The Second Presidential Debate

One thing is abundantly clear from last night’s debate between John McCain and Barak Obama.   The country’s slide toward socialism is going to continue at an accelerated pace regardless of who is elected President.   Both candidates support even more government control over virtually all aspects of the economy.   You know the slide is irreversible when McCain, the Republican candidate, proposes that the federal government spend $300 billion to purchase home mortgages on top of the $700 billion bailout package just approved by Congress last week.    Under McCain’s new plan, the government would purchase and own bad home-loan mortgages and would then presumably forgive a portion of the debt owed on each mortgage.   This plan may be necessary to reverse the high home foreclosure rate, but it would reward people who have incurred more debt than they can repay at the expense of taxpayers who have kept their own debt at levels they can afford.     

The only real news from the debate involved McCain’s proposal for the government to buy bad home-loan mortgages, and even this proposal did not receive much attention.   For the most part, the debate consisted of the moderator asking a question and the candidates responding by regurgitating their talking points.   I found the debate to be fairly boring and uninformative.    I didn’t learn anything new about the candidates or their positions.   I found myself hoping for another debate between Joe Biden and Sarah Palin so I could at least look forward to Palin’s smiles and winks and her refreshing way of discussing the problems facing the country.

During the debate last night, Obama, as he has done in the past, repeatedly linked McCain to President Bush and the current problems with the economy.   It’s a good strategy because it is working.   It’s also dishonest because there is little McCain could have done to prevent the current crisis, which started in the subprime mortgage market supported primarily by the Democrats.   But that is irrelevant.   After all, this is politics.  Why let the truth get in the way of a good campaign issue?   This is the way the game is played. 

Time is slipping away for McCain.   Everything is going against him.   Bad news on the economy is good news for Obama and terrible news for McCain.   For McCain, it’s guilt by association, which deeply offends Obama when the subject is Bill Ayers, the Rev. Jeremiah Wright, or Tony Resko, but suits him perfectly when the subject is President Bush and the economy.   It’s a double standard, of course, but Obama assumes correctly that most Americans will not see the hypocrisy and that most members of the media, who are his cheerleaders, will ignore it. 

In my view, both McCain and Obama performed reasonably well.   Once again, I think McCain demonstrated his superior knowledge in the area of foreign affairs, but I don’t think there was an overall clear winner of the debate.   All Obama needed was a tie to maintain his growing lead in the polls.   McCain needed a knockout blow, or he needed for Obama to make a mistake.   Neither one of these things happened.    

Biden's Fantasy World

In today’s edition, The Wall Street Journal published an editorial under the heading “Biden’s Fantasy World”.   Here it is:

In the popular media wisdom, Sarah Palin is the neophyte who knows nothing about foreign policy while Joe Biden is the savvy diplomatic pro. Then what are we to make of Mr. Biden's fantastic debate voyage last week when he made factual claims that would have got Mrs. Palin mocked from New York to Los Angeles?

Start with Lebanon, where Mr. Biden asserted that "When we kicked -- along with France, we kicked Hezbollah out of Lebanon, I said and Barack said, 'Move NATO forces in there.  Fill the vacuum, because if you don't know -- if you don't, Hezbollah will control it.'  Now what's happened?  Hezbollah is a legitimate part of the government in the country immediately to the north of Israel."

The U.S. never kicked Hezbollah out of Lebanon, and no one else has either.  Perhaps Mr. Biden meant to say Syria, except that the U.S. also didn't do that.  The Lebanese ousted Syria's military in 2005.  As for NATO, Messrs. Biden and Obama may have proposed sending alliance troops in, but if they did that was also a fantasy.  The U.S. has had all it can handle trying to convince NATO countries to deploy to Afghanistan.

