Will There Always Be An England?

In the 1970's Sixty Minutes aired a piece called "Will There Always Be An England?"  It showed all the problems the British economy was experiencing then, long lines at the doctor's office, and at the unemployement office, the disincentives caused by socialism, etc.  In one example it compared the British Triumph motorcycle, which had a manual starter with a Japanese Honda motorcycle which had an electric starter.  It was a stinging endictment of too much government.  It went viral, and was repeatedly shown across the country.  And it made me proud to be a Republican, and glad I lived in America.

Now, 30 some odd years later, I notice that England is still here.  Her standard of living seems to be just fine.  Her health care system is better than ours.  There doesn't seem to be a mass exodus from her shores.  

And I'm not sure any more that Republicans have all the answers.  I know that it's not as simple as some of them make it seem.  (I have my liberal sons, and a tendency to try to see the other side, to thank for that.)

The fact is that some segments of the economy don't lend themselves to free market forces.  Education is one of those, and, I believe, health care.  And the simplistic statement, "get the government out of our faces, and we'll be fine" is just not true any more, if it ever was.

By the way, I'm going to risk total embarrasment and make a prediction -- landslide.

Issue 2.2: The Economy

I know many of us are tired of the economic debates, but our friends at the Tax Policy Center have recently published their analysis of the candidates' newest tax proposals (see Issue 2.1) and I thought I'd share. Besides, their analysis is pretty grim for Obama so I thought that might lift the spirits of our McCain-inclined readers as well as provide a bit of balance to the C.Post.

In order to make this as quick and painless as possible, I'll quickly outline each candidates' ideas again and include what the Tax Policy Center has to say about them.

Both Candidates

• No federal taxes on unemployment insurance benefits - TPC says this would mostly benefit unemployed workers who have substantial "other" income. Doesn't really help the people who need help.

Obama

• Remove penalty for early withdrawal from retirement accounts - TPC says encouraging people to withdraw money from their retirement accounts to pay the bills today is dangerous and wouldn't help people in the long run. They also say it would encourage people to withdraw money while that money is temporarily worth less--doesn't really make sense.
• Give companies $3,000 per new employee they hire - TPC says this would mostly benefit companies in already-expanding industries and wouldn't do much to help companies that are hurting.

McCain

• Suspend rules requiring 70.5 year-olds to pull money out of their IRA - TPC says this would largely benefit the wealthy because they 1) gain more from tax deferral and 2) are in the best position to use other money to live besides their IRA.
• Lower the tax rate on IRA and 401(k) withdrawals - TPC says the benefit goes largely to those in the highest tax bracket.
• Lower the tax rate on long-term capital gains - McCain camp says the purpose is to encourage investment, TPC says it wouldn't work and would instead give people who already have investments an incentive to sell them now instead of later.

I know that's entirely too much tax jargon, but I think the gist is this: Obama's ideas wouldn't really work and McCain's ideas would benefit people who don't really need help. Tough choice. The good news is the entire TPC report is only 5 pages long. If you want to read it, click here.

The Real Problem With Obama's Tax Plan

This is from the Washington Post:

Almost Everyone Would Do Better Under the McCain Health Plan

From the Wall Street Journal:

Immigration

akdoxey asked that we talk about something new: Immigration. I thought it was a worthy request.

Neither candidate has focused much on immigration, probably because it has the potential to be such a polarizing issue and perhaps because there's not much difference in their positions on the issue. I took a look at the candidates websites to see what they say.

Obama admits that our immigration system is broken. His website outlines the following components of a plan to fix it:

• Create secure borders through additional personnel, infrastructure, and technology.
• Fix the dysfunctional immigration system, while helping ensure that families are kept together.
• Remove incentives to enter illegally by cracking down on employers who hire undocumented workers.
• Allow undocumented immigrants who are in good standing to pay a fine, learn English, and go to the back of the line for the opportunity to become citizens.
• Work with Mexico to promote economic development there, to address a major underlying cause of illegal immigration.

McCain also admits that our immigration system is broken. His website outlines the following plan:

• Secure our border through "physical and virtual barriers". Ensure that funding is adequate. Implementing software and infrastructure.
• Prosecute "bad actor" employers and implement an "electronic employment verification system."
• Implement temporary worker programs to meet our labor needs, including specific plans for highly-skilled workers, low-skilled non-agriculture workers, and low-skilled agriculture workers.
• Require undocumented workers to enroll in a program to resolve their status. Identify and deport criminal aliens.
• Eliminate the family backlog.

Although the candidates' websites use different terms to describe their respective plans, the plans themselves are remarkably similar.

The Economist's special section on the election, to which I have referred in previous posts, includes an article on immigration that goes beyond the candidates' plans and looks at their records. Here are a few excerpts from the article:

Like many politicians with roots in troubled cities, Mr Obama is much less keen on increasing the number of guest workers... He backed a measure cutting the number of guest workers from 400,000 to 200,000. He introduced another measure that would have banned companies from employing guest workers in areas of high unemployment and required them to pay prevailing wages.

