Centerblue.org

As the Obama juggernaut looms like a tsunami on the horizon, we are witnessing nothing less than the final, well-deserved, and overdue destruction of the Republican Party in its current form.

Not only is Obama ahead by double digits in the polls, he is strongly ahead in ridiculously red states like Indiana, North Carolina, and Virginia–and may have brought the polls to a draw in ultra-conservative states like North Dakota and Montana.

His Congressional coattails are a mile long. Democrats are poised to possibly take a filibuster-proof 60 seat majority, and dire predictions for the House are that forty or more Republicans are about to be washed away.

McCain’s disastrously erratic campaign is now springing more leaks than a worm-eaten boat, with a long New York Times Magazine article detailing internal blow by blow accounts of how McCain’s campaign has careened from one campaign message to the next, unable to gain traction against Obama.

McCain, cracking under the pressure, let loose a barrage against the Bush administration that has been weighing him down like a millstone. Said the Washington Times:

Sen. John McCain on Wednesday blasted President Bush for building a mountain of debt for future generations, failing to pay for expanding Medicare and abusing executive powers, leveling his strongest criticism to date of an administration whose unpopularity may be dragging the Republican Party to the brink of a massive electoral defeat.

“Spending, the conduct of the war in Iraq for years, growth in the size of government, larger than any time since the Great Society, laying a $10 trillion debt on future generations of America, owing $500 billion to China, obviously, failure to both enforce and modernize the [financial] regulatory agencies that were designed for the 1930s and certainly not for the 21st century, failure to address the issue of climate change seriously,” [were among the issues cited by McCain].

It’s too little, too late. He needs to, and cannot, explain where he was and what he did while Bush and the GOP Congress unleashed these depradations on America. He was, under his own admission, voting for Bush’s wishes 90% of the time.

Bushites did not take McCain’s words lying down. A top Republican strategist issued a searing response:

“Lashing out at past Republican Congresses, … echoing your opponent’s attacks on you instead of attacking your opponent, and spending 150,000 hard dollars on designer clothes when congressional Republicans are struggling for money, and when your senior campaign staff are blaming each other for the loss in The New York Times [Magazine] 10 days before the election, you’re not doing much to energize your supporters.

“The fact is, when you’re the party standard-bearer, you have an obligation to fight to the finish. I think they can still win. But if they don’t think that, they need to look at how Bob Dole finished out his campaign in 1996 and not try to take down as many Republicans with them as they can. Instead of campaigning in Electoral College states, Dole was campaigning in places he knew he didn’t have a chance to beat Clinton, but where he could energize key House and Senate races.”

How did the GOP get to this point, poised to lose all of the power it accumulated over the course of a generation? In my view, primarily because of the imposition of ideology over intellectualism.

E. J. Dionne perfectly captures how ideology and pandering took over the Republican Party:

For years, many of the elite conservatives were happy to harvest the votes of devout Christians and gun owners by waging a phony class war against “liberal elitists” and “leftist intellectuals.” Suddenly, the conservative writers are discovering that the very anti-intellectualism their side courted and encouraged has begun to consume their movement.

The cause of Edmund Burke, Leo Strauss, Robert Nisbet and William F. Buckley Jr. is now in the hands of Rush Limbaugh, Sean Hannity — and Sarah Palin. Reason has been overwhelmed by propaganda, ideas by slogans, learned manifestoes by direct-mail hit pieces.

The GOP became very good at convincing voters that their pocketbooks didn’t matter as much as God, guns, and gays. It degenerated from having thoughtful ideas about individual responsibility, limiting government intervention into citizens’ private lives, and a strong national defense–to a party dominated by bigots and ideologues hell bent on keeping power at any cost. Why come up with and sell good ideas when they could win elections by banning gay marriage, ending affirmative action under the guise of “quotas,” overturning Roe v. Wade, and the like?

Again and again, many Americans turned away from the cool intellectualism of Democrats like Dukakis and Kerry in favor of “sunny” and “folksy” actors who proudly proclaimed themselves to be the anti-intellectual, anti-elite Everymen. Even today, Sarah Palin pumps up her crowds by proclaiming herself to be proud to be a redneck.

The death of intellectualism in the GOP became a slippery slope, culminating in the twin debaucheries of slaughtering the economy on the altar of unfettered regulation on the one hand, and the evisceration of our Constitution and most profound ideas about human rights and civil liberties on the other.

People are finally waking up and realizing that rednecks and actors might make you feel good, but they have run our country into the ground. As the markets continue to plunge seemingly without end, we are remembering that there is a real value to ideas and the thoughtful men and women behind them.

