a few on our own:
A guy asks Barack Obama, "Who was that lady I saw you with last night?" Obama replies, "I think people should lay off my wife. The notion that you can attack my family--that's not what America is all about. It's too easy to get caught up in these distractions."
Why did the chicken cross the road? To get away from the so-called leaders of the Christian right, who have been all too eager to exploit what divides us.
And then there's the one about the definition of audacity: when a guy throws his grandparents under the bus, then pleads for mercy because his parents are orphans (or would have been had they not predeceased their own parents).
Army Fatigued
The gold standard* of political humor, of course, is a joke told by another former presidential nominee back in 2006:
You know, education--if you make the most of it, you study hard, you do your homework, and you make an effort to be smart, uh, you can do well. If you don't, you get stuck in Iraq.
This was side-splitting enough at the time, but an Associated Press report shows that it is funny on a whole new level:
Spc. Grover Gebhart has spent nine months at a small post on a Sunni-Shiite fault line in western Baghdad. But the 21-year-old soldier on his first tour in Iraq feels he's missing the real war--in Afghanistan, where his brother is fighting the Taliban.
With violence in Iraq at its lowest level in four years and the war in Afghanistan at a peak, the soldiers serving at patrol station Maverick say Gebhart's view is increasingly common, especially among younger soldiers looking to prove themselves in battle. . . .
That soldiers are looking elsewhere for a battle is a testament to how much Iraq has changed from a year ago, when violence was at its height. Now it's the lowest in four years, thanks to the U.S. troop surge, the turn by former Sunni insurgents against al-Qaida in Iraq, and Iraqi government crackdowns on Shiite militias.
The aforementioned erstwhile candidate came of age in the Vietnam era, when conscription was the law. Because thousands of men were forced into military service who did not want to go into that line of work, somehow the stereotype has persisted that the work of a soldier is undesirable. In fact, the work of war is very attractive to some people, and one of the glories of a free economy is that it is the best possible means for sorting people into jobs they find fulfilling.
If service in Iraq is now less desirable because success has made it boring, the joke is on those who fail to grasp that the dangerous work of defending America is, to some men, also supremely rewarding.
* This is an example of a form of humor known as "sarcasm."
Triumph of the 'Will'
Agence France-Presse experiments with a new form of journalism:
Barack Obama will flash Kennedy-style charisma but face a stern test as a novice on the world stage in the Middle East and Europe next week, on a trip rich in both risk and potential rewards. . . .
Obama will get a receptive audience, in Europe at least, where his prospects are feverishly followed and he boasts approval ratings that are the envy of some of his battered hosts, British Prime Minister Gordon Brown, for example. . . .
Obama will begin his visit to Europe in Berlin, a city rebuilt with American money after World War II, with its very unity a living symbol of shared US and European endeavor in the Cold War.
His visit will draw comparisons to the fabled visit to Berlin in 1963 of president John F. Kennedy, to whom Obama is often compared by supporters who see him also as a leader at the intersection of hope and history.
Most news organizations tell us what happened. AFP tells us what will happen. Unfortunately, this story doesn't tell us what we really want to know, namely who will win the election. We guess we're just going to have to wait till October to find out.
Jeers for Hezbollah
The Jerusalem Post reports that not everyone in the Arab world is applauding Hezbollah for inducing Israel to release Samir Kuntar, who heroically bashed a 4-year-old girl's skull in with a rifle butt:
A leading Arab paper ridiculed the perceived "victory."
"The Radwan deal," the headline of the London-based A-Sharq Alawsat newspaper on Thursday cynically ran, "cost Hizbullah over $7 billion, more than 1,200 dead and 4,500 wounded Lebanese citizens."
The paper referred to the exchange by the name given to it by the guerilla group. Radwan was the nom de guerre of Imad Mughniyeh, Hizbullah's terror mastermind who was killed several months ago. While Hizbullah blamed Israel for the assassination, Israel maintains it was not involved.