Until recently Mr McCain’s record on immigration was so liberal that the National Council of La Raza has twice given him an award for his political work. He has long fought for “comprehensive” immigration reform—code for any change that would provide a route to citizenship for illegals... When Mr McCain talks about the issue these days he sounds chastened. The failure of immigration reform taught him a lesson, he says—that Americans will tolerate a move to legalise illegal immigrants only if they are assured the border has been fixed.

The phrase "until recently" about McCain's record reflects the belief that his position on immigration seems to have changed. For example, he admitted that if his own immigration proposal came to a vote in the Senate, he wouldn't vote for it.

Issue 2.1: The Economy (updated)

It's been awhile since we've had an "issue" post, so I thought I'd update us on some new economic policies that were proposed by the candidates in the past week to deal with our current economic woes. Lucky you, most of them have to do with taxes. Don't worry, I'll try to make it as painless as possible.

As expected, both candidates have some similarities between their proposals. For example, both McCain and Obama want to give people the option of withdrawing some of their retirement money to help pay the bills. McCain wants to do this by lowering the tax rate to 10% on IRA and 401(k) withdrawals up to $50,000. Obama wants to let people withdraw up to $10,000 in 2008 and 2009 without paying an early withdrawal penalty (normally if you withdraw money from your 401(k) before you're 59.5 years old, you pay a penalty of 10% of the amount you withdraw). Under Obama's proposal, you'd still have to pay the normal tax amount on your withdrawal even though you'd avoid the penalty. Under McCain's, you'd still have to pay the penalty even though the tax rate would be lower.

The two candidates have also suggested differing proposals. McCain wants to use $300 billion of the recently passed bailout plan to buy people's bad mortgages and allow them to refinance for a more manageable rate and terms. This is similar to McCain's earlier proposal of allowing qualifying homeowners to refinance their bad mortgages (see here for more on that).

Obama wants to give a tax credit (don't remember what a "tax credit" is? don't worry, refresh your memory here) to companies that create new jobs here in the United States by giving them $3,000 per each additional full-time employee that they hire in the U.S. during 2009 and 2010. This is also similar to an earlier proposal to give companies tax incentives to create jobs here in the U.S. (see here for more on that).

Obviously there are other proposals in each of the candidates new plans, but I think that'll do for now. 

In case you're interested, the Obama campaign refers to their plan as the "Rescue Plan for the Middle Class." You can read the whole thing here. The McCain campaign refers to their plan as the "Pension and Family Security Plan." You can read more about it here.

If I Were King

I think it would be fun, and possibly instructive, to imagine what one would do for our health care system if one were king, if there were no political impediments to taking a machete to the whole thing and then building it back up in a logical and proper form.  This is what I’d do.

 

I’d get rid of the HMO’s.  I’d give the insurance companies 60 days to revise their policies and procedures.  I’d force them to:

• Cover catastrophes more thoroughly and inexpensively.

• Cease covering office calls. 

• Cease covering any dental care except for complications.

• Eliminate pregnancy coverage except for complications.

• Forget about pre-conditions.

• Require that they cover everyone, but subsidize the coverage for high risks.

I’d let the doctors become entrepreneurs again.  True competition would then begin to influence their pricing and quality.

I’d allow ER’s to refuse service for anything that isn’t a true emergency.

I’d leave the decision of what constitutes adequate preventive health care to the individual.  The argument that the government should dictate or at least strongly influence a person’s preventive care, because to not do so would cause us all to have to pay for the consequences of poor care would be largely eliminated by the other provisions herein.  I would, however, make government funds available for adequate prenatal care, and I would provide a combination of public funds and insurance funds for MRI’s and other expensive tests.

I wouldn’t legislate against abortion, but I would not enable it in any way, that is, if an  individual wants an abortion she would have to pay for it, and I wouldn't let the insurance companies cover it.  I would make partial birth abortion a felony, just like murder, which it is.  I’d provide extensive education on the consequences of unplanned pregnancy, but I would recognize that education does not necessarily produce responsible behavior.  Ted Bundy was very well educated, for example.

I’d make it illegal for the drug manufacturers to advertise on TV, thus eliminating their current rampant scare tactics to try to get us to “talk to your doctor about Avidart”, or whatever.

This is not a complete list of everything that would need to be done to kill the old system and cause the new one to rise up out of the ashes, but it’s a start.  I invite anyone to add to it in the spirit of brainstorming.  

Here are some of the effects I believe this program would produce.

• The entire system would be a combination of private and public funding.

• People would pay for their routine health care the same way they do for the food they eat.

• Catastrophes would be covered by insurance, which would truly become “insurance” again. 

• Doctors and hospitals would have much less paperwork to fill out.  They could then reduce their costs somewhat.

• Because prenatal care, so vital to a healthy populace, would be covered by the public, there would be no excuse for mothers-to-be to not get good care.

• Drug manufacturers would save huge sums that they currently pay for advertising. 

• Expensive tests, such as MRI’s would be left to the discretion of the doctor.

Here is a summary of our family’s experience with health care over the past 26 years.

• In 1982 we became self employed and couldn’t afford to convert our group policy.