In Obama, people see a mature, well-read, calm, intellectual opposed to McCain’s anger, inconsistency, and “shoot from the hip” gambler’s mentality. They realize that the gravity of the times needs a man of ideas, not a volcanically-tempered cowboy. And hopefully they have come to understand the connection between Republican ideology and the economic/cultural precipice upon which we now find ourselves.

Out of ideas and like rats abandoning ship, Republicans are now every man to himself. Like the last violinist on the Titanic, Charles Krauthammer eulogizes his movement as it faces the coming wave:

I stand athwart the rush of conservative ship-jumpers of every stripe — neo (Ken Adelman), moderate (Colin Powell), genetic/ironic (Christopher Buckley) and socialist/atheist (Christopher Hitchens) — yelling “Stop!” I shall have no part of this motley crew. I will go down with the McCain ship. I’d rather lose an election than lose my bearings.

Well said, Charles. Too bad your party has not had the same integrity to risk losing elections over ideas, choosing instead to shred the Constitution, our economy, and our nation.

I’m off to Vermont and Quebec for a couple of weeks’ worth of much-needed R&R. See everyone soon!

Crooks & Liars rather deridingly posts that now everyone is an economist, posting on previously inscrutable topics like “mortgage-backed securities” and “credit default swaps.”

I don’t think that’s a bad thing at all. I think it’s GREAT.

There has been a poison spreading secretly in our economy for years, false growth fueled by speculation and over-leveraging of debt. It seeped into every facet of daily life without most people’s knowledge–real estate values, stock prices, commodities, credit cards, and so on. It was all financed by foreigners eager to lend cheap money to Americans and let them continue to spend beyond their means. Americans congratulated themselves on selling ever-more-expensive houses to each other and calling it economic progress.

It was all a farce, but that wasn’t immediately apparent. Most people saw “good times” (or at least “not bad times”) and were complacent. Who cared what was going on on Wall Street as long as house and stock prices kept going up? We turned to other, more interesting (or banal) topics–from politics to American Idol and runway models.

There were people ringing the alarm bells, distinguished economists like Nouriel Roubini–but they were laughed at, dismissed as “economic Eeyores.” Nobody listened until it was too late.

Now the crisis is upon us, and people are waking up! They’re hungry for knowledge, trying to understand why their society and way of life threatens to crash down around everyone’s ears. How could the United States of America possibly witness a situation where the Treasury Secretary goes into an emergency meeting with ashen-faced Members of Congress to inform them that if they don’t pass a bailout bill there “may not be an economy on Monday“?!

Several friends have phoned or contacted me, asking me to explain what’s happening in a way a non-economist can understand. I’m no economist, but I’ve learned a lot about economics over the last few years as I read with ever-increasing alarm about what I thought to be a ticking time bomb. That reading is what led me to sell my condo in 2006 as the housing crash was just beginning.

I basically say this to my friends who have asked: an economy cannot run without trust–whether it be trust in what a dollar is worth, or trust that individuals and institutions will repay their obligations. Banks and Wall Street loaded up on mortgage instruments that they thought were good, but in fact were not. Now, nobody knows what’s good and bad out there, or who has what. Banks are looking at each other and saying “I don’t trust you to be solvent a day or a week from now because of those mortgages you might have, and will therefore not lend to you.” That brings the economy to a screeching halt, as credit (which is lending, after all) dries up. The bailout plan tries to restore trust by removing the mortage instruments clogging up the works, in the hopes that institutions will trust each other enough to lend once again.

That’s really all there is to it, and I’m happy to explain it to anyone who will listen at any level of detail they desire. It’s time that everyone knows the chicanery that has been going on, the wool that has been pulled over everyone’s eyes, the deceit of unfettered de-regulation under the guise of a false posterity.

We’re all in this together, and the more people who know and understand the truth the better.

Time has an interesting article on why people don’t support the bailout. Apart from being viewed as a bailout to rich people and corporations who don’t deserve it (which is true), it’s also that people do not specifically understand the risks associated with failure to act.

It’s like climate change–the risks are too amorphous, fuzzy, not in the here and now. Given the complexity of the situation, most Americans without a sophisticated background in economics simply cannot fathom how not acting could profoundly change American life for the worse. Our leaders have talked a lot of gloom and doom, but have done so in a vague and non-specific manner so as to avoid a widespread financial panic that would make things much worse. But the consequences are that Americans don’t really understand what they’re getting into.

So here’s my attempt to make concrete some of the consequences of failing to do anything (I’m not necessarily advocating the current package, just saying what happens if we do nothing). These are worst-case scenarios that may or may not come to pass, but Americans need to know about the possibilities.