The Saudi paper Al Watan pointed out that Hizbullah has yet to disarm and that UN Resolution 1701, which ended the war, has not been implemented.
In Lebanon, Al Anwar carried an editorial piece which said it was "shameful to see members of the government in Beirut join the celebrations of Hizbullah."
But one newspaper is hewing to the Hezbollah line. See if you can guess which one:
The [Lebanese] government declared a national day of celebration, closing all government offices and banks, and many private businesses closed as well. The president, the prime minister and others tried to present the swap as a triumph for Lebanon, not just Hezbollah, which is considered a terrorist group by the United States. But there was no disguising the fact that, in the eyes of its followers and many others, Hezbollah had scored a historic victory.
Give up? It's the New York Times.
Life Imitates 'Seinfeld'
• " 'World's Greatest Dad' Charged in Online Child-Sex Sting"--headline, USA Today Web site, July 16, 2008
Have They Tried Binary Fusion?
"Report: US Is Behind in Doubling Science Grads"--headline, Associated Press, July 15
They're 10 for a Buck at the Dollar Store
"SWTC to Buy Hanger From City for $1 Million"--headline, Altus (Okla.) Times, July 16
Somebody Untie It!
"Air Force Academy Bound"--headline, Powell (Wyo.) Tribune, July 14
Help Wanted
"Police Seek Two for C&W Network Robbery"--headline, TheRegister.co.uk, July 17
Everything Seemingly Is Spinning Out of Control
• "Hispanic Service Agency Faces Bleak Future"--headline, Day (New London, Conn.), July 17
• "Art Auctions on Cruise Ships Lead to Anger, Accusations and Lawsuits"--headline, New York Times, July 16
• "Your Neighbor Could Be Next to Lose Electricity"--headline, Denver Post, July 16
• "Hippie Town's Homeless Attack Portends Trend"--headline, Associated Press, July 17
• "Energy Crisis Threatens U.S. Survival, Gore Says"--headline, CNN.com, July 17
• "Robots Take Over University"--headline, WEAU-TV Web site (Eau Claire, Wis.), July 16
Breaking News From 1948
"Moscow Remains Overtly Contentious"--headline, Washington Post, July 16
News of the Tautological
"Low-Cost Flights a Hit With Budget Travelers"--headline, Kyiv (Ukraine) Post, July 16
News You Can Use
• "Trust Me, Toe Injuries Can Be Annoying"--headline, Kentucky Standard (Bardstown), July 16
• "Don't Become the Victim of a Surgical Error"--headline, CNN.com, July 17
Bottom Stories of the Day
• "Utah NAACP President Still Opposes Vouchers"--headline, Associated Press, July 16
• "Canada Won't Seek Return of Gitmo Detainee"--headline, Associated Press, July 16
• "Rapper Has Defiant Words for New Album"--headline, CNN.com, July 16
• "List of 101 Things Defining Canada Adds Aboriginals After 1st Poll Overlooks Them"--headline, Canadian Press, July 16
![[The World's Smallest Violin]](http://s.wsj.net/public/resources/images/OB-BJ437_wsv_20080501135716.jpg){kind=small}
The World's Smallest Violin
Addison Herron-Wheeler is "a rising freshman at Virginia Commonwealth University," according to the author's bio at the end of his column in the Fredericksbug Free Lance-Star. To judge by his current employment, there's no way to go but up:
It never fails: Murphy's Law. When applying for jobs, the one place you do not want to call you back inevitably will. I encountered this annoying fact applying for jobs in Richmond, when I landed one at the local Subway.
Of all the interesting, vibrant-looking places in my area that I could have worked, this was definitely my last choice. But the only other places I had wanted to work told me it would be a few weeks or months, and I had to have something ASAP so that I could pay the rent.
Trouble is, he "failed to take into account" his "inability to function in this kind of a situation" and his "disdain for the restrictions that come with employment at any fast-food restaurant":
First of all, some of my co-workers whom I met later are not exactly savory. They are much older than me and don't seem to respect me at all, even though I am doing my best to comply with their every wish and to be the best employee I can be. The management also demands that I remove my lip rings while working--which is ridiculous considering how many people with piercings I serve every day. This makes things a bit difficult due to the fact that I don't have the extra money right now to go out and buy spacers to put in the holes while I'm at work.
