Monday, October 27, 2008

It’s the Economy, Stupid!

The above phrase was the guiding philosophy that gave Bill Clinton his victory in 1992. His campaign stayed focused on it. It is pocket book issues that decide elections.

Everybody’s thinking about the current economic crisis. But I have yet to see either candidate come up with solutions. No matter what sector of the economy you are from, no matter how wealthy or how poor, the state of the US economy is affecting you. Unless you’re Donald Trump or Bill Gates.

I don’t mean that your lifestyle has changed. At least not yet - unless you are one of those who has lost a job or business because of it.

But vast amounts of wealth has disappeared in - what seems like a flash in a stock market that has fallen at record levels. That affects the entire world economy. The power of the United States economy is so strong that when we fail, so does the rest of the world.

We all know what caused the economic meltdown. It a nutshell it was the fiscal irresponsibility of huge lending institutions. They made risky unsecured mortgage loans to people who could not afford to pay them back. They then defaulted on those loans. And instead of money, these lenders ended up with a glut of devalued real estate. Besides,lending institutions are not in the real estate business. And the major insurer all these major lenders, AIG could not pay out on the massive claims made by these failed lenders. And the economy is collapsing.

Credit, the fuel that drives major industry in this country has all but dried up and businesses of all kinds... of shapes and sizes - cannot afford to operate. Many of them are closing up. Jobs are being lost… It’s a mess.

The 700 billion dollar government bailout to AIG has not rebuilt the confidence in the economy required to turn things around. This is on top of already higher fuel costs over the last year that resulted in rise in the cost of all goods and services. This has made this a simultaneous inflation and recession! (Oil prices are now down, but – except for gas prices - I doubt we will see a corresponding drop in goods and services.)

I am not an economist. And this may be an oversimplification. But this is the way I understand what is happening. And I don’t think we have seen the end of it yet.

Which brings me back to the Presidential elections. As I said I do not see either candidate offering any solutions. Just a lot of vague promises of tax cuts for one or another segment of the population.

Philosophically, I am far more in tune with the free market - supply side approach of John McCain. He speaks of incentivizing business towards more production. That will create jobs and more disposable income.

Obama speaks of redistribution of the wealth. He calls it ‘fairness’. He wants to help the middle class who needs it the most by giving only them the tax cuts. But that will not give people more jobs. At best it’s a temporary fix. By taxing business he disincentivises them from production. This is socialism. You can’t keep giving money away to those who don’t earn it without calling it that.

That is one reason I am voting for McCain. He stands by this principle. Unfortunately his arguments do not resonate with the masses. They like the Obama ‘Robin Hood’ idea of soaking the rich and giving it to the poor. But this will not help the economy at all. It will increase the deficit and thereby lower world confidence in the US economic system even more than it is now! If you think our dollar is at a low point now (although it has risen somewhat recently) wait until the deficit increases with all the Obama social programs – if he carries out his election promises.

But it doesn’t matter. Obama is going to win the election. The economic crisis has all but assured that.

Just to be clear -as I have said many times in the past - the main reason I am voting for McCain is his stance on Israel. But I cannot be dismiss the economy. It is too important.

So… are we about to be given over to hell in a hand basket? Is an Obama Presidency going to destroy the ‘world as we know it’? I can’t answer the question. But my guess is that it will not. In fact I believe that Obama’s lack of experience and his recognition of that fact will serve to prevent it, hopefully.

Barrack Obama is a good man He is a social and economic liberal but nevertheless a patriot who wants to serve his country. He will surround himself with the best and brightest people he can. And – if he is true to his word – he will include people who disagree with him so that he can hear all perspectives on any issue. Hopefully he will make some good choices for this country domestically. We’ll just have to wait and see.

Foreign Policy is another question. But there too, I take him at his word that he fully supports ‘our ally Israel’ – despite his past connection to the rabidly anti Israel Reverend Jeremiah Wright. He has completely severed his relationship to him and called his rhetoric hateful (or something like that).

Though I do not believe his commitment to Israel is as deeply emotional as McCain’s who sees Israel’s survival in the ‘never again’ mold of the holocaust – I nevertheless believe he will not turn his back on the Jewish State. Hopefully he will listen to his more pro Israel advisers than his anti Israel advisers. (…although I have detected signals in his rhetoric that he will have a more ‘evenhanded approach’ – whatever that means!) Again, we will have to wait and see.

Perhaps Obama’s biggest problem is that he is ‘too smart’. He may become indecisive because he will see both sides of an issue and be unable to decide on policy thus stagnating domestic issues as well as foreign ones. That was in part Carter’s problem. One more time: we’ll have to wait and see.

McCain does not have this problem. If anything he has an opposite one – deciding things too quickly. But good advisers will help him make better decisions. Think Reagan.

Of course there is still a chance that McCain can somehow win the election. Polls have been wrong before. And there may very well be an element of racism not reflected in the polls that will be reflected in the voting booth – the so called ‘Bradley Effect’. But I strongly doubt it. I'd hate for that to be the reason for a McCain victory anyway.

A McCain victory is highly unlikely at this point. I just hope and pray that - despite my fears - an Obama Presidency will somehow- with the help of God - work out well.