Obama or McCain, California is still in trouble

When I moved to California in 1988 I had this notion that it never rains, and sure enough it didn’t rain from the date I arrived (June 1) through November. In fact we were in a drought. To paraphrase Spock sometimes having is not as good as wanting.

It has always bothered me that the state does not have an effective form of government, where budgets require a 2/3 majority and the initiative process delivers generally cruddy legislation (cf, Props 1a, 5, 13, 99, 187, etc). My favorite was SF Proposition BB in 1993 when Officer Bob Geary managed to garner enough signatures for this lovely question, “Shall it be the policy of the people of San Francisco to allow Police Officer Bob Geary to decide when he may use his puppet Brendan O’Smarty while on duty?” And he won.

I grew up in a state where an honest politician stayed bought (NJ), but our roads and bridges were maintained and our school systems remained relatively competitive. In the meantime, California’s infrastructure degraded at a time of great prosperity, where people invested in their SUVs, Wiis, and wide screen TVs (not to mention prisons), with only a modest break when Grey Davis (who otherwise was quite awful) drove resources into the schools.

Now with California having the highest foreclosure rate in the country we already see the crisis of municipalities cutting services, and schools are next in line. My friends in Asia think the U.S. is finished. They think that our reputation is so tarnished, and our finances so wrecked, that we will not recover in our lifetimes. They may be right.

While Obama or McCain might be able to fix our reputation, no matter who wins tonight, California, the 5th largest economy in the world, cannot expect the federal government to fix the above messes that Californian citizens made. Whether Prop 8 passes is absolutely insignificant compared to what has to happen to get things on the right track. To me that includes an overhaul of the taxing policies, review of how we fund our schools, opportunistic use of emminant domain to fix public transportation and power distribution, and most of all, a fix to the initiative system, which should be a last resort, and one that requires a super-majority to prevail.

So sure! Get out and vote. But then think about real change in California. It will take a lot of work.

Electoral Differences between McCain and Bush

Why is it that John McCain picked Sarah Palin? The answer lies in how George W. Bush won the presidency. President Bush jumped on a wave of conservative ire aimed at the Democratic Party and President Clinton on the heels of the Monica Lewinsky scandal. By driving a convincing message that he would realize the conservative agenda, Bush energized the huge electoral machine of right wing moralists. This shifted the field to the right, and required VP Gore to play a more moderate game than he would have otherwise played, and it just did not ring true to anyone. Bush didn’t really play to the moderates, except to be some sort of compassionate conservative.

McCain argues that he is a moderate, and so he should have played to them. Instead, he tried to play President Bush’s game of driving to the right after the primary was won. The New York Times recently had an article that compares the campaigns to the faux campaigns found in the last two seasons of West Wing. In that series, at one point it is argued that the Republican candidate (Vinick) could wiin ALL fifty states by expanding the moderate base of his party. This is what McCain could have tried to do, but it is not what he did. Instead, he attempted to play to both bases, and he argued neither convincingly. By bringing in Sarah Palin he alienated the center. And it wasn’t enough to sooth the right.

There was no way that George Bush’s strategy would work for John McCain. McCain is also the victim of bad timing, with regard to the economy, an issue about which the public as blamed the Republicans nearly exclusively. Barack Obama, merely has to mention the economy and McCain’s ratings drop. That is vaguely reminiscient of President Clinton’s old slogan, “It’s the economy, stupid.” Were it only the economy, perhaps McCain could have survived. However, the War on Terror also looms like an albatross around the neck of Republicans. People are sick of it. Finally.

And so, before Democrats start to crow too loudly, one should point out that neither of these two problems, the economy or our current geopolitical environment, are simple problems, and both will require serious consideration and absense of hubris to repair.

The Case of the Missing President

I had been wondering what had happened to President Bush. Here is a man who is clearly self-aware enough to not engage in campaigning, knowing that not only does he have no coat tails, but that his presence actually does harm in some places. This is vaguely reminiscient of what happened to President Clinton at the end of his term. At the time there was a lot of talk about how VP Gore did not use the president effectively. That same conversation is now occuring with regard to Mssrs McCain and Bush, as the New York Times reports.

The (Interim) Results of Negativity

As I wrote previously, when you throw mud you had better make sure that your aim is true, and that you are pretty clean yourself. The McCain/Palin ticket cannot make either claim, and the results are in. An Washington Post/ABC Poll has Senator Obama now leading by 10%. This would be the official “I told you so”. There are perhaps other reasons why the Republicans are doing poorly, like the fact that Senator McCain’s message is not well received by a majority of Americans, or that he is viewed as part of the old guard that caused many of the problems we faced today.

Here is what we can expect for the next few weeks: intense campaiging by both sides, with a change of the message on the McCain side. As they can read polls as well as anyone else, they have probably already realized that mud slinging hurt them. Unfortunately, their latest approach is unlikely to work either. Senator McCain is proposing additional tax cuts. A change in the message at this point will demonstrate what Republicans often accused President Clinton of: waffling. While these times do call for some amount of flexibility to react to changing economic circumstances, Republicans break out the same old tune to all problems: tax cuts. That’s not flexibility – that’s a form of intransigence to play to their base.

Meanwhile, Senator Obama has rolled out his own plan. While he has already discussed middle class tax cuts, and that message hasn’t changed, he is now discussing something more valuable to Americans in distress: protection from being evicted from their homes. If overdone, this policy could be abused by people who have many homes, or who really have no intention of paying their fair share. But if administered judiciously, the policy provides for a limited period of relief for those who need to either renegotiate the terms of their loans or simply pick up and start again.

The wisdom of such a plan is this: banks don’t really want to foreclose right now. Flooding the market with distressed properties harms neighborhoods, and makes it increasingly difficult to actually recover equity. That is what has happened in central California and other places.

Showing vision and poise in the face of a serious global financial crisis is the sign of a true leader, and that will earn Barack Obama a slightly larger bump in the polls than he has now, probably another 2 to 4%. But we can then expect the race to tighten slightly at the end of the month. I predict nationally that Obama will win with an 8% margin, nationally. This says nothing about the electoral college count. I’ll leave that to others.

More abut the financial mess

We’ve already talked about how banking deregulation contributed to the current debacle. Now comes a story from The Register which discusses how naked shorts might have caused as much of a problem for the big brokerage houses. What is particularly sad about the story is that there was at least one person who raised the red flag and wasn’t allowed to publish an editorial in the Wall Street Journal.

This raises yet another concern for me. For me, the Wall Street Journal has long been the paper of record, when it comes to financial news. I have never thought much of their editorials, as they always seem to get it wrong. When they clamor for regulation and beat their fists against the desk, the sound is just a bit hollow to me, having read their constant anti-regulation protests.

Now with the purchase of the paper by right-wing media tycoon Rupert Murdock, I expect things to get worse. The web site has certainly already deteriorated in its new redesign. This leaves another open question. If the Wall Street Journal is deteriorating, where can one find a good daily market news source that has some amount of decent analysis to go with? I’m stumped.

Another question: did banks have substantial numbers of naked shorts that contributed to this mess? Was the firewall between their investment and banking arms sufficient? Certainly the failure of WaMu and others leads one to think the answer is “no”.