He also loathes "all the evil that I see in the fast-food industry," which he complains is "wasteful and goes against even the most basic environmental practices." There's too much packaging, and workers aren't allowed to take home spoiled food. "In short, it is all about the profit and not about the overall good of society."
On the other hand, it strikes us that it's awfully generous of Subway to let such a malcontent keep working there, especially when he badmouths the company to the vast readership of the Free Lance-Star. Incidentally, if he does find a job in an establishment that allows him to wear his lip rings by serving food, we hope he writes another column about it, so we'll know to avoid the place.
Run on Washington
Washington's biggest names – from President Bush to Ben Bernanke to Nancy Pelosi – have all trotted out publicly this week to declare their profound concern about the American economy. Alas, our leaders are promising to do everything except what might really do some good: Abandon what they've been doing for the past year.
When the financial market turmoil hit last August, the U.S. economy was growing, albeit slowly, with moderate inflation. Washington has since embarked on a stampede of easy money from the Federal Reserve, nonstimulating tax rebates from Congress, and a crisis-driven, haphazard approach to credit market triage.
![[Run on Washington]](http://s.wsj.net/public/resources/images/ED-AH894_1run_20080716205225.gif)
The result a year later: The overall economy is still expanding, albeit slowly, but with inflation roaring and the dollar hitting historic lows. Soaring oil and commodity prices – the byproduct of a weak dollar – have tanked the airlines, the car companies and trucking firms, cattlemen and hog farmers, among many others. Meanwhile, the financial mess rolls ahead, having spread from Wall Street to the midsized banks, and engulfing even the government-chartered companies that Washington only weeks ago declared were our saviors, Fannie Mae and Freddie Mac.
It's not exaggerating to say that the world is fleeing the dollar in what amounts to a global run on Washington itself – from Capitol Hill to the White House to the Federal Reserve. The world's investors are saying they lack confidence in U.S. leadership.
* * *
That's certainly true of the Fed, where Mr. Bernanke looks increasingly like a professor shocked to find that the world has rejected his academic theories. Yesterday's dreadful inflation numbers are as stark a repudiation of Fed policy as you could imagine: up 1.1% in June alone, 5% for the last 12 months, the highest in 17 years. Energy and food prices led the way, as every American consumer already understands. But the report showed that inflationary expectations are also creeping through more of the economy, including services and transportation.
Mr. Bernanke stated the obvious when he told Congress Wednesday that inflation "is too high." And markets rallied even on the hint of a tougher line, with oil and gold both falling as the dollar rose. Yet Mr. Bernanke, Vice Chairman Donald Kohn and Governor Frederic Mishkin – the Fed's three intellectual amigos – continue to pursue a reckless policy of negative real interest rates with no change on the horizon. For months, they have overestimated the risks of recession while underestimating the dangers of inflation. They have been too attentive to the pleas of Wall Street and Capitol Hill, and not enough to the American middle class.
Meanwhile, Congress wants to double down on its failures, with Speaker Pelosi proposing a second round of "stimulus" spending. Someone should ask what happened to the first. Just as critics predicted, the rebate checks gave consumer spending a short-term fillip without changing longer-term incentives. The checks did, however, add $168 billion or so to the federal deficit. And now the Speaker wants to add $50 billion more – all as a prelude to next year when she'll claim we need to raise taxes to reduce . . . the deficit.
While Barack Obama campaigns on "change," the irony is that for the past year Washington has been pursuing his economic policy mix. The tax rebates and spending were his idea of "stimulus," too, while he's said nary a discouraging word about the Fed or the dollar. The left's leading economic gurus – Larry Summers, Robert Rubin – have also urged the Fed on. With the huge tax increases he's proposed for next year, Mr. Obama's policies are another source of the global run on Washington.
