If there’s one lesson we should all bear in mind as fear stalks Wall Street and the presidential race keeps getting tighter as it races towards its conclusion, it is this: Don’t Panic.
Now, the current crisis is not an illusion; at its core, it’s about markets that valued assets one way and now value them as being worth considerably less, and that has all sorts of ripple effects when it threatens to close down major financial institutions or force the fire-sale liquidation of portfolios of billions or trillions of dollars worth of assets for which there may not currently be a liquid market. People have lost real money and real jobs, and serious people in business and government alike do need to think long and hard about how to contain the damage and reassess and rationalize government’s regulatory roles going forward.
But financial markets, credit markets and even consumer spending markets all depend on trust and confidence, and can all be brought to a grinding and ultimately self-defeating halt by panic.
Now, John McCain has never been accused of being a financial whiz, but the one thing we can trust McCain not to do is panic in a crisis, or encourage anyone else to panic. McCain’s survived three plane crashes, multiple bouts with cancer, the loss of a presidential primary campaign, five years in captivity, months on end in solitary confinement, countless hours of torture, being at the epicenter of a shipboard fire that killed 134 people, being named in a front-page scandal that killed multiple major political careers, being beaten by an angry mob, having one of his top legislative priorities torpedoed by his own party’s base, standing stubbornly for a war nearly everybody had declared lost, and just a year ago found his presidential campaign broke, rudderless and declared dead by nearly everybody. Yet time after time after time, McCain picked himself up, dusted himself off, gritted his teeth, set his jaw, and refused to give up, whether that meant lying broken in a filthy cell as a young man or trudging on week after week to sparsely-attended rallies in the New Hampshire snow as an old one.
Why that matters to today’s news, of course, is that even as the headlines have been dominated by one ripple of the credit crisis after another, McCain has acknowledged the damage and the need for reform, but he has stubbornly refused to panic, and has urged the voters even in hard-hit communities not to panic either. Over and over he has insisted that underneath all the credit craziness, the fundamental foundation of the American economy – the labor force, the businesses, the old-fashioned Yankee ingenuity, the entrepeneurial spirit – is still strong and still the envy of the world. As McCain’s economic guru, Douglas Holtz-Eakin, put it recently, “You shouldn’t run for president by running from everything in sight and trying to scare people.” (H/T) McCain himself has promised regulatory-agency reform that “consolidate[s]” the alphabet soup of regulators (e.g., Treasury, Fed, SEC, CFTC, OCC, FINRA, OFHEO, PCAOB, to say nothing of 50 state banking agencies, 50 state securities commissions, 50 state insurance commissions), but also warned against “a risk of overregulation and overreacting…Congress has a tendency to do that.” His latest TV ad stresses this bedrock optimism, the can-do sense that we’ve been through worse and can beat this too:
But every time McCain has made this point, Obama and his campaign have flown into a tizzy. Obama seems to think it’s a great selling point to attack McCain for trying to tamp down panic over the fundamental foundations of the economy. This is perhaps unsurprising; Obama’s never had to stand his ground under fire for anything, so he doesn’t understand why McCain is doing what he’s doing or what value there could be in reassuring the public to hang in there. The signature feature of Obama’s career, after all, has been a restless desire to move on to the next thing; even his survival of the long primary race against Hillary Clinton was all about simply running out the clock before his act wore too thin. But panic and ‘malaise’ is the last thing we need right now:
The palpable panic of Obama and the Democrats can best be seen in their aimless and economically illiterate lashing out to try to capitalize on the credit crisis after weeks of losing polling ground. Joe Biden thinks he can convince people to blame the Bush tax cuts for the credit crisis (!), or worse yet, he believes it himself. Obama himself can apparently barely even spell AIG and is voting ‘present’ on the bailout, yet he’s still pushing to jack up taxes on all forms of investment, even months after admitting that he favored a capital gains hike even if it didn’t bring the government any more tax revenue. Harry Reid gives an unhinghed speech calling the 1999 Gramm-Leach-Bliley Act “financial weapons of mass destruction,” ignoring the fact that Reid and Joe Biden voted for the Act in its final form, to say nothing of the fact that J.P. Morgan’s purchase of Bear Stearns, Barclays’ purchase of Lehman Brothers, and Bank of America’s purchase of Merrill Lynch would all have been impossible without Gramm-Leach-Bliley’s elimination of the archaic and artificial Depression-era barriers between commercial and investment banking. Then, Reid turns around and admits that “No one knows what to do.” At this point, the whole lot of them look like Kathleen Blanco, the Democratic Governor of Louisiana who simply froze up in the crisis of Hurricane Katrina.
By contrast, the McCain camp has been steady – even as McCain has warned against the “moral hazard” created by bailouts, his running mate has acknowledged the real-world reasons why the Fed may have felt it necessary to throw a credit lifeline to AIG. McCain isn’t pushing a radical expansion of government or a dire view of the state of the economy, just a promise to reform and modernize the way government works within its proper scope. He’s being the one adult in the room.
Maybe this realism about the situation and steadiness in its face is one reason why McCain is now slightly more trusted on the economy than Obama, as a decisive plurality of voters share McCain’s concern that the federal government will overreact.
McCain and Obama both want us to have hope for the economy. But somehow it seems that only McCain understands the lesson he learned in that long-ago POW camp – that you can’t have hope unless you have faith.