Friday, October 10, 2008

To Vote or Not To Vote: What If You Are Not Allowed?

On October 8th the New York Times ran an article that was the result of an investigation it had done regarding voter registration rolls (The article can be found by clicking on the title of this post). The article states that "tens of thousands of eligible voters in at least six swing states have been removed from the rolls or have been blocked from registering in ways that appear to violate federal law, according to a review of state records and Social Security data by The New York Times." The states in question are Colorado, Indiana, Ohio, Michigan, Nevada, and North Carolina and are all states in which Obama's performance is due in large part to the large advantage his campaign has had in registration new voters for this election. 

Before people start crying that partisan politics, cheating state election officials, and political operatives are to blame, it is important to note that the New York Times found that "the actions do not seem to be coordinated by one party or the the other, nor do they appear to be the result of election officials intentionally breaking rules, but are apparently the result of mistakes in the handling of the registrations and voter files as the the states tried to comply with a 2002 federal law, indented to overhaul the way elections are run." The 2002 federal law in question is the ironically named Help America Vote Act of 2002, which was designed to provide federal money to help states modernize their voting systems. However, buried in the bill was a relatively innocuous and highly vague subsection that required that if states received Federal money under this program they would also have to ensure that their registered voter rolls were accurate and modern and that states create statewide voter rolls. Previously, these voter lists were kept on a local level. It is the combining these local rolls up to the state level that is probably causing all the problems since it is a huge process and removes the local factor of knowing who lives in the area, who has similar names, etc.

In the past, state voter resignation rolls are notoriously out of date. In fact the organizations that have the most up to date valid voter registration lists are of course the two major parties. They use these lists to contact likely voters of their party to make sure they have ways to get to the polls, know who the party would like them to vote for, etc. and since they use these lists on a regular basis to figure out their parties position in a state, they regularly update them when they find people have moved out of the state, died, or been convicted of a felony. While only the state election rolls are valid in determining who can and cannot vote on election day, state election officials have none of the incentives that parties do to make sure that their voter registration rolls are up to date. As a result, in the past, registered voter rolls would regularly have voters listed who had moved out of the state or died. 

In 2002, the republicans were on a mission to end what they conceived as nation wide voting fraud. As a result, between 2002-2005 we saw lots of new voter identification laws crop up in many republican controlled states and as we have already said at the Federal level we had the Help America Vote Act of 2002. The key aspect of all of this is that with a few exceptions states are free to conduct elections and register voters how ever they want. So, when the conditions of the Help America Vote Act of 2002 are put into play, they have a slightly different effect in each state, based on how that states existing election law is set up. In some states it may require updating of lists in others that have electronic record keeping it may require no action. The net result is that since the Help America Vote Act of 2002 is so vague as to what exactly states have to do to their voter registration rolls to qualify for Federal aid, that many states have taken actions that are not required and in fact my actual violate existing federal election law by incorrectly disenfranchising  qualified voters. 

I will refer you to the New York Times article for details about what states are exactly doing that is illegal, but the key result is that the New York Times found that for every voter that has been added in some of these swing states, two have been removed from the rolls. Now, it is important to point out that such a ratio could reflect how out of date the rolls are and that there really are a large number of people who have left or have died and thus shouldn't be on the rolls. However, considering the advantage Obama has had in registering new voters, even if the purging was random of qualified voters, its effect is likely not to be since there are now so many newly registered democrats. The actions taken by these states has to be of concern and warrants an investigation by the FEC and state officials to ensure that all qualified voters are able to vote on Nov 4th. 

Beyond this election, even though I am a strong supporter of federalism as an important check on Federal power, we must consider nationalizing our election systems so that we have a common set of rules and procedures for how we vote in this nation. As long as we have 50 different systems with little oversight and transparency the risk for disenfranchising legal voters is too high. 

Wednesday, October 8, 2008

Debate Part II: Rumble in Tennessee

Last night featured the second debate between Obama and McCain and although there has been a recent sharpening of attacks in the last few days between these candidates, last night was quite civil. Overall, we saw a repeating of a lot of the same positions and attacks that we saw in the first debate. However, there were several things that I think are important to note as we evaluate this debate. 

First, McCain clearly was doing well early on. The first two questions he hit out of the park. Even though his idea of having the government buy and renegotiate mortgages is already in the current bailout plan that passed last week, his presentation of it was well timed and delivered well. Also, it is interesting that if you had asked an alien to pick which party McCain was from based on those comments, I don't think you would have heard republican in response. This is important because it implies to win, McCain has to, in essence, have anti-republican proposals. 

However, that is where the good performance stopped for McCain. For the rest of the debate Obama consistently provided better answers to questions and rebuttals to attacks. The basic problem McCain faces is that even though he is not your typical republican, he is still tied to that party which, rightly or wrongly, is at the moment being held responsible for causing the current recession. 

