Game Changer

This week, historians will record, was a game-changer in two key respects.

First, the free-market chickens finally came home to roost.

Treasury Secretary Hank Paulson, who came to Washington from Wall Street with an elaborate agenda of further deregulation the better to enable firms like his own Goldman Sachs to operate ever more baroque casinos, was seen flitting from ad hoc bailout to ad hoc bailout. Not long ago, conservatives were whacking progressives who wanted more investment in public infrastructure, or solar technology, as presuming to "pick winners and losers." But there was Paulson, with no shred of a transparent process, deciding, "Lehman, I think not...A.I.G., maybe no, oops, maybe yes." Talk about picking losers. It wasn't just Lehman Brothers that was revealed as bankrupt, but the whole ultra market formula.

And this was the week when Barack Obama recovered that voice that gave so many of us so much hope. As readers of this blog will know, I have been very harsh on Obama and his handlers lately for sticking to a stale script of wanting to "move beyond left and right", and blaming "Washington" generally, and using rather tame and generic criticisms of McCain as insider. As the Palin surge showed, it wasn't working. Even something as superficial as a celebrity Moose-mom being added to the Republican ticket was enough to shift momentum to McCain. But Palin, who doesn't know her Fannie from her Freddie, now becomes a liability in a financial crisis.

McCain began the week with a big stumble -- his Hooveresque howler about the fundamentals being sound and his not terribly credible attempt to recover by explaining that he was talking about workers. Even less credible was McCain's makeover as a born-again Teddy Roosevelt-style regulator.

But it wasn't so much McCain's stumbles that began the turnaround. It was Obama sounding like a compelling leader, and connecting the dots between Republican ideology, Republican policy, carnage on Wall Street, and wreckage on Main Street--and taking it directly to McCain. And just in time. Here's the voice we've been waiting for, as heard in Obama's speech yesterday in Elko, Nevada.

The events of this week have shown that the stakes in this election couldn't be clearer.

We are in the midst of the most serious financial crisis in generations. Three of America's five largest investment banks have failed or been sold off in distress. Our housing market is in shambles, and Monday brought the worst losses on Wall Street since the day after September 11th. Monday brought the worst losses on Wall Street since the day after September 11th, and today we learned that the Fed had to take unprecedented action to prevent the failure of one of the largest insurance companies in the world from causing an even larger crisis.

While we do not know all the details of the arrangement with AIG, the Federal Reserve must ensure that the plan protects the families that count on insurance. It should bolster our economy's ability to create good-paying jobs and help working Americans pay their bills and save their money. It must not bail out the shareholders or management of AIG.

Everywhere you look, the economic news is troubling. But for so many Americans, it isn't really news at all.

600,000 workers have lost their jobs since January. Home values are falling. Your paycheck doesn't go as far as it used to. It's never been harder to save or retire; to buy gas or groceries; and if you put it on a credit card, they've probably raised your rates. In so many cities and towns across America, it feels as if the dream that so many generations have fought for is slowly slipping away.

I have every confidence that we can steer ourselves out of this crisis. That's who we are. That's what we've always done as Americans.

But the one thing I do know is this--we can't steer ourselves out of this crisis by heading in the same, disastrous direction. And that's what this election is about.

It's been an interesting week for John McCain. It's been really interesting to watch him respond to this economic news. His first reaction to this crisis on Monday was to stand up and repeat the line he's said over and over and over again throughout this campaign--quote--"the fundamentals of our economy are strong."

Now, his campaign must've realized that probably wasn't a smart thing to say on the day of a financial meltdown, so they sent him back out a few hours later to clean up his remarks.

But it sounds like he got a little carried away, because yesterday, John McCain actually said that if he's president, he'll take on the -- quote -- "ol' boys network" in Washington. I am not making this up. This is someone who's been in Congress for twenty-six years -- who put seven of the most powerful Washington lobbyists in charge of his campaign -- and now he tells us that he's the one who will take on the ol' boy network. The ol' boy network? In the McCain campaign, that's called a staff meeting.

Amen!

I have a sense that hearing himself speak in a stronger voice, and watching his standing recover in the polls, will be a real tonic for the candidate, his campaign, his supporters, and the late deciders. And not a moment too soon.

---
Robert Kuttner, co-editor of The American Prospect and Distinguished Senior Fellow at Demos, has just published Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency (Chelsea Green). He is blogging daily about the election and the economic crisis at www.obamaschallenge.com.