• We lived without insurance, with much fear and trembling, for a couple of years.

• Then we noticed that the sky didn’t fall in, as we had feared.

• Over time we became comfortable, then jubilant over our lack of insurance.  It wasn’t that we were “without” insurance; we “chose” not to have it.

• In the 26 years since, we have paid far less, magnitudes less, for health care than we would have paid for insurance premiums.

• We had small children, so we had our share of scrapes, bruises, and broken bones, and we paid as we went.

• I remember on one occasion the ER sent us a bill for what seemed to us an exorbitant amount for a half hour of the doctor’s time, so we wrote them a letter.  They cut the bill in half.  (Free market forces at work.)

• We recognized, and still do, that we are at risk for a catastrophe, but we also know that the risk, statistically, is minimal.  We’re prepared to live with the consequences if the dice rolls deuces, but we honestly believe that somebody up there is looking out for us.  We believe with Dr. Norman Cousins that attitude is huge where health is concerned.

• We do not skimp.  If a health care provider is needed, we go see him.  We strongly disagree with the idea that people will deny themselves proper care because of the cost, unless that cost is huge.

• We also don’t run out to get every test the TV suggests, implying that we’d be fools not to.  We take our health seriously.  We listen to the inner voice, and occasionally to our son, the physician, and our vitality in the face of advancing years is proof of our philosophy.

• We’re of course not suggesting that anyone else follow our lead, but we believe it can serve as a guide to the crafting of a comprehensive universal health care system.

Summary

Our children’s education is run by the state governments, with some oversight by the feds.  This is a good thing, because it falls under the mandate of the Preamble to “promote the general welfare”.  It’s not perfect by any means, but it works.  If it were left to free market forces, it wouldn’t work, and this is possibly the best example of how some things don’t lend themselves to free market forces.

Health care may be another example.  It appears to be so in many other developed countries.  Alex, having lived with his family in London for 9 months, has first hand knowledge.  To make it work here, however, will require a thorough understanding of the forces that resist it, political, ideological, and emotional, and I don’t think we have that understanding yet.

But I do believe that if we take an idealistic view such as this one, for brainstorming purposes, we might add to the body of knowledge.

...So Help Me God

We talk all the time about making sure not to mix politics and religion, it’s dangerous. It has even come up several times in this blog that we should not use religion to support our own political views. While, in no way, am I condoning an acontextual twisting of scriptural passage to support an otherwise weak argument, I would like to suggest that “religious” views and “political” views are not, nor should they ever be, completely separate.

When the President of the United States takes office, he promises his country, “I solemnly swear that I will faithfully execute the office of President of the United States, and will to the best of my ability preserve, protect, and defend the Constitution...so help me God.” If politics were indeed meant to be wholly separated from faith, why would George Washington have added the phrase “so help me God” to the end of his presidential oath, and almost every president since then repeat it.

In support of Washington’s addition to the presidential oath, John Adams said, 'We have no government armed with power capable of contending with human passions unbridled by morality and religion... Our constitution was made for a moral and religious people.”

We revere the founding fathers as men endowed with enough courage and foresight to establish a country that can be ruled by moral principles. So why then should we shy away from making political decisions based on religious and moral principles? If we are ever to achieve sustainable economic prosperity, won’t it be based on the moral notion that success is gained through hard work, and that everyone deserves a fair chance? If we are to have a healthy nation, shouldn’t it be because we believe that no human life is more important than the next? If we are to have a country with a strong foreign policy, shouldn’t it be based on the idea that all humans are God’s children, that he is no respector of persons, and so neither should we?

I realize that I am not making specifics argument about policy plans. I’m not quoting numbers, nor am I even supporting one party in favor of the other. What I am saying is that if what we are striving for is “Liberty and Justice for all,” should we not elect every president based on his ability to lead us as “one Nation under God”?

Why I'm Voting for Obama

Jed recently invited us to share our decisions and express the reasoning behind them. Here's mine.

I'm voting for Obama for these reasons:

• On balance, I agree more with Obama on the issues.
• I've observed Obama to be thoughtful and intelligent and to be a careful and wise decision maker.
• I've lost some respect for John McCain.

I'd like to elaborate on each of these points.

The Issues

In a comment on an earlier post I mentioned that, weighing the candidates' positions on all the issues, I conclude that Obama's positions are more consistent with my beliefs and values than are McCain's positions. Here's why:

• Taxes: I side with Obama - Bush's tax cuts for the wealthy have failed to stimulate the economy or create jobs and they have contributed to the largest federal budget deficit in history. McCain wants to extend those tax cuts and even further them. Obama wants to roll back Bush's tax cuts for those making more than $250,000. I find Obama's position more fiscally responsible.


• Economy: I side with Obama - Obama seems to have a better understanding of the economy and of the factors that led to our current economic crisis. I believe that Obama's interest in intelligent, effective regulation and oversight is appropriate. Obama has been surrounding himself and consulting with intelligent, trustworthy economic experts. McCain, on the other hand, once admitted that economics is a weakness for him and was taking economic advice from Phil Gramm who was a prolific deregulator and who complained that those who didn't believe the economy was doing well were "whiners".


