Posted by Todd Zywicki:
Was the Bailout The Turning Point in the Election?
http://volokh.com/archives/archive_2008_11_02-2008_11_08.shtml#1225983319
Given the convincing margin of Obama's victory, it may be that there
is no single turning point to the election. But if there is one, I
think it was John McCain's decision to go along with the bailout.
[1]At the time, I had thought (and from a public policy perspective
hoped) that McCain would come out forcefully against the bailout and
try to insist on a rewrite of its terms along the lines proposed by
the House Republicans at the time. He could have denounced it as too
expensive, lacking adequate controls, and an example of the sort of
crony capitalism and "business as usual" in Washington that he would
oppose. In addition, it would've allowed him to make a firm break with
the Bush administration. Polls at the time indicated that would have
been a popular position (and the exit polls I've seen suggest that it
would still be a popular position today). In addition, even if it was
thought necessary (and there is some indication that it was not) the
enactment of the bailout did little at the time to staunch the
bleeding on Wall Street.
Instead, the event turned into a political debacle for McCain. He
interrupted his campaign to "save" the bailout and form a bipartisan
consensus. Then, of course, he wasn't even able to do that when the
House voted down the initial bailout package, so he looked ineffective
on his own terms. [2]Dick Morris also views this as a turning point
when the election slipped away from McCain:
Had McCain voted against the bailout of Wall Street firms and
backed the Republican alternative, there is no question in my mind
that he would have won. After calling attention to his "suspension"
of his campaign, McCain compliantly and supinely embraced the Bush
bailout backed by the Democrats. America was waiting for him to
speak out against excessive government spending and against bailing
out Wall Street firms for their greed.
Some will blame the war in Iraq for McCain's defeat. Others will
cite the economic crisis. But had McCain had the courage of his
convictions, it would have sent a message to all voters that he was
determined to change business-as-usual in Washington. By bowing to
conventional wisdom, he undid the entire work of his convention and
contradicted his message of independence from President Bush. His
willingness to vote for the bailout package, earmarks and all,
belied his pretensions of independence.
McCain frequently said that he would rather do the right thing than
be president. But his vote for the bailout turned out to wrong.
Many have opined that this was a turning point for McCain because what
it revealed about his and Obama's respective "styles." I'm not sure
about that. Had McCain suspended his campaign and acted decisively and
forcefully to oppose the bailout, and Obama remained "cool," I think
that the politics of the situation would have been very different. The
way in which the bailout was presented to Congress was outrageous and
it would've been nice for someone to have said so. Had McCain opposed
the bailout, in retrospect he could have been seen as independent and
decisive (rather than merely impulsive) and Obama might have been seen
as weak, indecisive, and just going along with the Wall
Street-Washington establishment. It was the substance, not the style,
that made this a turning point in my opinion. The style was secondary,
except that McCain's style was so unhinged from the substance--why so
much energy wasted just to rubber-stamp the administration's proposal?
Why didn't McCain do this? It is a bit of a puzzle, because I would
think that McCain's instinct would have been to be repelled by the
expense and cronyism of the bailout. I suspect that it is threefold.
First, McCain simply does not understand economics, did not understand
the problem that the bailout was trying to address, nor how the
bailout was supposed to address it. And, I've I opined previously, he
is not that good at faking it when he doesn't know something. I
suspect Obama had no idea what the bailout was all about either, but
he came up with some good, empty talking points that were enough to
bluff him through.
Second, McCain seems to have made a political calculation on the
bailout that the way he could best play it would be to use it as an
opportunity to show his ability to form "bipartisan" consensus in a
time of crisis. Which was a bad decision, I think. First, it didn't
work once the bill failed to pass the House inititially. Second, I'm
not sure that it is a good political move to be seen as the leader of
a bipartisan consensus on high-profile legislation that is a political
turkey (leaving aside the merits).
Third, I think McCain must've bought into the idea that the bailout
would work and take the issue off the table. Instead, at the time,
there was no indication that the bailout was even working. So it was a
political turkey with little policy pay-off. Even worse, by
broadcasting his "leadership" on the bill, McCain tied himself both to
the Bush administration and to whether the bill would actually work to
address the financial crisis at the worst possible time. And this was
all based on Hank Paulson's "trust me" approach to the issue. Given
the track record of the Bush administration I have no idea why anyone
would want to tie themselves to any policy of the Bush administration,
much less one based on a "trust me" justification (I recall that
approach didn't work out so well with a certain war we got ourselves
into). Regardless, it ended up tying McCain to Bush at the worst
possible moment, on the worst possible issue, with the worst possible
political optics.
All around, I agreed with Dick Morris then and agree with him now that
if there was a turning point, that was it. Would McCain have won had
he followed Morris's advice? My intuition is that it very well might
have. That he didn't seize this opportunity, however, might speak to
why McCain lost and what it revealed about why he shouldn't be
President. He may be a leader and he may be decisive, but that doesn't
mean he actually understands what is good or bad policy to be decisive
about.
On the other hand, I'm not sure that the experience told us much about
Obama's ability to be President--other than that he was savvy enough
to stand back and let McCain drive himself off the cliff. (It is also
interesting that Obama coasted when he was elected to the Senate
because his opponent self-destructed). Obama did remain cool and above
the fray throughout that time. At the same time, one of my biggest
concerns at this point is that the flip side of Obama's coolness and
desire to form consensus is his possible tendency toward
indecisiveness and undue compromise and to avoid being pinned down and
taking responsibility for difficult decisions. I'm not sure that his
response to the financial crisis provided much insight one way or the
other in determing whether he was cool or just indecisive.
References
1. http://volokh.com/archives/archive_2008_09_21-2008_09_27.shtml#1222514432
2.
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/05/AR2008110503211.html
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