As for the Bush Administration, the best one can say is that it looks tapped out. By agreeing without a fight to January's tax rebates, Mr. Bush gave up his last chance to shape this year's economic debate. He might not have won in Congress, but he would at least have had an argument. Instead, he told the American people that the rebates would spur growth, and now that they haven't he's undermined the popular appeal of tax cuts more broadly.
The President could still play a role in crisis financial management, such as reforming Fannie and Freddie. But he seems to have abandoned that field to Mr. Bernanke and his Treasury Secretary. Hank Paulson has been an expert at media relations, and the Members love him on Capitol Hill. He and the Fed have done some creative work on emergency financing through the Fed's discount window. But Mr. Paulson has also invited the dollar's fall as a way to boost exports, despite the resulting oil spike and collateral damage to Detroit and American consumers.
The Treasury chief is also still behind the curve in cleaning up the financial system. The Fannie Mae debacle caught him by surprise, and he still hasn't triggered the Federal Deposit Insurance Corporation Improvement Act to prepare for the inevitable bank failures. With more IndyMacs on the way, this is the kind of advance financial plumbing that would help restore confidence.
* * *
For all of this blundering, the miracle is that the U.S. economy has so far avoided a recession. Housing prices will find a bottom eventually – all the faster if Congress doesn't pass its current housing bailout. Parts of the economy are showing remarkable strength, as Intel's earnings showed this week.
The main problem is political, and intellectual. Washington has spent the last year running from the stable dollar and pro-growth tax policies that have marked most of the past 25 years. In its waning days, the Bush Administration has lost its will and bent to Congress's agenda while staying silent as the Fed has encouraged a damaging inflation.
There's an opportunity here for John McCain, if he has the wit to seize it. He could describe how Washington has lost its Reaganite moorings on the dollar, taxes, spending, and the corporate socialism of Fannie Mae. He still may not win the election. But educating voters about this collective Washington failure, and then separating himself from it by pointing in a new direction, may be his only chance.
Judges Are No Reason to Vote for McCain
The judiciary is becoming an important election issue. John McCain is warning conservatives that control of today's finely balanced Supreme Court depends on his election. Unfortunately, his jurisprudence is likely to be anything but conservative.
The idea of a "living Constitution" long has been popular on the political left. Conservatives routinely dismiss such result-oriented justice, denouncing "judicial activism" and proclaiming their fidelity to "original intent." However, many Republicans, like Mr. McCain, are just as result-oriented as their Democratic opponents. They only disagree over the result desired.
Judge-made rights are wrong because there is no constitutional warrant behind them. The Constitution leaves most decisions up to the normal political process.
However, the Constitution sometimes requires decisions or action by judges – "judicial activism," if you will – to ensure the country's fundamental law is followed. Thus, for example, if government improperly restricts free speech – think the McCain-Feingold law's ban on issue ads – the courts have an obligation to void the law. The same goes for efforts by government to ban firearms ownership, as the Court ruled this term in striking down the District of Columbia gun ban.
Yet even as Republicans support and defend the Second Amendment, they ignore the Constitution when it says that only Congress can suspend habeas corpus, and then only in event of an invasion or rebellion. And if a president says we are "at war," Republicans believe he can ignore laws passed by Congress.
Mr. McCain is a convenient convert to the cause of sound judicial appointments. He has never paid much attention to judicial philosophy, backing both Clinton Supreme Court nominees – Stephen Breyer and Ruth Bader Ginsburg. He also participated in the so-called "Gang of 14," which favored centrist over conservative nominees as part of a compromise between President George W. Bush and Senate Democrats.
What's more, Republican Court appointments have often turned liberal. Earl Warren, William Brennan and Harry Blackmun were GOP appointees to the high court. So are "liberals" John Paul Stevens and David Souter, as well as centrists Anthony Kennedy and former Justice Sandra Day O'Connor. There is no reason to believe that a President McCain, once freed from the need to seek conservative support, would support more philosophically sound candidates. Even if he did, he would not likely prevail against a Democratic Senate majority.
