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June 5 - 11, 2008
It took Christopher Columbus about 70 days to get to the New World -- a bit less than half as long as it took us to get through the 2008 primary calendar. But by Tuesday night, we’ll have reached our destination, and people in the Obama and McCain camps are feeling good about themselves. Neither campaign is planning a major pivot for the fall. Both are confident they have a strategy for victory. So my role today is Dr. Doom -- to break through unmerited confidence and raise the anxiety level in both camps. Since effectively wrapping up the nomination, Barack Obama has lost seven of the last 13 primaries. Obama’s confidants say that this doesn’t matter. In states like Pennsylvania and Ohio, primary-election results are no predictor of general-election results. That’s dubious. Though voters now prefer Democratic policy positions on most major issues by between 11 and 25 points, Obama has only a 0.7 percent lead over McCain in the RealClearPolitics average of polls. His favorability ratings among independents has dropped from 63 percent to 49 percent since late February. Furthermore, Obama has spent the past several months rolling up his sleeves and furiously courting working-class votes. It doesn’t seem to be working. Ron Brownstein of the National Journal calculates that Obama did no better among those voters in a late state like Pennsylvania than he did for 26 out of 29 earlier primary states where he lost the working class. There is something about his magic that resonates powerfully with the well-educated but doesn’t translate with the less-educated. As a result, you get all these odd poll results. Voters agree with Obama’s original position on Iraq, but according to the Pew Research Center, they trust McCain more to handle the issue. We haven’t had two presidential candidates as far removed from the mainstream suburban lifestyle. McCain’s family has been military for generations. But Obama’s path through the university towns is particularly elusive. Peter Hart did a focus group for the Annenberg Public Policy Center with independent voters in Virginia that captured reactions you hear all the time. These independent voters were intrigued by Obama’s “change” message, but they knew almost nothing about him except that he used to go to the
Rev. Jeremiah Wright’s church. It’s as if they can’t hang Obama’s life onto anything from their own immediate experiences and, as a result, he is an abstraction. As Hart points out, people’s inability to come up with a clear narrative about Obama could make it easy to label him in the fall. Finally, the Obama people are too convinced that they can define McCain as Bush III. The case is just factually inaccurate. McCain will be able to pull out dozens of instances, from torture to global warming to spending, in which he broke with his party, as Rush Limbaugh will tell you. The Republican camp, meanwhile, is possessed of the belief that Obama is a charming lightweight. Republican senators have contempt for Obama’s post-partisan image, arguing that he and his staff refused to even participate in backroom bipartisan discussion groups. But Obama is far from a lightweight, as Republicans will learn if he agrees to do joint town meetings with McCain. McCain’s jabs that Obama is naive will backfire. In this climate, a candidate can’t define the other guy, only himself. When McCain attacks Obama for being naive, all voters see is McCain being sour and negative. More fundamentally, McCain’s problem is that his party is unfit to govern. As research from the Republican pollster David Winston has shown, any policy becomes less popular when people learn that Republicans are supporting it. If the GOP sponsored the sunrise, voters would prefer gloom. Many Republicans are under the illusion that they are in trouble because they’ve betrayed their core principles. The sad truth is that if they’d been more conservative, they’d be even further behind. I’ve spent the past few years trying to find conservative experts to provide remedies for middleclass economic anxiety. Let me tell you, the state of free-market thinking on this subject is pathetic. There are a few creative thinkers, but for the most part, McCain is forced to run in an intellectual void. On Tuesday, he is scheduled to give a forceful speech on why “reform” is better than “change.” But McCain’s reform message is only being carried by him and a few bloggers. Obama can draw on a coherent body of economic work and 10,000 unified voices. This election will be asymmetric. Obama has to come up with a personal narrative voters can relate to. McCain needs to come up with a onesentence description for why he represents a clean break and a compelling future. Neither campaign has done that. I don’t know what they’re so happy about.
Talk about self-inflicted wounds. The Democrats may finally be stepping away from their circular firing squad. It took them long enough. There are so many things that the Democrats need to do to have any chance of winning the White House in November, and it’s awfully late in the game to begin doing them. Only now is the party starting to rally around Sen. Barack Obama, who has been the likely nominee for the longest time. No one knows how long it will take to move beyond the fratricidal conflict that was made unnecessarily bitter by Bill and Hillary Clinton. The cry of “McCain in ‘08!” at the Democratic rules committee meeting in Washington over the weekend came from a supporter of Sen. Hillary Clinton.