• Education: I side with Obama - Obama's education plan is much more specific than McCain's, and I find Obama's ideas fresh, creative, and compelling. I believe that education is critical to reducing poverty and crime, ensuring our country's continued competitiveness, and fostering an effective democracy. We all have a personal stake in ensuring that our fellow citizens receive a good education. I think Obama's proposals would do more to improve our educational system.


• Health Care: I side with Obama - I don't think we're getting our money's worth for what we spend per capita on health care. (The US spends more, per capita, on health care than any advanced nation, yet our health, measured by life expectancy and infant mortality, is among the worst across advanced nations.) I believe that insurers spend too much time and money working to deny coverage and claims for those who need and deserve them and that this practice adds undue administrative overhead to the cost of private insurance. I believe that underinsurance discourages people from preventive care, so that by the time they're in real trouble they require expensive, emergency care (and the rest of us paying customers bear the cost of that care). I believe that Obama's health care policies will do more to ensure that more people get access to decent health insurance and to reduce the cost of health care for everyone.


• Foreign Policy: I side with Obama - I believe that Obama's disposition to engage in more diplomacy and to work better with our allies will improve our standing in the world, help us regain the trust of our allies, and help us work more effectively with other nations to fight our enemies. I agree with Obama's positions on Iraq and Afghanistan. I conclude that McCain is too predisposed to act unilaterally and to strike militarily before exploring diplomatic options. I think his foreign policy positions are too similar to the neoconservative philosophy that has yielded such terrible results over the past 8 years.


• Abortion: I'm ambivalent about the two candidates' positions - Abortion is not an issue that has featured prominently in this election and, to be honest, I think it too often distracts us from issues that are more immediate and have more of an impact on our lives. I mention abortion here because I know it is an important issue to many who read this blog. I agree with McCain that abortion is an issue that should be decided by the states, not by the federal government. However, I think Obama's positions, as evidenced by his voting record, would do more to reduce the number of unwanted pregnancies and therefore the number of abortions (read Matt's summary of the candidates' voting records here). So, while I tend toward McCain on the general issue, I agree with Obama that we should have a multi-pronged approach to the problem.

As you can see, on my scorecard on the issues Obama comes out way ahead.

Obama's Character

From what I've observed of Obama he is thoughtful and intelligent. He surrounds himself with bright people and he listens to their advice. He weighs the options carefully before making a decision.

Obama's choice of Joe Biden as his running mate is evidence of this. Biden is well-known for speaking his mind and for not being a "yes-man". Obama knew this. His choice suggests to me that he's interested in hearing dissenting opinions. Biden also fills what many considered to be gaps in Obama's resume: Biden has extensive experience while Obama is a relative newcomer. Biden is a foreign-policy expert where Obama has little foreign policy experience. Obama's choice indicates that he carefully considered what he needed in a Vice President and chose someone that would help him govern well, not just win an election.

When the economic crisis swelled in mid-September, after the bankruptcy of Lehman Brothers, Obama convened a meeting with economic and financial experts including Robert Rubin, Warren Buffett, and Paul Volcker to help him understand the situation and develop ideas for addressing it. I am reassured by the fact that Obama seeks out smart people and turns to them for advice when he needs it. On the other hand, the advice that McCain has received and the behavior he's exhibited during the crisis do not give me confidence.

I was fascinated by this analysis of Obama's talents by conservative commentator David Brooks.

Why I've Lost Respect for McCain

Back in 2000, if John McCain had won the Republican presidential nomination, I would have voted for him against Al Gore (in retrospect, though, I think Gore would have been a better president). I was very disappointed that McCain lost the nomination to Bush. I thought McCain offered much better proposals than Bush. When Bush's was campaigning for huge tax cuts, McCain was calling for paying down the national debt. I was repulsed by the brutal smear tactics the Bush campaign used against McCain. I was impressed with how McCain ran his campaign: granting unfettered access to the press and talking "straight" whether or not his audience agreed. During Bush's first few years, I was impressed that McCain continued to offer a voice of reason. He voted against Bush's first tax cuts and opposed some of Bush's worst judicial nominees.

But sometime during Bush's first term, McCain must have realized that he would never win a Republican presidential nomination unless he tacked right and appealed to the conservative ideologues his moderate positions had alienated. He befriended those he used to refer to as "agents of intolerance". He hired the same operatives that so unfairly smeared him in 2000 to advise his 2008 campaign. While he still travels in the "Straight Talk Express", his talk doesn't seem so straight anymore. He changed his position on Bush's tax cuts. He reversed course on immigration.

I question some of the decisions McCain has made during his campaign. His decision to suspend his campaign in mid-September seems rash, unnecessary, and ineffective in hindsight. I think McCain's choice of running mate betrayed his mantra of country first. In my opinion, if McCain really put his country first he would have reached across (or at least into) the aisle and chosen someone like Joe Lieberman as his running mate. (Rumor has it that's what McCain wanted to do, but didn't out of fear of the backlash from conservatives.) Instead, he put his party first and chose someone that appealed to the evangelical base, that he hoped would help him win an election, but that arguably couldn't do much to help him govern.

