Market Bailout Proposed

A grim-faced President Bush announced an unprecedent government intervention in the financial markets in which the federal government would buy up millions of mortgages to get them off the books of troubled banks and brokers. It is doubtful that Bush really understands what is going on or the long-term consequences of this deal as the people who brokered it are treasury secretary Henry Paulson, federal reserve chairman Ben Bernanke, and chairman of the New York federal reserve bank, Timothy Geithner. Bush surely understands though that such a move is diametrically opposed to everything the Republican Party has stood for since the great depression ("the markets are smarter than the government"), but the pressure to do something is immense. Put in more political terms, when the red phone rings at 3 A.M. (or more likely 3 P.M.) with the caller saying: "The markets are collapsing" a possible answer might be: "So? Call the treasury secretary." An article on Politico is entitled "Will Bush Become the New Hoover?"

But it is also unlikely that Paulson, Bernanke, and Geithner (who are experts) know what comes next. Paulson estimated the cost of the bailout to the taxpayers at more than $1 trillion. Where's the money going to come from at a time of record deficits? The Fed can print it if it wants to but what are the consequences for inflation? What happens when the voters discover that an amount double the entire bill for the Iraq war so far is suddenly being given to a handful of Wall St. firms who made horrible business decisions over the years and when nothing is being done about health care insurance and probably won't be in the foreseeable future due to the budget crunch? The whole affair is strongly reminiscent of the rush to declare war on Iraq when panicked congressmen nearly all did what the President told them to do without thinking about the consequences. Here is a good article in the NY Times about some of the risks here, which hardly anyone is talking about. Just as one example, in the Savings and Loan crisis in the 1980s, the government took over real estate and later resold it. Real estate always has value, but this time the government would be buying complex derivatives whose value nobody understands.

So what are the candidates saying about all this? Obama has talked in vague generalities and said we need bipartisan cooperation. He has tried to be the statesman and stay above the fray--which conveniently allows him to avoid taking positions that might later turn out to be foolhardy. McCain spent most of yesterday blasting him for it. McCain, however, was initially against the $85 billion bailout of A.I.G. and then switched positions, which looks like a flip-flop. Obama has been repeating McCain's comment made Monday that "the economy is sound" over and over to illustrate that McCain doesn't have a clue what is going on. That comment may be the sound bite that ultimately does him in.

A CBS/NY Times poll taken this week show that half the voters think the economy is the top issue, triple the number who are concerned about national security. Sixty percent of the voters are confident that Obama can handle it vs. 53% who think McCain can do the job. Thirty-nine percent think the economy is very bad. All in all, the financial crisis is likely to move the focus of the remaining campaign to economic issues, where McCain's experience doesn't seem to be helping him much.

McCain and Palin Campaigning Together

In contrast to virtually all previous campaigns where the presidential and vice-presidential candidates campaigned separately to cover twice as much ground, John McCain and Sarah Palin are appearing together on the trail. It is pretty clear to everyone that the person generating all the excitement is Palin, not McCain, with large numbers of women showing up waving lipstick tubes in reference to the lipstick wars of the past week. But fame is a fickle thing. Among white women Obama/Biden is up 13 points over McCain/Palin in the past week. In part this is due to increased media scrutiny of Palin. In one poll, her favorable rating is down 4 points to 40% and her unfavorable rating is up 8 points to 30%. There is a longer article on Palin's ratings at Newsweek.

Mississippi Senate Race Will Be at the Top of the Ballot

The Mississippi secretary of state put the Senate race between Sen. Roger Wicker and former governor Ronnie Musgrove at the bottom of the ballot, below local races, in the knowledge that many people wouldn't see it there. A court has now told them that Mississippi law requires federal elections to go before state and local ones. Gov. Haley Barbour has acquiesced to this decision and the Senate race will be moved up to the third slot.

Today's Polls

We have 15 presidential polls today and the map has changed again. A few of the polls are noteworthy. Obama now has a double-digit lead in Iowa, a state Bush won in 2004. If Obama can hang onto all the Kerry states, he needs about three more to win. Iowa looks like it is one of them. Colorado and New Mexico are two others. So if Obama holds the Kerry states and wins Iowa, New Mexico, and Colorado, which is what today's map shows, he gets the keys to the White House.

In Indiana, McCain's lead has dropped to 2 points, but Indiana is a very Republican state and it is unlikely Obama can ultimately win this one. We have two polls in Michigan, a must-win state for Obama. The results are mixed. EPIC-MRA has him up by 1 point while Marist College puts him up by 9 points. Marist also has Obama slightly ahead in Ohio, 47% to 45% and also in Pennsylvania, 49% to 44%.

We also have 8 Senate polls. The most significant one is in Alaska. Despite Gov. Sarah Palin focusing attention on the state, Anchorage mayor Mark Begich (D) is still ahead of indicted senator Ted Stevens (R) 50% to 44%. The deadline for Stevens dropping out has passed. He will be on the ballot in November no matter what. His only hope is being acquitted before the election. Another significant poll is in North Carolina. Sen. Elizabeth Dole (R-NC) tied with state senator Kay Hagan (D) at 35% apiece. With Tom Allen (D) not doing very well in Maine against Sen. Susan Collins (R-ME), the DSCC is likely to pour even more money into Hagan's campaign.

We also have two House polls. As expected, the renomination of Rep. Don Young (R-AK) for Congress may pretty much end the GOP's hopes to hold the seat against Democrat Ethan Berkowitz. This seat is an especially important one because the presidential race is so close that a 269-269 tie is certainly a possibility. In that case, the new House elects the President with each state getting one vote. That would mean Berkowitz gets as much say as all of California. Like Earl Pomeroy (D-ND) and Stephanie Herseth-Sandlin (D-SD), he would be in a situation of being a Democrat in a state that went wildly for McCain. Pomeroy has been around for a while and can probably withstand the pressure applied to him to vote as his state did, but Herseth-Sandlin and Berkowitz as relatively newbies will get introduced to power politics real fast. A situation in which Berkowitz, Herseth-Sandlin, and Pomeroy got together for lunch in a smoke-free room to pick the President would be kind of unprecedented. Here's what they look like.

Ethan Berkowitz

Stephanie Herseth-Sandlin

Earl Pomeroy

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