Speaking of which, Mr. Biden also averred that "Our commanding general in Afghanistan said the surge principle in Iraq will not work in Afghanistan."  In trying to correct him, Mrs. Palin mispronounced the general's name -- saying "General McClellan" instead of General David McKiernan.  But Mr. Biden's claim was the bigger error, because General McKiernan said that while "Afghanistan is not Iraq," he also said a "sustained commitment" to counterinsurgency would be required.  That is consistent with Mr. McCain's point that the "surge principles" of Iraq could work in Afghanistan.

Then there's the Senator's astonishing claim that Mr. Obama "did not say he'd sit down with Ahmadinejad" without preconditions.  Yet Mr. Biden himself criticized Mr. Obama on this point in 2007 at the National Press Club: "Would I make a blanket commitment to meet unconditionally with the leaders of each of those countries within the first year I was elected President?  Absolutely, positively no."

Or how about his rewriting of Bosnia history to assert that John McCain didn't support President Clinton in the 1990s.  "My recommendations on Bosnia, I admit I was the first one to recommend it.  They saved tens of thousands of lives.  And initially John McCain opposed it along with a lot of other people.  But the end result was it worked."     Mr. Biden's immodesty aside, Mr. McCain supported Mr. Clinton on Bosnia, as did Bob Dole even as he was running against him for President in 1996 -- in contrast to the way Mr. Biden and Democratic leaders have tried to undermine President Bush on Iraq.

Closer to home, the Delaware blarney stone also invited Americans to join him at "Katie's restaurant" in Wilmington to witness middle-class struggles.  Just one problem: Katie's closed in the 1980s.  The mistake is more than a memory lapse because it exposes how phony is Mr. Biden's attempt to pose for this campaign as Lunchbucket Joe.

We think the word "lie" is overused in politics today, having become a favorite of the blogosphere and at the New York Times.  So we won't say Mr. Biden was deliberately making events up when he made these and other false statements.  Perhaps he merely misspoke.  In any case, Mrs. Palin may not know as much about the world as Mr. Biden does, but at least most of what she knows is true. 

A History Lesson

The current financial crisis started in the market for subprime mortgages and then spread to other parts of the economy.   As usual, our politicians are blaming everyone but themselves and are saying the current crisis proves the need for more government regulation.  I agree that new regulations are needed, but the truth is that well-intended but misguided government regulations started the avalanche that snowballed into the current crisis, which is now threatening the entire economy.   If there is anything we should learn from history, it is that well-meaning legislation frequently has unintended consequences.

Let’s take a little history lesson.  The following article, which appeared in The New York Times on September 30, 1999, explains the genesis of the problem we are facing today.   Portions of the article have been omitted to conserve space. 

Fannie Mae Eases Credit to Aid Mortgage Lending 

By Steven A. Holmes 

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans.  Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

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Jeff Jacoby, a columnist for The Boston Globe, provided his perspective on the causes of the financial crisis in a column published on September 28, 2008, which stated in part as follows:

While the mortgage crisis convulsing Wall Street has its share of private-sector culprits,…. they weren't the ones who "got us into this mess."  Barney Frank's talking points notwithstanding, mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers.  It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so - or else.

The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites.

The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless.  Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods."  Lenders responded by loosening their underwriting standards and making increasingly shoddy loans.  The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this "subprime" lending by authorizing ever more "flexible" criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.

As long as housing prices kept rising, the illusion that all this was good public policy could be sustained.  But it didn't take a financial whiz to recognize that a day of reckoning would come…. [Frank’s] fingerprints are all over this fiasco.  Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape.  Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis."   When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.

Now that the bubble has burst and the "systemic risk" is apparent to all, Frank blithely declares: "The private sector got us into this mess."  Well, give the congressman points for gall.  Wall Street and private lenders have plenty to answer for, but it was Washington and the political class that derailed this train.   If Frank is looking for a culprit to blame, he can find one suspect in the nearest mirror.