In short, McCain isn't the maverick he used to be. Of course, if he was he probably wouldn't have won his party's nomination. But I've lost respect for him and I disagree with the new McCain on practically every issue.

Countering the Counter-Arguments

Allow me to address one of the most common arguments against Obama: his lack of extensive experience. John Kennedy had little experience when he ran for president. His only political experience was as a state representative for six years and a US senator for eight. Abraham Lincoln's experience when he ran for president consisted merely of a few terms as a state representative in Illinois and a single term in the US House of Representatives.

Obama's brief experience would matter more for me if I didn't know where he stood on the issues. But I believe that if you've researched the issues and the candidates' positions, and if you've cut through the mudslinging to the real substance, then you know where Obama stands, whether you agree with him or not.

I feel like I know where Obama stands and I agree with him on so much more than I disagree. That's why I'm voting for Obama.

A Letter from the Editor

I want to first thank all of those who have and continue to contribute to this blog. Whether in posting your thoughts or commenting on others', I appreciate everyone's contributions and feel encouraged that this fledging blog is gaining somewhat of a following. I also sincerely hope that for many, if not all of you, this blog has been helpful in providing both a forum to voice your opinions and information to help us all make more informed voting decisions. None of this would be possible without your contributions--thank you.

To that end, I wanted to say a few words about constructive discussion and destructive arguing. Unfortunately, I think this blog has seen some of both. When it comes to politics, I think we're all much too familiar with the consequences of destructive arguing. For many of us this is the very reason why we can't stand politics or politicians and why we choose not to engage in the process at all. Unfortunately, for whatever reason, our political opinions quickly become very personal to us and so I think we tend to defend them and argue against others' in emotional and destructive ways. The problem with this is that not only is it unhelpful and may even discourage people from participating, it focuses on who is right and who is wrong rather than what is right and what is wrong for us and our country.

Here's what I mean. In Matt's recent post regarding abortion, one line stuck out to me, "Sen Obama voted against every piece of legislation that would restrict abortion and . . . voted for legislation aimed at increasing education, including abstinence education, and access to pregnancy prevention. Sen McCain voted for every restriction on abortion and against education and prevention." I take this to mean that both Obama and McCain agree that abortion is wrong and is a problem that needs fixing, where they disagree is on their proposed solution to that problem. When viewed in this light, the differences between the candidates can be discussed in the same way we discuss differences in their policies on Iraq, the economy, foreign policy, energy or the many other important issues at stake in this election. Some of these issues are, and should be, more important to us personally, but that should be the driving force behind our voting decision, not behind how we discuss the issues that make up that voting decision.

Unfortunately, on this and other issues, instead of focusing on the policy differences and engaging in constructive debate, we argued--truly unfortunate and for which neither side of the arguments have been completely blameless. The arguments were destructive and provided no means for common understanding or further education. 

Fortunately, we've also seen comments focusing not on the differences between us, but the differences between the candidates' positions. These contributors commented with respect for other's opinions and in return were given respect for theirs. It's important to note that these people disagreed--I'm not suggesting we all agree, quite the opposite--but they also came to respect each others' decisions as a result of their awareness of the factors that make up those decisions. Such understanding and education is exactly why I started this blog.

When we discuss constructively we (hopefully) allow ourselves to look at the decisions we are making and think about why it is that we disagree. This then allows us to either reconfirm our opinions or decide they need a shift, making us that much more informed and confident in our decision. When we argue destructively, we not only deepen the divide between us but deny ourselves the opportunity of continued education.

Now, my point is not to discourage further contributions by any who wish to do so--all are welcome at The Citizen Post, regardless of their opinion. What I am suggesting is that as we voice those opinions we do so with respect for those with whom we disagree and with a focus on the issues, and not on each other.

Thank you again for your contributions.

How (I think) it all began

Today the markets plunged, with the major indices falling around 7%. (Usually the Dow and S&P 500 average a 1 or 2 percent change in a day.) The immediate cause of this is the tightening credit markets, but our "real" economy, or our productivity is also suffering and will lead to more long-term problems. I wanted to discuss the immediate cause of the recent volatility, which is the mortgage crisis. How did it happen? The following is what I have pieced together over the last months, and I look forward to hearing your theories as well.

The growth of the global economy has created a great deal of wealth, and institutions and governments need somewhere to put this money that is safe and provides a reasonable return. It used to be US treasury bonds, until Fed Chair Alan Greenspan lowered the federal funds rate to 1% in 2003. After this, the investors needed somewhere else to put their money that was secure and had a good return. Wall street decided that residential mortgages would be a safe bet, and figured out how to sell mortgages to investors. Here is what they did:

1. A citizen wants to buy a home, so he gets a mortgage from his local mortgage broker. Presumably the citizen can afford to pay the mortgage.

2. The local mortgage broker sells this mortgage (essentially an income stream) to another mortgage broker.

3. Mortgage broker number two packages hundreds of mortgages together and then sells them to investment banks. At this point, when packaged correctly, these mortgage-backed securities have a AAA rating (very, very safe).