Beyond what they said, McCain did three things during last night's debate that struck me as odd, and will probably be what most people will remember from this debate. First, when McCain was speaking Obama sat on his chair and appeared to be listening intently to what McCain had to say. He showed him respect and courtesy. But when Obama was speaking, McCain was walking around and was almost never facing Obama when he was speaking. His moving around was constantly picked up by the cameras. While I do not think McCain intended to be seen, his moving around appeared disrespectful. The tacit feeling that came across was that Obama was someone who listened to ideas, even ones he doesn't agree with, while McCain is only interested in giving his opinion and not what others have to say. I don't think this is actually true, but their nonspeaking actions seemed to communicate this last night.

Second, during Obama's follow up to McCain's attack of him on Afghanistan, McCain interrupted him to say "thanks" in response to a nice comment Obama was making about McCain, but this backfired in two ways. First, Obama was making a serious comment while McCain's interruption looked like he was looking for a laugh. His interruption made Obama look presidential since Obama ignored the interruption and continued in the same tone. Second, Obama was doing a very normal debate technique where you turn a complement into an attack. The result here was that McCain actually said "thanks" right as Obama was delivering the attack. So beyond the fact that McCain appeared rude for interrupting Obama, the timing of the events made it appear as if McCain was saying thanks and agreeing with Obama's attack. 

Third, during one of McCain's attacks on Obama he said that voters should just compare their records in deciding who to vote for. McCain said you have me or (and, then pointing at Obama) "that one". I am not sure what he was going for here, but that was about as close to a gaff as we we had last night. It was a very derisive attack that did not play well with voters in the room and probably not at home either. If you watch the playback of the debate when McCain makes that comment you seen some very uncomfortable shifting and body language by many of the voters in the town hall room. 

Overall, last night was a pretty clear victory for Obama in terms of both the information he spoke as well as how he carried himself throughout the debate. As a final example of how McCain misfired last night was after the debate. Typically at town hall debate candidates go around and talk to the uncommitted votes there, pose for pictures, etc. McCain did this for about 5 min and then left the room. Obama continued to chat with voters and pose for pictures. All of this was captured on TV before the commentators started their analysis. McCain yield a room of uncommitted voters to Obama and the public got to watch how they all responded to Obama, while McCain was no where to be found. This was the icing on the cake and spoke volumes regarding how the campaign is going.  

Friday, October 3, 2008

Why a Credit Market Bailout (Now a "Rescue") is Needed

Many Americans are furious at the prospect of spending nearly a trillion taxpayer dollars to help bailout the mistakes and greed of Wall Street firms and other financial institutions.  Their ire is justified, and I count myself as someone who is furious at the excess and greed that has taken place, but I also understand the necessity of assisting the credit markets. 

Years of minimal accountability allowed those on Wall Street to profit from risky investments, while a lack of regulation and clever financial schemes hid the true folly of this system.  Now this arrogance and greed has led to a meltdown that has consumed many Wall Street firms, some of which had existed for over a century.  A person’s first instinct is likely to be to let them suffer for the mess they created (read this article for a look at how this situation exposes a natural desire for retribution in humans) to teach them, and those in charge of such institutions in the future, a lesson. 

But this desire for retribution will likely not serve the average American very well if it blocks a bailout package (now its a "rescue" package).  There will be time for tackling the excess and greed on Wall Street and the financial industry, but at the moment their screw-ups have placed our entire economy in jeopardy.  Americans have only started to realize this in the wake of the failed first attempt to pass a bailout in the House of Representatives. 

While the securities backed by mortgages (sub-prime or not) seem like bad debt, most of them are not; it is just that the market cannot value them right now.  No investor wants to touch them and these financial institutions cannot unload them, and so they appear as giant anchors on balance sheets because under accounting rules, some sort of present value has to be assigned to them.  The problem is that when no one wants to touch them, their value has no where to go but down.  These institutions now either have trouble both giving loans and getting them, and this difficulty has spread into the rest of the credit market around the globe as everyone starts to tighten their lending practices and none of the mortgage backed securities can be offloaded quickly.   Additionally, companies need to get rid of the securities soon because their inability to get loans and the unwillingness of others to give them in the immediate future is at the core of this crisis. 

To be sure, this is completely unfair. The reckless Wall Street firms screws up, and yet they benefit because no American can afford to let them fail (this is moral hazard everyone keeps talking about).  Also, those with a mortgage who could otherwise afford to pay it and now can't because of a decline in the market, increased interest rates, or inability to get a loan/credit (due primarily because of the bad lending practices) do not have much to gain from this bailout. 

There is some tax relief for homeowners, but this is paltry.  However, relief for those with a mortgage is a dicey political issue that would likely not get passed by the current Congress.  It does look increasingly likely that Democrats will gain even greater control of Congress as well as the White House, and helping homeowners directly is a top priority on their agenda (Republicans too wish to help homeowners, but they continue to insist on more indirect market oriented methods of helping them so I am making an assumption that more immediate and direct assistance would be more forthcoming under a Democratic Congress and President). 