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Would more government regulations have prevented the current crisis?  Writing in The Los Angeles Times on October 2, 2008, J.D. Foster, a fellow at The Heritage Foundation, said:

Europeans have been rather smug about our troubles, but they're now looking at failures of their own major financial firms, nationalization of their banks and threats of a banking panic.  It turns out their heavier regulatory hand was no defense against the current crisis.  Nor did their regulators fare better in ferreting out the gathering dangers. 

Today's financial troubles have many fathers in Washington, on Wall Street and, yes, even on Main Street. (Ask anyone who lied on a mortgage application.)  As the crisis recedes, Americans will need to understand what went right and what went wrong with private behavior, public policy and our regulatory system.  More than ever, we'll need careful, thoughtful analysis -- not Washington's usual high-pitched rants. 

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There is plenty of blame to go around, but it is clear that our current problems started when government decided to interfere with the private economy.  Well-intended government policies are a principle—if not the major—cause of the current financial mess.    Now the same members of Congress who adopted these policies will be passing new laws designed to prevent future problems.   I wonder how many new unintended problems will be caused by the new laws and regulations soon to be imposed on private enterprise (or what used to be referred to as private enterprise).

 

 

 

 

The Vice Presidential Debate

Here is my bottom line with respect to last night’s debate between Joe Biden and Sarah Palin:  it was irrelevant.   I was impressed with both Biden and Palin.   Many in the media were predicting and hoping the debate would be a disaster for Palin.  It was not.   I thought she handled herself well, but I doubt if the debate will make any difference in who gets elected as our next President. 

Does it make me nervous that Sarah Palin could be a heartbeat away from being President of the United States?   Yes, it does.    But it makes me even more nervous that Barak Obama could be President of the United States and that Nancy Pelosi is currently and will probably continue to be two heartbeats away from being President of the United States.    

As I have previously said on this blog, I don’t think either Obama or Palin is qualified to be President of the United States.   If you agree with me, this is the question:  Would you rather have an unqualified President or an unqualified Vice President?   To me, the answer to that question is a no-brainer.    

Now some of you will disagree with the way I have framed the question because you think Obama is qualified to be President.    If you favor Obama because you think he is qualified, then your analysis of Obama’s background and experience is totally different from mine, and I will probably never understand the way you think.   On the other hand, if you favor Obama because he is attractive, articulate, charismatic, and the most liberal member of the United States Senate, there is nothing I can say to change your mind because I agree he is all of those things.  If those are the things that are important to you, then you should vote for Obama.   For me, I place more importance on the candidates’ experience, political philosophies and voting records.   For more information on my views, see my post dated September 10, 2008 entitled “Experience and Achievements” and my post dated September 14, 2008 entitled “The Importance of Personalities and Charisma”. 

The reason I think last night’s debate was irrelevant is because I think most people, including me, will be voting for the candidate they think is most qualified to be President.  It’s a package deal.   We don’t have the opportunity to split the ticket and vote for the most qualified candidate for President and the most qualified candidate for Vice President.   Accordingly, most people, including me, will base their decision on the top of the ticket rather than the bottom of the ticket.  

Even though I view last night’s debate as irrelevant, I enjoyed it, and I thought it was more interesting than the first debate between McCain and Obama.   Biden was the typical old-time Washington politician.    By contrast, Palin was like a breath of fresh air.   She comes across as being genuine and folksy and as someone I would like to have as my next-door neighbor.   Palin connects well with people because she is like the people you and I know and interact with on a daily basis.   Of the four candidates, McCain, Obama, Palin and Biden, Palin is the only one who comes across to me as being a normal person.    This is her appeal.   But I don’t think she will be able to swing enough voters to McCain to make a difference.    If McCain is going to win this race, he will have to do it on his own.    At the present time, his prospects are not very good. 

Fiscal Irresponsibility

Even before the recent meltdown in the financial markets, one of the most serious threats faced by the country was the fiscal irresponsibility of our federal government.   Both parties are to blame.   When the Republicans controlled both houses of Congress, they were as irresponsible as the Democrats.   President Bush has been ineffective as a leader in controlling government spending.   According to The Wall Street Journal, federal spending has increased by almost $1.2 trillion, or 57%, in this decade alone. 