4. These Mortgage Backed Securities (MBS) were sold to Wall Street and then sold to governments and institutions as a safe place to invest that had a decent return. According to credit rating agencies, it was as safe as a Treasury bond.

5. Insurers, like AIG, insured these securities but didn’t have the cash to pay out. They never expected things to go so wrong.

It is important to note that at every step in this process, almost every player was using borrowed money to carry out these transactions, leveraging themselves at ratios as high as 20 to 1. At Lehman it was 40 to 1. Now everyone was happy, that is until they ran out of mortgages. Once everyone that could afford to buy a home bought a home, the supply of MBSs dried up. Wall street called mortgage brokers demanding more. So, the brokers gave them more, but they had to lower their standards when it came to screening homebuyers. This process spiraled lower and lower until there came into existence the NINA loan: No Income No Assets. An individual could get a loan without any proof of income and without any assets. By the time this loan was packaged and sold to Wall Street, no one knew what the real risk was because all of their risk assessment tools were based on old data, from a time when a homebuyer was carefully screened. There was no data on these new sub prime mortgages.

Even with all of the holes in these investments, the payments from homeowners continued to come in. These securities were working the way that they were supposed to and there was no reason to complain. But, the reason they were working was that home prices continued to increase as demand continued to increase. So, when a homeowner couldn’t afford to make the mortgage payments, he could borrow money on the value of his home in the form of a home-equity loan. Many people were using home-equity loans to pay their mortgages.

Then, in 2006, home prices stopped increasing and homeowners stopped making payments. Once they couldn’t make payments, they defaulted and their home was now on the market. The market flooded with homes and prices started dropping leaving homeowners unable to even borrow money to pay their mortgage. This created a chain reaction that killed all of the middleman mortgage brokers. They died because they never truly had the money in the first place. They borrowed money to buy mortgages, then flipped the mortgages to the investment banks and used the proceeds to pay off their debt. As soon as they couldn’t sell the mortgages and pay off their debt, they went out of business, but not before they had poisoned every major investment bank on Wall Street.

This was the “sub prime housing crisis,” which frightened the global investors and they went running back to investments like treasury bonds. This fear created what we are currently referring to as the “credit crisis.” Now, global investors are afraid to invest in anything that even resembles a potential risk. Because of this, businesses can’t get financing, which they are dependent upon to operate. And borrowed money is the lifeblood of our financial industry, as made evident by the extinction of the investment bank as we knew it.

All of this began with a rational proposition: that investments based on home mortgages would be safe and stable. And they were safe when these securities were invented decades ago. At first, the mortgages were based on a sound investigation of the homeowner’s ability to make the payments. But, a combination of greed and diffusion of responsibility turned what could have been an investment fad of little consequence into a crisis.

Abortion

I wanted to test the waters a bit on this "hot button" issue and get a sense for the opinions of those of us voting for Sen Obama. I had an email fight with a friend about this the other day. She plainly states that she won't vote for Obama because of his stance on the abortion issue.
The voting record of the two candidates on the issue is not unclear. Click here for a voting history.
They're on opposite sides of the issue.
I think this is an issue my right wing friends feel like they have me on. They feel like they're on the moral high ground and in an inarguable position. They've even insinuated that I can't be a good Mormon and vote for someone who supports abortion rights.
Personally, I think this issue is somewhat of a distraction. But I also think the debate about abortion focuses on the wrong thing. I think that whether or not abortion is legal has little bearing on the issue. It's legal in certain circumstances now. What will changing that do? On the other hand, we can look at what I think is a more significant cause of babies dying - teen pregnancy and unwed mothers. The rate of teen pregnancy in our country is among the highest in the civilized world. These women who get pregnant are most often poor, uneducated, and without access to basic health care. The fact that these women don't get prenatal care contributes significantly to the fact that America ranks 41st in the world in infant mortality.
When you look at the voting records you'll see that Sen Obama voted against every piece of legislation that would restrict abortion and that he voted for legislation aimed at increasing education, including abstinence education, and access to pregnancy prevention. Sen McCain voted for every restriction on abortion and against education and prevention.
In my mind, the way to reduce abortion is not to make it illegal, it's to educate and prevent. As with all other issues, we have a clear choice in vision.
I fully recognize and am seriously pained by the moral quandary. Can I really support a man who supports abortion? What I have not seen from my republican friends is an acknowledgement of the moral quandaries presented by their own candidate. How can they support a man who promotes tax decreases for the super-wealthy and a spending freeze on programs that help the super-poor?
I see the moral issues presented by Sen Obama's positions. I would appreciate an acknowledgement of the moral issues presented by Sen McCain's positions.

Education

The current issue of the Economist has a great special section on the election. It's a well-balanced, issue-based look at the candidates. (Why is it that only foreign publications take the time to discuss the issues?) The Economist analyzes the candidates tax proposals, economic policies, foreign policy, approaches to the wars in Iraq and Afghanistan, health care proposals, and more. It's a great credit to Jed that if you've been reading this blog, most of what you'd read in the Economist's special section would be very familiar.