Comments

[zjr909]

This whole "crisis" is becoming curiouser and curiouser by the minute. And, indeed, it's starting to look very much like a scheme hatched in the Red Queen's mind to tighten her control (or perhaps the Mad Hatter's mind). No matter what happens to anyone anywhere, our system is calibrated so that the only loser is the average American. The new home owners couldn't pay their mortgages: no problem, just take it out of their tax dollars. Package it as a "financial meltdown" and the schmucks'll buy it hook, line and sinker. Guaranteed. You don't need to be an economist to notice when you're being conned. But you do have to take your eyes off that man behind the curtain telling you the world will end tomorrow if you don't bailout the big boys long enough to see that the only ones in a panic are the reporters and pundits. I doubt if even the lamb sacrificed to make it all seem real (Lehman Brothers) will fare all that bad when all the smoke and mirrors have settled. This is nothing less than Bush-Cheneys farewell finger-fest to the American people. Maybe we should return the gesture.

[Sealthbomber]

Imagine an America where you actually had genuine talent in the White House. The mind boggles.

[proreality]

Obama's voice has always been there, the media refuses to cover it. The MSM is a corrupt frivolous joke and continues to lead the country into being the same.

[Pupadup4oBama]

Robert, I thank you for seeing what a lot of us have been seeing in him all along.

The man knows what he's doing... he doesn't get 18k people at his rallies because he's weak.

[PaulinaSmedes]

It's not recovery, it's called 'strategy'. It's all about timing... and I think it's just very cunning. Think about it. Go a little deeper...
Just wait and see, he'll be just fine, I promise.

[Marksalot]

Read my lips: the market will take care of itself.

[Pupadup4oBama]

I'm not by an means an economist....but I have a question...
will the market take care of itself because now more people can buy low?
I'm seriously not trying to sound dumb, but is that the reason why?

[larry278]

Since the market's melt down everybody, including Marksalot, is dumb about the economy. Comments on the economy must be wry on the rocks till 2014. It will take that long to sort things out while cleaning up the mess.

[raskolnikov72]

No .. Financial sector was tanking because nobody knew how to value the bad loans on their balance sheets (used to measure how healthy a company is - kind of like your 401(k) + savings + house, etc.). Hence, bankers are scared to lend money to even each other because they just don't know a) the value of what they have on their own balance sheets and b) how to turn these bad pieces of paper into money (eg, having the underlying homes sell)

Paulson and Bernanke think that if they can just buy up all these bad pieces of paper and that will make Banks more likely to lend money to one another, small business, and John K. Average consumer (who is already up to his eyeballs in debt).

Its more hocus pocus, this will take _years_ to get right.

[MeiLing]

Sure the market will take care of itself! It always does. But what about the fallout along the way? The decent, hardworking folks who've lost their life savings! The folks who've put in 30+ years and can't afford to wait 10-15 yrs for things to recover!

[raskolnikov72]

Well, if you're in cash, you're hosed and if you're in the market, depending on what you're in, you're hosed...

bury it in the back yard. These guys don't know where the bottom of the well goes. This Kojack was telling us all it was a-otay for the better part of 12 months ... and now, in 1 week, its, er, "we need 700 billion?" shove it.

[DocTwain]

I agree that you did a great job on Hannity. The epithets you threw at him were warranted, and you made your point very well.

Although I agree that the financial crisis is a boon to Obama, I'm not sure that his message is sharp enough to take advantage of it and lead to victory. In the comments you quote above, Obama points out that there is a _problem_, and criticizes McCain for being an "ol' boy," but there's no _narrative_.

Obama doesn't go into causes at all, and doesn't explain directly that the Republicans and deregulation are to blame. He should say, point blank, that the financial crisis was caused not by vague "ol' boys" but by incompetent Republicans and their stupid, greed-based, plutocratic ideas about deregulation. He should say that Bush and McCain and the Republicans' stupidity and free-market greed devastated homeowners and that that devastation is trickling up to blast the financial markets and already is trickling back down again, and it's all the Republicans' fault. That McCain's financial adviser is Phil Gramm, whose policies are directly responsible for the Enron scam and for the deregulation that led to the financial crisis, that McCain has embraced the same ideas, which are grossly irresponsible, senseless and asinine and at this stage will only bring ruin and suffering to the American people. In other words, he needs to pin the tail on the elephant, _hard_.

[Pupadup4oBama]

I feel that message is getting across.

[Hiphopcrates]

Well said!

[donndublin]

Don't forget Franklin Raines who was appointed by Clinton to run Fannie and Freddie and who made millions for himself while running it into the ground. Could this be a strategy for these socialists to run the capitolist institutions into the ground so they can repace it with a pure socialist state?

[southernsepia]

Well if it is this republican administration is doing a very good job of implementing it.