1) You might wake up one morning and the money in your bank might be gone (likelihood: low). This is the Armageddon possibility. While it’s true that FDIC insures deposits up to $100,000, there are finite limits to the funds available. If the current crisis causes a string of banks to fail simultaneously, especially some of the biggest ones, it’s possible that the number of failures might overcome the amount of money available through FDIC. Congress would probably step in with an emergency infusion, but might it be enough to safeguard everyone 100%? Who knows–it depends on the severity of the crisis. This happened once, and was in fact one of the triggers of the Great Depression–which is why FDIC was founded in the first place.

2) Stock market crash, ruination of people’s 401k retirements (likelihood: high). The Dow Jones fell 90% from peak to trough during the Great Depression, and took decades to recover. Anyone with stock wealth would be financially ruined. You’ve been warned.

3) Inability to buy or sell a house, causing a much worse crash in housing prices (likelihood: high). The failure of the credit markets means it is much harder (perhaps eventually impossible) to get a mortgage. Since most people can’t pay for a house in cash given current prices, prices would have to fall and fall until either mortgages become widely available again, or until they fall to the point where people can in fact buy them with whatever cash they have. While renters (including myself) might rejoice at such a possibility, the truth is that the majority of American wealth and retirement security is locked up in their houses and such a deflation would be financially disastrous to millions.

4) Inability to get loans for college, buy a car, start a new business, etc. (likelihood: high). Again, with credit markets malfunctioning people will find it difficult or impossible to get necessary loans for life’s ordinary needs.

5) Mass bankruptcies of American businesses (likelihood: medium). Companies don’t keep spare cash for short term needs in some big massive steel vault. They invest it. If they need cash for those short term needs they also don’t pull the money out of some vault–they borrow it. Choking off credit means companies can’t borrow to meet their short-term needs such as buying inventory–or making payroll. Companies who cannot meet their obligations are insolvent, and bankruptcy is a possibility if they can’t afford or can’t get longer term loans to meet those needs. Even if they don’t go bankrupt, they would have to seriously curtail their expenses–including payroll. (see below)

6) Mass unemployment (likelihood: medium to high). Don’t believe today’s unemployment figures, they’re totally bogus. The government doesn’t include people who’ve despaired to the point they are no longer looking for work, or even people no longer collecting unemployment. So unemployment today is already higher than the 6.5% or so that is claimed. Unemployment reached nearly 25% during the Great Depression, as companies went out of business or had to severely restrain costs. Despite the sunny forecasts from people who a year ago were saying the crisis was "contained" (cough::cough), much higher unemployment is entirely possible.

7) Cities go bankrupt (likelihood: medium to high). Cities with plunging tax revenues from unemployed people, and unable to borrow money, will quickly go bankrupt. Thousands of cities went belly up during the Great Depression. City bankruptcies mean the disruption of many services from schools to police forces. Crime will increase and urban decay will spread rapidly. Civil disorder is a real possibility.

8. Hyperinflation (likelihood: medium). The American government can’t really go bankrupt (although it’s credit rating could be severely impacted)–they can just print more money. But printing more money to address the magnitude of the crisis might lead to inflation or hyper-inflation as everyone is chasing a higher number of dollar bills. Prices on everything could skyrocket almost overnight, severely eroding the value of whatever money people have figuratively stashed under their mattresses. Think it can’t happen? Imagine how it would be like if we suffered the same inflation rate being endured by Zimbabwe, which saw a yearly increase of 66,000%. (That is not a typo).

9) We grow it/make it, they use it (likelihood: medium): One nasty side effect of #8 if it occurs is that printing money devalues the currency (more dollars floating around mean each individual one is worth less)–meaning America will put up a big garage sale sign for foreigners with much stronger currencies like the Euro, who can then swoop in and buy up entire swaths of Americana (buildings, factories, commodities, food, etc.). Think this doesn’t impact you? Consider a hypothetical example where a global drought makes wheat scarce (as happened earlier this year). The US grows much of the world’s wheat, but because the dollar has become so weak, foreigners could outbid us on the open market for our own wheat! We grow it and then grow hungry as the wheat is shipped overseas to feed other people.

10) Deflation (likelihood: medium). The opposite of inflation, deflation is when an economy enters a vicious cycle where people believe that stuff will cost less tomorrow than today, so they put off buying–which causes prices to fall, repeating the cycle over again. Some economists think we’ll have deflation instead of inflation. So basically, everything you own will become pretty worthless, more companies go out of business as they become unable to earn any profits, and wages spiral downwards.

So there you have it: ten nasty things that could happen if we do nothing about the economic crisis. People who oppose "bailouts" in any form should carefully consider these consequences as they make their decisions.