The spending splurge is continuing even in the midst of a financial crisis.   The New York Times reported last Friday as follows:  “As Congress tried to cobble together a plan to spend huge sums on a financial bailout, lawmakers also moved Thursday toward final approval of an omnibus spending bill with more than 2,300 pet projects, including a $2 million study of animal hibernation…  Taxpayers for Common Sense, a budget watchdog group, calculates that earmarks account for $6.6 billion of the omnibus bill’s cost, which totals more than $630 billion.”    Just yesterday, in order to attract votes for the $700 billion bailout package currently under consideration, the Senate added $150 billion of “sweeteners” consisting of tax breaks for special interests.  

The federal government’s spending splurge is being financed by borrowed money that will have to be repaid by our children and grandchildren.  This is reckless and immoral, just as it would be reckless and immoral for me to borrow money to finance an extravagant lifestyle with knowledge that my children and grandchildren would have to repay my debts following my death.   

Despite the obvious need to reduce federal spending, both McCain and Obama, in an effort to get elected, have promised new government programs that will cost billions of dollars.   According to the Committee for a Responsible Federal Budget, Obama during his speech at the Democratic Convention proposed $547 billion in annual spending increases and tax cuts, and McCain during his speech at the Republican Convention proposed between $524 billion and $563 billion in annual spending increases and tax cuts.  Both candidates are promising to pay for their new programs by cutting government spending in other areas and closing tax loopholes.  Both candidates, however, have been vague about how they would do this.    Based on my observations, it is very rare for politicians to eliminate a government program, even if the program is ineffective and has outlived its usefulness. 

In my opinion, both McCain and Obama are failing to be honest with the American people regarding our ability to pay for new government programs on top of existing entitlement programs that are growing at an unsustainable rate.   The national debt will soon exceed $11 trillion.   On top of that, the Heritage Foundation recently issued a report stating that the federal government’s liability for unfunded retiree benefits is $40.9 trillion, including $34.1 for unfunded Medicare benefits and $6.8 trillion for unfunded Social Security benefits.   In recent weeks, according to The Heritage Foundation, the government has obligated the taxpayers to incur $840 billion in liabilities for financial bailouts, assuming Congress this week approves the $700 billion bailout package currently being debated.     

Under these circumstances, how do you choose between McCain and Obama, both whom are trying to buy your vote by promising new government programs and both of whom are trying to convince you they will be fiscally responsible and will cut government spending?   The only way I know is to examine the records of the two candidates in an effort to determine which one has demonstrated the most fiscal responsibility in the past.  In my experience, the best way to determine how someone will behave in the future is to examine his or her past behavior.  Most people don’t change. 

Despite his unrealistic campaign promises, McCain has a strong track record as a fiscal conservative.     He is one of the few members of the U.S. Senate who does not request earmarks, and he has promised to veto any bill containing an earmark.   Unlike McCain, Obama is not bashful about requesting earmarks.   According to media reports, Obama has requested earmarks valued at either $860 million or $938 million during his first three years in the Senate, a rate of approximately $1 million per day in earmark requests.   Many politicians justify earmarks by saying they represent a small percentage of total government spending, which is true.   Using this rationale, you can justify almost any new project at any cost.  Earmarks are a symbol of the larger problem with irresponsible government spending.  Politicians use earmarks to buy votes with other people’s money.    The other people are the taxpayers, including you and me and our children and grandchildren.    

The Council for Citizens Against Government Waste (“CCAGW”) examines the voting records of members of Congress to separate taxpayer advocates in Congress from those who favor wasteful programs and pork-barrel spending.  CCAGW has given McCain a score of 100% for 2007 and a lifetime score of 88%.   By comparison, Obama received a score of 10% for 2007 and a lifetime score of 18%.    There may not be much difference in the campaign promises being made by McCain and Obama, but there is a significant difference in their voting records on matters involving the expenditure of taxpayer money.    