[larry278]

The only things the GOP has experience in is deregulation & larceny. As for implementing anything, the GOP believes that erotic toys are implements. It wasn't always like this. Harry Truman made a speech from a common farm implement, a manuere spreader; he said, "This is the first time I've ever stood on a Republican platform." That was a very long time ago, back when you could make a living on a 300 acre, family farm. While agri-businesses prosper now, the family farm is history. The corporate farms hire displaced farmers to do the work since ex-farmers can handle the implements & work cheap. Those who own the corporate farms use a computer as an implement. It's like virtual farming or phone sex.

[JBryan]

Seems to me the Republicans have no problem with socialism when they need to have their sorry asses bailed out of a situation they created. They are the first in line for corporate welfare, burrowing their fat jowls in the public trough.

[winstonhowell]

I think Robert Kuttner is one of the brightest people we have on our side. And he has the rare ability to talk about economic matters in language the public can understand. And while I liked the fighting spirit he displayed against Hannity (and think our side needs more of it), I thought he came a little unglued -- he let Hannity get under his skin a little too much, lost his cool, and got derailed for a moment. I think it would have been more effective to stay completely in control and channel his rightful contempt/anger into cool analysis. I would have loved to see him dissect, one-by-one, Hannity's talking points about low unemployment under Bush, low interest rates, low inflation, and economic growth. Low unemployment, yes, but that statistic hides the massive UNDER-employment that has occurred. Low interest rates and inflation, sure, but those stats hide the fact that wage growth has been so dismal that even with those low interest rates and inflation the middle and lower classes fell further behind in recent years. And that "economic growth" went almost entirely to a tiny handful of super-weatlhy Americans -- no "trickle down." Plus, stats don't take into account that people' can't afford healthcare­/insurance­, that the #1 reason for bankruptcy is exorbitant healthcare bills, the high #'s of foreclosures, more seniors can't afford basics like adequate food, etc. (I'm sure Kuttner can do this better than I have here.)

[FGAofFLA]

I agree that Obama can and should do more to with the specifics you mention to link McCain's economic disconnect and past history of supporting "trickle-down economics" with our economic meltdown as a way to discredit the McCain-Palin campaign's flip-flop pronouncements and phony claims to being "the original mavericks." At the same time, thought, Obama's challenge also is to simplify his economic message, as Reagan did many years ago when he asked: "Are you better off than you were four years ago?" Hopefully, Obama can get a memorable message across like that in the coming weeks.

[southernsepia]

I beg to differ. This has been Obama all along. The media could no longer ignore the issues after the market debacle, that is the difference.

Obama is from Chicago - he is far from weak. You talking heads panicked last week without provocation.
Far better to encourage volunteers than to criticize. He's got this.

[M1]

As the Economy crumbles under our feet the comfort of those buying the palin/mccain white mom & pop Image will come undone. Also, others will switch thier vote to Obama because survival demands it.

It will be close but Obama will prevail. A few pictures of Obama with Bill Clinton would be great in the battleground states right now. Image means so much to the low information voters.

[krocklin]

Bill Maher said last night on Rachel Maddow's show that the people are just too dumb, can't grasp nuanced concepts, respond only to demagogues and emotional signals like a dog does, and can't be trusted.
Probably the most realistic view of coming prospects I'm afraid

[Pupadup4oBama]

I love Bill and agree with him on MANY points...but I think the American people are starting to get it. I really do.
And maybe I'm the eternal bright eyed optimist...but I believe it to be true, just from pictures I've seen (and yes, a picture can be worth a thousand words).

[Pulemerci]

I guess it's OK taht Obama took large donations from Fannie May and Freddie Mac? Nothing wrong with that right?

[tigerakabj]

From their EMPLOYEES, no. If he took it from the company's FUND or CASH REGISTER (the company itself), yes.

And that goes for any company. Go to his donation site and look at the 7 conditions of donating.

[Pulemerci]

Isn't his economic advisor, Franklin Raines, the former head of Fannie Mae. Didn't he get a $50 million parachute from that failed entitiy that had to be taken over by the government? And this is Bush and McCain's fault that Raines ran this into the ground. Why would Obama tap him as an economic advisor. Please explain that to me.

[surfcitysteven]

I saw your segment with Seanitty and Combs last week, loved it. If we could just get a loop of Seannity saying how what great shape the economy is now that the stock market has tanked. He truly is in bizarro world.

[ofbbg]

Isn't that swell. Pity he doesn't tell everyone how, under his "inspired leadership", NeoFascism is going to solve the problems! If private businesses fail, we obviously need more government. When government fails, we obviously need more government!!?? This is called NeoCom logic.

[shaytoonee]

Amen... Amen...Amen

He is finding his voice again. LOVE IT

[Pupadup4oBama]

He's always had it...but some people have just been to nervous or pessimistic to realize it.