Nor is it obvious that Barack Obama would attempt to pack the court with left-wing ideologues. He shocked some of his supporters by endorsing the ruling that the Second Amendment protects an individual right to own firearms, and criticizing the recent decision overturning the death penalty for a child rapist. With the three members most likely to leave the Supreme Court in the near future occupying the more liberal side of the bench, the next appointments probably won't much change the Court's balance.
But even if a President McCain were to influence the court, it would not likely be in a genuinely conservative direction. His jurisprudence is not conservative.
For instance, most conservatives believe that the First Amendment safeguards political speech. Mr. McCain does not. Indeed, it is the liberal bloc which upheld McCain-Feingold's restrictions on ads criticizing incumbent politicians, while the conservative members, led by Chief Justice Roberts and Justice Samuel Alito, forged a more recent majority overturning parts of McCain-Feingold.
In his May 2008 speech on judges at Wake Forest University, Mr. McCain talked about the importance of "the constitutional restraint on power," but in practice he recognizes no limits on government or executive-branch authority. In fact, if Mr. McCain nominated someone in his own image, the appointee would disagree with not only the doctrine of enumerated powers, which limits the federal government to only those tasks explicitly authorized by the Constitution, but also the Constitution's system of checks and balances, and even its explicit grant of the law-making power to Congress.
Mr. McCain has endorsed, in action if not rhetoric, the theory of the "unitary executive," which leaves the president unconstrained by Congress or the courts. Republicans like Mr. McCain believe the president as commander in chief of the military can do almost anything, including deny Americans arrested in America protection of the Constitution and access to the courts.
It is important to choose judicial nominees carefully. But that is no reason for conservatives to vote for Mr. McCain. He has demonstrated no more interest in "conserving" the Constitution, and its principles of limited government and individual liberty, than has Mr. Obama.
The best way to get better judges is to expand candidate choice beyond the Republicans and Democrats. Supporting the political status quo guarantees more jurisprudence based on political convenience, not constitutional principle.
Mr. Barr is the Libertarian Party's candidate for president.
Inflation and the Bush Legacy
Federal Reserve Chairman Ben Bernanke clings to an easy money policy while assuring us that he is keeping an eye on inflation. Glendora Rider, a pensioner in New Smyrna Beach, Fla., also has an eye on inflation.
Glendora, a onetime newspaper colleague of mine, sees this phenomenon from ground level, not the commanding heights occupied by the Federal Reserve Board:
![[Inflation and the Bush Legacy]](http://s.wsj.net/public/resources/images/OB-BV799_oj_mel_20080716184813.jpg) |
| Martin Kozlowski |
"Two years ago, I nearly emptied my billfold pulling out $15 for six gallons of gas. Six gallons of gas at $4 a gallon (many places more than that) now cleans me out of $24, and that's not filling the tank. Consumers are now advised to gas up in the early morning before the heat expands the gas and you get less for your money. Most stations are adding 10% ethanol to the mix and this makes my 2001 Chevy truck limp along in a state of depression and attrition leading eventually to a high-priced mechanic.
"In the grocery store recently, a fellow shopper turned to me and said, 'I can't believe I would ever pay $2.87 for a pound of tomatoes.' We glumly compared prices: milk, $4 a gallon; bread, $2.89 a loaf – ad nauseam. This was in a store where shopping is supposed to be a pleasure. The $20 spent in 2006 for a quick restocking of staples now relieves me of $40.
"For lunch I stop at my favorite drugstore for the noon special and pay $5 for a hamburger. Add French fries and a drink, and it's $7, what I would have paid for a dinner special two years ago. How much does a hamburger cost at a theme park? Never mind, we can't afford to drive to the 'attractions' and pay a $70 per-person admission price plus $12 to park the car.
"The lawn guy comes and charges $30, instead of $25, the price in 2006, and before that $20. A six weeks' haircut at the salon is $30. Two years ago it was $20, and not that long ago it was $12. The bills for monthly services, utilities, insurance, cable, telephone keep inching up due to fees and taxes while the service is the same or cut down."