Now let’s consider what happens if Obama gets elected and if the Democrats retain control of both houses of Congress, which is highly likely.   CCAGW gave the Democrats in both the Senate and the House a score of 5% based on their votes in 2007 compared with a score of 67% for Republicans in the Senate and 60% for Republicans in the House.    The scores for the Republicans are less than impressive, but the scores for the Democrats are downright frightening.  

If Obama is elected, and if the Democrats continue to control both houses of Congress, then it is a virtual certainty that government spending will continue to increase at an accelerated rate.   If McCain is elected, I think he will at least make an effort to apply the brakes to government spending.     I am not optimistic either way, but I know one thing for sure:  if our elected officials do not control government spending, then the future for our children and grandchildren will be bleak.  If you think we can tax our way out of this mess, please contact me.  I have a bridge I would like to sell you.    

Who Opposed More Regulation?

Prior to yesterday’s vote in the House of Representatives on the financial rescue package, Speaker of the House Nancy Pelosi, the Democratic leader in the House, said, “For too long this government, eight years, has followed a right-wing ideology of anything goes, no supervision, no discipline, no regulation.”   Rep. Pelosi is either intentionally misleading the public or she is suffering from Alzheimer’s disease.   The facts are that it was the Democrats—not the Republicans—who opposed increased regulation of Fannie Mae and Freddie Mac.   If you don’t believe me, then listen to what some Democrats and Republicans were saying in their own words.    Below are two links to videos on YouTube.   I recommend that you take the time to watch them.  I do not approve of all the language that has been inserted between the video clips on the second link, but you need to listen to what the Democrats were saying when the Republicans warned that a major financial crisis was looming.   Here are the links. 

http://www.youtube.com/watch?v=3QBRIsCkGQ0 

http://www.youtube.com/watch?v=_MGT_cSi7Rs 

Don’t get me wrong.   I am not trying to place all the blame on the Democrats.  There is plenty of blame to go around.   I am simply pointing out the hypocrisy of Speaker Pelosi and other Democrats who are trying to convince you they are without blame and that the Republicans are responsible for the current financial crisis.

 

A Little Bit of Perspective

During the last week, Ann and I have been relaxing at the beach while the financial markets have been melting down.    For the first time in a couple of years, we have been enjoying St. Simons Island, which is located on the southeast Georgia coast and still retains the small-town atmosphere we first observed approximately 35 years ago.   Regrettably, our week of relaxation is over, and we are on our way back to Atlanta today.

Many of you will be surprised to hear I was splurging on a beach vacation at a time of great financial uncertainty.   There is one simple explanation:  I paid for the vacation in advance before I understood the extent of the financial crisis facing the country and without knowing how much my retirement assets would plunge in value before and during my vacation.    

As it turned out, St. Simons was a great place to be during a time of financial turmoil.   For me, there is no better way to feel close to God and to find peace than to take a walk on the beach or a hike in the mountains.   I have never understood people who think the beautiful world we enjoy just happened by accident.   God speaks to me at various times, sometimes when I least expect it, but always when I am walking on the beach. 

A walk on the beach also helps me put today’s problems in perspective.   It reminds me that waves have been splashing against the shoreline for thousands of years.    They were rolling in long before I was born, and they will be rolling in long after my death.   The waves at St. Simons were rolling in for centuries before the United States of America even existed.    They were splashing against the shore throughout the Revolutionary War, the Civil War, World War I, the Great Depression, World War II, and the Cold War.   The waves were coming in on September 11, 2001 while terrorists were killing thousands of innocent people during a series of brutal attacks on U.S. soil.   The ocean and its waves remind me that our country and the world at large have endured much worse crises than those we are facing today.  I have no doubts we will endure once again.