One issue that the Economist covers that we haven't yet discussed here is Education. The article opens with a discussion of how the US education system has been underperforming for years. It then details what the candidates say about education. Having read the article, I decided to check out the candidates' websites to verify what they say about education.

Obama's website offers a number of specific proposals, only a few of which I've excerpted below:

• Increase funding and quality of Head Start programs.
• Reform (but keep) No Child Left Behind (NCLB), including properly funding the initiative.
• Increase funding for the Federal Charter School Program, but make charter schools more accountable and close low-performing charter schools.
• Make math and science education a national priority.
• Increase access of high school students to AP or college-level classes by, for example, providing grants for students seeking college level credit at community colleges if their school doesn't provide those classes.
• Recruit more teachers by offering new college scholarships for students who agree to teach after graduation for at least four years in a high-need field or location.
• Assess, mentor, and train teachers and provide more rewards for successful teachers.
• Offer tax credits to cover college tuition, in exchange for community service.

McCain's website is light on specifics, but mentions these concepts:

• No Child Left Behind has exposed inconsistencies in how we apply standards to students.
• Students in underperforming schools should be able to change schools. Parents should have freedom to choose among schools for their children.
• Schools and teachers should be accountable and responsible.

The Economist summarizes the candidates proposals as follows:

[Obama's] plans run the gamut, from grants for preschool programmes to a $4,000 tax credit for university fees. He is vague about NCLB, but has resisted calls to throw out the law. He suggests improving it through more sophisticated tests, measuring students’ progress over time and giving schools more resources. In September he announced new plans to double federal funding for independent or “charter” schools. A separate “innovative schools fund” would help districts to create a portfolio of successful school types, including charters.

Perhaps most interesting are his plans for teachers. He would give extra money to districts that work with their unions to form “career ladders”. These could include pay increases for a list of achievements, from teaching in hard-to-staff schools to lifting students’ performance. But a good scheme on paper may be diluted in practice. Negotiations over pay are messy at best.

For his part, Mr McCain offers promising opinions but few details. He supports NCLB but has said little about how to strengthen its main tenets. He supports charter schools (like Mr Obama) and voucher programmes (unlike Mr Obama, who is dead-set against them), but has said little about how he might expand them. His boldest ideas centre around using federal money to let parents choose tutors and principals reward good teachers.

But don't take the Economist's word for it and don't take my summary as a detailed analysis. Check out the candidates' education pages (Obama | McCain). They're a quick read, there are some clever ideas, and contrasting the two pages is pretty interesting.

Issue 4: Iraq

Much has been said about the differences between Obama and McCain on Iraq. However, a closer look at the candidates' policies reveals that the two actually agree on the underlying goal of the Iraq War: leave Iraq with a functioning government that can protect itself and promote peace in the Middle East. The main differences between the two candidates lie not in what they want for Iraq, but in how they propose to achieve it. With that in mind, let's look at their policies.

McCain's proposal for achieving stability in Iraq is continued U.S. military support. Obama, on the other hand, proposes a steady withdrawal of military support. McCain's argument is that the "surge" has worked and, if we stick to that strategy, it will continue to work, thus providing the Iraqi government the necessary peace to build a sustainable system. Obama's counter-argument is that, while the surge has worked from a military perspective (lowering the violence in the area), the political objectives for Iraq have yet to see much progress and will not be achieved unless we force the issue by withdrawing military support.

Along with the continued surge effort, McCain has two other proposals to help build a self-sustaining Iraq--boost the Iraqi economy and apply pressure to Syria and Iran. McCain proposes to boost Iraq's economy by encouraging the Iraqi government to invest a portion of it's budget surplus into employing Iraqis in infrastructure projects and projects to restore basic service to Iraq. McCain claims that this will also help "move young [Iraqi] men away from the attractions of well-funded extremists," thus continuing to lower the violence in Iraq. McCain has also suggested that the international community provide micro-financing in Iraq to help bolster local-level entrepreneurship. I should point out that McCain's bottom-up strategy for boosting the Iraqi economy appears to differ from his strategy for the U.S. economy (see Issue 2: The Economy and Issue 1: Taxes). In order to apply pressure to Syria and Iran, McCain's website states that he will do this by getting the international community to "apply real pressure to Syria and Iran to change their behavior" and not by "unconditional dialogues." The website does not currently provide specifics regarding what such "real pressure" would entail.

Obama's strategy for a self-sustaining Iraq is to withdraw 1 to 2 brigades of American troops per month, claiming that such will force the Iraqi government to take ownership of their political system, a point the Prime Minister of Iraq also recently made. However, Obama also proposes maintaining a small "residual force" in Iraq to help train Iraqi military and conduct "targeted counter-terrorism missions," but not to hold permanent bases in Iraq. Along with his military strategy, Obama also calls for "aggressive diplomatic efforts" with Iraq and it's neighbors, including Iran and Syria, in which he includes the possibility of Presidential level talks with Iranian and Syrian leaders without "pre-conditions" but with "preparations." Finally, Obama's strategy for Iraq is largely intertwined with his overall defense and counter-terrorism strategy. Namely, Obama proposes re-deploying many of the troops withdrawn from Iraq to Afghanistan to help fight al Qaeda and capture Osama Bin Laden, an area Obama argues is overlooked as a result of the war in Iraq. Obama also claims that his "diplomatic efforts" will place the U.S. in a stronger position to enlist the help of the international community in fighting the war on terror.