Glendora and I aren't in harmony on public policy – she seems to want more government and I want a lot less. But we agree on one thing. Inflation, even at what the Fed assures us is a modest 5% rate, is a destroyer. It lowers the living standards of the unrich, erodes capital, spurs labor unrest and ultimately dilapidates both public and private infrastructure. It gets worse if untreated, as we learned in the 1970s.
In the November election, unhappy voters like Glendora will mostly blame the Republicans, if opinion polls are any guide. Both President Bush and the Republicans who ran the Congress up until the 2006 elections deserve opprobrium. It will do them little good to claim that the Democrats will behave even more irresponsibly, despite the support for such a claim in the campaign promises of Barack Obama and the track record of the Pelosi-Reid Congress. When voters look for someone to punish, the president is their first choice.
Alan Greenspan, in his memoir "The Age of Turbulence," tells of a lunch he had in the 1970s with Jack Kemp, the Republican wunderkind of that era. According to Mr. Greenspan, Rep. Kemp lamented that the Democrats had historically won elections by giving away goodies and the Republicans were then elected to clean up the mess. The Fed chairman was appalled when Mr. Kemp suggested that the Republicans should reverse that process.
Well they did. As Mr. Greenspan notes, the Republicans, after seizing both the White House and Congress in 2000, went on a spending spree. Instead of trying to discipline his fellow Republicans – something a congressional party always requires – Mr. Bush signed everything that came his way.
Mr. Greenspan is himself taking flak for having left the monetary spigots open too long after the 2001 dot-com recession. It is natural that he might want to shift the blame for today's swooning dollar and its inflationary consequences. But he has on his side some very respectable economists, Milton Friedman for example, who have argued that the primary source of inflation is overspending by Congress.
Federal deficits have to be financed, and the debts of Congress, combined with those of state and local governments, business corporations and consumers, have taxed the investment powers of even trading partners like Japan and China, who hold huge dollar surpluses. The weak dollar, and inflation, particularly affecting the price of oil, is the end result.
Latter-day critics of the Iraq invasion like to argue that the war caused the problem, but as Mr. Greenspan points out, the war's cost was a relatively modest contributor to the spending spree. Moreover, not many of those critics objected in the immediate aftermath of the 2001 attack on the U.S. when the president and most other Americans felt that clearing the Middle East of terrorism sponsors, including Saddam Hussein, deserved high priority.
Mr. Bernanke currently is in the Fed hot seat. But it can be said in at least partial exculpation that Fed chairmen are often asked to do the impossible. They are under constant pressure from Congress and Wall Street to keep interest rates low.
A tough Paul Volcker backed by another tough guy, Ronald Reagan, resisted those demands and killed inflation, albeit at some short-term cost. But Mr. Bernanke isn't getting much political help from any source. If he acts unilaterally he will carry the cat for whatever economic slowdown occurs in this election year. Meanwhile, measured inflation tops 5% and forecasts say it will go higher. Glendora Rider's diminishing savings tell her that it already is plenty high enough.
George W. Bush has a creditable economic policy record on many fronts, and would have done even better if congressional Republicans had followed his leadership on such matters as immigration and Social Security reform. The best thing he could do for his party and the country, as he finishes out his term, would be to publicly give his full backing to measures that would reverse inflation.
That might sound counterintuitive in political terms, because of possible temporary economic repercussions. But it would help John McCain – one of the more responsible members of his party during the Republican spending spree – persuade voters that Republicans still are a responsible party, willing to do penance for the pocketbook pain they have caused Glendora Rider and millions of other Americans.
Voters Want Economic Leadership
Elections are often reshaped by unexpected and fast-moving events, and when this happens a candidate who quickly takes the lead on the new issue can bolster his chances to win. There is such an opportunity now for Barack Obama and John McCain with the crisis facing Fannie Mae and Freddie Mac.
