American Judgment

Dumb Money
By Michael Kinsley


We don't need a conversation about race. At least not now. What we need is a conversation about money. It becomes clearer by the day that this is not your grandmother's--or even Barack Obama's grandmother's--economic downturn. This time we start with a huge government deficit and record private debt, all run up when times were good and we should have been storing up acorns. This is one that begins with people losing their homes, which is usually the last act of the drama. This is one that is bringing back stagflation--that poisonous combination of economic slowdown and eroding currency we cured at a terrible cost back in 1981. When that red phone rings in the middle of the night, it probably won't be the National Security Adviser saying Osama bin Laden has struck again. It will be the Treasury Secretary reporting that markets have opened in the Far East and the dollar has become worthless.

The three remaining candidates have finally given speeches that addressed the economic crisis. But the presidential campaign is bouncing into its second year inside a hermetic bubble where the discussion is mainly about itself. Who cares about the economy when there is the allocation of superdelegates to worry about?

John McCain has manfully admitted that he doesn't know much about economics. Typically, this comment has been analyzed in terms of its effect on the campaign, not in terms of what it might mean to have a President who doesn't know much about economics. It has become an occasion for the popular Washington game Who Will His/Her Advisers Be? In a speech on March 25, McCain declared that he "will not play election-year politics with the housing crisis" but "will evaluate everything in terms of whether it might be harmful or helpful." He promised to "not allow dogma to override common sense."

In other words, he hasn't got a clue. Another word for dogma is values, and another word for politics is democracy. So McCain, by his own admission, knows little about economics, has no underlying values or principles to apply in considering what action to take and isn't interested in your opinion either.

Hillary Clinton's speech on March 24 blamed everybody for the excessive borrowing at the root of this crisis--except the people who did the borrowing. Her proposal to help is a parody of old-Democrat thinking. Thirty billion dollars to states and cities to spend on "everything from police and fire support to graffiti removal and better lighting." She offers a complex plan to renegotiate the terms of troubled mortgages--ultimately with a federal guarantee, which she insists "would cost the taxpayers nothing in the long run." Republicans believe you can cut taxes and bring in more money. Democrats believe you can turn mortgages that people can't afford to pay into ones that they can and it won't cost anyone a cent. Most pathetically, Clinton calls for an "Emergency Working Group" composed of Paul Volcker, Robert Rubin and Alan Greenspan. Let those guys figure it out if they're so smart.

As with most issues, there isn't much daylight between Clinton's position and Obama's. Obama also blames lenders and excuses buyers, while piling on new subsidies that will nicely compensate everyone involved for the new regulations he also wants them to endure. Obama's unique angle is blaming the war in Iraq. In the business, that is called "message discipline."

Where is the "conversation" about the economy that's even half as sophisticated as Obama's speech about race? One that explains to people that you can't just make everything better by sending out $1,200 checks? That there is a real cost to protecting overextended homeowners from the consequences of their own folly? That, yes, there are villains here, but blaming the whole mess on villainy is missing the point? That immigration and international trade are part of the solution, not the problem?

Journalists don't help. This is a golden age of economic journalism, with wonderful business writers churning out great stuff every day. But they're not the ones covering the candidates. The endless political campaign has produced a permanent class of political journalists (or perhaps it's the other way around). Many are just as wise as the business journalists, but they devote their wisdom to the minutiae of campaign strategy and are mystified to the point of terror about economics.

C'mon, boys and girls--economics may be complicated, but it's no more complicated than the laws about campaign-spending limits or the mathematics of Democratic Party superdelegates, all of which you handle with ease. We all know about the economist who predicted nine of the past five recessions. But you don't want to miss this one. It's going to be a whopper.