If you'd like to know more about either candidates' proposals for Iraq, you can find them at their respective websites here: Obama | McCain

I can't vote for McCain because...

Since I live in a country where I must fit all of my political views into one of two parties, I decided that supporting Barak Obama is really the same as opposing John McCain. (My third option is not voting at all, or voting for some third party candidate that didn’t have the $1 Billion that the two major parties will spend.) So, this post is in the format of reasons why I can’t vote for McCain.

He isn’t concerned about the economy. “The fundamentals of our economy are strong,” is his mantra. Four days after Paulson distributed his three page bailout proposal, McCain said, “I have not had a chance to see it in writing.” And, after suspending his campaign because of the crisis, he did an interview with Katie Couric, then went to dinner in New York, then spoke at the Clinton Global Initiative, then went back to DC almost 24 hours after suspending his campaign. Before he arrived, republicans and democrats had reached a preliminary agreement about the bailout. After he arrived, the deal fell apart. And, at no point did he suspend television and radio advertising.

His tax policy favors the wealthy. I do agree with McCain, that the American worker is at the heart of the economy (this is his reasoning for saying the fundamentals of the economy are strong), so why don’t we make the American worker the beneficiary of our tax policy instead of the wealthy 5%? My take is obviously biased, so read Jed’s post “Issue 1: Taxes” for an unbiased explanation of the candidates’ tax policies.

He appointed Phil Gramm as his economic advisor, and who is a likely candidate for Treasury Secretary if McCain is elected. In July, Gramm said about those that thought the economy wasn’t so healthy, “We have sort of become a nation of whiners, you just hear this constant whining, complaining about a loss of competitiveness, America in decline.” Denial isn’t a strategy. My favorite Gramm legislation is the Commodity Futures Modernization Act, a bill slipped into a 2000 appropriation bill that deregulated energy trading (see Enron, which helped write the act, and employed Gramm’s wife at $915,000 a year) and credit default swaps, which have played a big role in the recent financial meltdown. This guy will make a great economic advisor! It would be a greater irony if he were appointed Treasury Secretary and put in charge of deciding which credit default swaps and mortgage backed securities the government will buy from failing banks. And don’t forget, he was a lobbyist for AIG after leaving the Senate.

He uses the troops in Iraq to get votes. This is a common republican strategy: speak lovingly about the bravery and sacrifice of our troops, then use it to question the patriotism of democrats. In the debate, McCain told a heartwarming story about a speech he gave in Baghdad to a group of American soldiers who had voluntarily reenlisted: “And you know what they said to us? They said, let us win. They said, let us win. We don’t want our kids coming here. And this strategy, and this general, they are winning. Senator Obama refuses to acknowledge that we are winning in Iraq.” This is brilliant rhetoric: summon the brave and noble troops who want to be successful, and then use them to sell your military strategy. And just for good measure, subtly imply that your opponent doesn’t support the troops. One can support the troops and disagree with the overall strategy, because, as far as I understand, the troops don’t get to choose the strategy.

He won’t set a timetable for leaving Iraq, and he doesn’t seem to acknowledge the deterioration of Afghanistan. If you really support your troops, you will put them where they can do the most good (Afghanistan) and you will at least attempt to get them out of there safely. McCain doesn’t seem to mind the idea of sending generation after generation of Americans over there. And, by the way, we can’t actually afford to be there right now, much less a decade from now.

He selected Sarah Palin as his VP. Read any Associated Press (no liberal bias) article about her and you are sure to find some mention of her corruption. I can’t blame her though, it seems impossible to be a politician in Alaska and not be corrupt.

His election would show the world that the American people agree with the Bush doctrine of foreign policy. (If you don’t know what the Bush doctrine is just ask Sarah Palin.) In the end, the two candidates actually end up agreeing on issues 95% of the time. To be elected they have to be middle-of-the-road. What I believe sets them apart more than anything is how the world views us through them. When we elect McCain, we will be saying to a world that hates us and our foreign policy, “we don’t care.”

I doubt that, if elected, Obama would be able to get much of his policy through congress, but he can renew our standing in the world and give us hope. He can start to get us out of the cycle of fear: for too long America has made decisions based on the fear of terrorism and have thus helped accomplish the goals of Al-Qaeda. Obama reminds me of JFK, who wasn’t necessarily a Washington heavyweight, but inspired us to put a man on the moon. With some inspiration, we did the impossible: we strapped some brave men on top of a missile, sent them to the moon, and brought them back home alive. Every American was right there with Neil Armstrong as he took those historic steps and inspired a generation to grow up to be astronauts and pilots and scientists and, perhaps more importantly, patriots. What is our space race? I hope it isn't conquering middle-eastern nations, because that doesn’t inspire me much at all.