The mortgage giants touch tens of millions of people because their core business is to buy, insure and securitize home loans. But they act like huge hedge funds with their portfolios worth hundreds of billions. As government sponsored enterprises (GSEs), they have an implicit federal guarantee that allows them to borrow money more cheaply than competitors. They have used that advantage to make ever-larger bets in their portfolios, generating big profits when home prices were rising, but big losses when housing weakened.
![[Voters Want Economic Leadership]](http://s.wsj.net/public/resources/images/OB-BV801_oj_rov_20080716190707.jpg) |
| Corbis |
Congress ignored an early warning sign when Fannie and Freddie failed to produce accurate accounting statements in 2002. That should have spurred Congress to pass reforms proposed by the administration the next year to clean up the GSEs. It didn't.
Now with Fannie and Freddie at greater risk, Messrs. McCain and Obama need to think like would-be presidents instead of senators. That starts with ignoring former Fannie CEO Franklin Raines, who says reform isn't needed – this from a CEO who couldn't produce accurate accounting statements. The goal has to be to force the GSEs into a position where they can no longer put taxpayer dollars at risk.
Serious reforms must include immediate measures to prevent Fannie and Freddie from collapsing, and long-term changes to protect taxpayers. That means jettisoning the implied federal financial backstop and shrinking Fannie and Freddie.
The candidate who makes such proposals will likely gain on the issue of "who's better to handle the economy." Mr. Obama leads on this in the latest Time magazine poll, at 44%-37%. But Republicans often win if they are within six points on this issue. The economy is still a jump ball.
That makes reining in the cost of a bailout that much more important. Making the stockholders and creditors of the GSEs bear most of the financial burden will appeal to voters suspicious of government getting too cozy with business.
A wag once said that Fannie and Freddie were political organizations masquerading as mortgage providers. They donate heavily to politicians who can shield them from regulation. This election the GSEs have given more than $800,000 to congressmen and senators who oversee legislation that affects them. They have also snapped up dozens of retiring lawmakers and staff as lobbyists and pay them lucrative salaries. Not bad for part-time, indoor work.
Over the past decade, the GSEs spent at least $171 million on lobbying, which combined would make Fannie and Freddie the third-biggest lobby. This has fostered a network of co-conspirators, including the liberal low-income advocacy group Acorn, big-city mayors and some lenders. Any reform must avoid creating more slush funds for the GSEs to reward political allies at taxpayer expense, and prevent them from investing in "jumbo" mortgages on expensive houses. After all, these GSEs were created to help lower- and middle-income homebuyers, not the rich and famous.
Leading on the economy's biggest problems – housing and the credit crisis – would allow Messrs. McCain or Obama to run as an outside-the-Beltway reformer, willing to take on insider deals that Middle America hates and add to (or foster) a reputation for decisive action. It would also help in battleground states. Denver, Detroit, Cleveland, Las Vegas and Miami metro areas are all in the top 10 in foreclosure rates.
Both candidates have challenges in taking up this cause. Each has received money from Fannie and Freddie employees this election: $82,299 to Mr. Obama and $14,400 to Mr. McCain. Mr. McCain isn't as strong in talking about the economy as he is about national security. Mr. Obama, on the other hand, is steeped in the Fannie/Freddie culture. He briefly tapped a former Fannie CEO to head his vice presidential search and he once worked for Acorn. And his campaign depends on Acorn's activists for voter registration drives. He may be too obligated to act against their allies.
But both candidates should remember past elections. For example, Republican William McKinley won in 1896 in part by embracing hard money after William Jennings Bryan's "Cross of Gold" speech at the Democratic convention. And in 1992, Bill Clinton won in part by promising tax cuts for the middle class to deal with a slowing economy. In both elections, nimbleness helped bring victory. What worked before can work today. An opportunity awaits Messrs. McCain and Obama. Will either man seize it?
Mr. Rove is a former senior adviser and deputy chief of staff to President George W. Bush.
1 comment:
Interesting article.
Thanks for posting!
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