It reminded me of Bill Clinton’s comment that “it would be a great thing if we had an election year where you had two people who loved this country and were devoted to the interest of this country.” He was talking about Hillary Clinton and John McCain. The former president’s comment played right into the sustained effort by opponents of Barack Obama to portray the senator as some kind of alien figure, less than patriotic, not fully American, too strange by half to be handed the reins of government. Obama’s effort to counter that line of attack has been all-but-completely undermined by the incredible shrieking pastors from the Trinity United Church of Christ in Chicago, a place that might be good for the soul but is potentially ruinous for a presidential aspirant. First came the Rev. Jeremiah Wright Jr. with his videotaped, over-the-top sermons. He didn’t just criticize the United States, but damned it. The Wright controversy was a body blow to the Continued on Page 46
NEW YORK TIMES NEWS SERVICE
Which decade is it, anyway? Not long ago it seemed as if everyone watching the carnage in financial markets was drawing scary parallels with the 1930s. This time, however, Ben Bernanke and his colleagues at the Federal Reserve did what their predecessors failed to do during the banking crisis of 1930-31: they acted forcefully to avert a collapse of the financial system. And their efforts seem, provisionally, to have worked. While things are far from normal in the financial markets, over the last few months the sense of panic has been gradually subsiding. You might think, then, that everyone would be congratulating Bernanke and company for their good work. But at an economic conference I recently attended, many of the participants -- including people with a lot of influence in the policy world -- seemed to be bashing the Bernanke Fed. You see, fears of a 1930s-style financial meltdown are apparently out; fears of 1970s-style stagflation are in. And the Fed stands accused of being soft on inflation. The emerging conventional wisdom, if what I heard is any indication, is that Bernanke has been fighting the wrong enemy all along: inflation, not financial collapse, is the real threat. And to head off that threat, the critics say, the Fed has to reverse course and raise interest rates -- never mind the risks of recession. So this seems like a good time to declare that the new conventional wisdom is all wrong. We’re not watching a rerun of that 70s show -- and the misguided belief we are could do a lot of harm. It’s true that the soaring prices of oil and other raw materials have led to public anguish over the rising cost of living. But this time around there’s no sign whatsoever of the wageprice spiral that, in the 1970s, turned a temporary shock from higher oil prices into a persistently high rate of inflation Here’s an example of the way things used to be: In May 1981, the United Mine Workers signed a contract with coal mine operators locking in wage increases averaging 11 percent a year over the next three years. The union demanded such a large pay hike because it expected the double-digit inflation of the late 1970s to continue; the mine owners thought they could afford to meet the union’s demands because they expected big future increases in coal prices, which had risen 40 percent over the previous three years. At the time, the mine workers’ settlement wasn’t at all unusual: many workers were getting comparable contracts. Workers and employers were, in effect, engaged in a game of leapfrog: workers would demand big wage increases to keep up with inflation, corporations would pass these higher wages on in prices, rising prices would lead to another round of wage demands, and so on. Once that sort of self-sustaining inflationary process gets under way, it’s very hard to stop. In fact, it took a very severe recession, the worst slump since the 1930s, to get rid of the inflationary legacy of the 1970s. But as I said, this time around there’s no wage-price spiral in sight. The inflation hawks point out that consumers are, for the first time in decades, telling pollsters that they expect a sharp rise in prices over the next year. Fair enough. But where are the unions demanding 11-percent-a-year wage increases? (Where are the unions, period?) Consumers are worried about inflation, but you have to search far and wide to find workers demanding compensation in the form of higher wages, let alone employers willing to accept those demands. In fact, wage growth actually seems to be slowing, thanks to the weakness of the job market. And since there isn’t a wage-price spiral, we don’t need higher interest rates to get inflation under control. When the surge in commodity prices levels off -- and it will; the laws of supply and demand haven’t been repealed -- inflation will subside on its own. Still, why not raise interest rates a bit, as extra insurance against inflation? Part of the answer is that the financial crisis, which seems to be in remission right now, could flare up again if money gets more expensive. And even if the financial crisis doesn’t come back, higher rates would further weaken an already weak real economy. Never mind whether we’re technically in a recession: it feels like a recession to most people, and higher interest rates would make it worse. The bottom line is that while expensive gas and food are inflicting real harm on American families, they aren’t setting off a 70s-type inflationary spiral. The only thing we have to fear on that front is inflation fear itself, which could lead to policies that make a bad economic situation worse.