This deal seems to get worse and worse for average taxpayers, Wall Street gets a bailout, and if there is any help for the homeowners (some of which the lender should not have even lent to in the first place), it will not be until at least next year.  But the biggest concern that should be on every American’s mind is the failure of the credit market.  Why is the credit market so important? 

The credit market allows individuals to get loans for homes, education, cars, consumer goods and everything else they need to get by on a day-to-day basis.  Stories are starting to trickle in of people being denied a loan (credit), but whether this will continue is unknown; it does, however seem to indicate a probable consequence of a collapsing credit market.  But consumers are not the only ones who need credit. Businesses need credit to expand, buy inventory, or even just pay their employees.  Without credit, business will start to contract.  Local governments are also having trouble getting credit, which they need to keep state services going and pay employees.  It also makes it more difficult to finance the sale of state bonds, further contracting state coffers. 

The conundrum of an diversified and integrated financial system that touches every aspect of our economy (and the global economy as well) is that we are completely dependent on it continuing to maintain our own personal economic well being.  The Free Market does allow greater growth and efficiency, but not always and it will inevitably fail at some point without proper regulation.  The current failure is extraordinary, and because the financial system is integrated into all the other aspects of our economy (and Americans are extremely dependent on credit), it is bringing down the whole house of cards.

A bailout may not stave off a recession, which is another downside to this deal, but it may be necessary to avert an even greater economic disaster.  This deal is unfair for sure, and it is ironic that there is more political outrage and pushback over such a bailout when compared to issues such as going to war, but it is currently the only game in town for immediate aide (I wouldn't call it a fix, its more like putting a Band-Aid on a wound—hopefully the Band-Aid is big enough).  In the best-case scenario, the government can sit on the assets (which still have value, and once the market recovers will gain value again) and eventually make money on the bailout.  The worst-case scenario is that the bailout is not enough, or is too late to stop an economic disaster, and it won't matter if Congress forces Wall Street to pay for the losses the taxpayer absorbed because of their incompetence.  The choice is a chance at stopping a disaster or just letting it happen, hopefully Americans will recognize the need to do something, the government will make money, and Wall Street will be regulated enough to prevent the need for future bailouts.

Thursday, October 2, 2008

VPs: Bring it On

Tonight's VP debate was very interesting in many ways. I will admit to screaming a few times at the tv screen when ridiculous things were said and for those interested in the score: ridiculous things said by Biden two, ridiculous things said by Palin six. But taking the debate as a whole, there were three aspects that stand out to me and will probably be what most people and media remember from this debate. 

First, Palin was relatively good and much better than she has been in the media interviews. This was hands down the best she has done since her speech at the republican national convention. She, for the most part, was able to answer questions without going into long stories that led to nowhere and she spoke in simple terms. More importantly, she showed herself to be a Washington outsider, which is clearly how the McCain campaign wants her seen. 

Second, don't like the question? Its cool, just answer the question you made up in your head. At two points in the debate Palin either did not understand the question or misheard it because she provided speech that never approached an answer to the question posed. The first time was when the moderator asked her whether she believed there should ever be an instance in which the United States should use nuclear weapons. Rather than answer this question, Palin instead talked about how we should stop nuclear proliferation. I agree with her. Nuclear proliferation is an important issue and we should stop it, but the question was asking about when she thought the United States should use nuclear weapons. The goal of these types of questions is to try to establish how risk adverse a candidate is in foreign affairs. If you say never, then you are very risk adverse, if you say only if attacked by nuclear weapons, you are considered rational, and if you say always, you are nuts. Clearly, this is an oversimplification, but the basic idea is that your answer to this question is supposed to be a kind of bellwether to how you approach crises. Do you panic? Do you over-react? Do you under-react? Are you decisive? Do you Plan? etc. Palin completely avoided this softball question and missed another opportunity to show that she might actually be competent in some foreign affairs issues. 

The second question that Palin completely disregarded is the standard job interview question: What is your greatest weakness? Instead of saying that she might have a weakness, she instead talked about all her strengths. From someone who used to do a lot of job interviewing, when I have a job candidate not answer a direct question like that it immediately tells me one or both of the following about the person. One, this person has a real weakness that he doesn't want me to know or two this person is unable to analyze himself, which means that he will be very difficult to work with because he will believe he is always right. Either way, whenever I had a candidate not answer that question it usually ended the chance that person had of getting the job. Unlike Palin, Biden made sure he answered this question and I think it will payoff because beyond my own feelings about this question, most people get annoyed when people pretend they have no weaknesses. 

The third memorable aspect of the debate were two responses delivered by Biden. The first was his comparison of McCain's health care tax credit as the ultimate bridge to nowhere. It was such a well timed response that even the audience and the moderator could not help but laugh. I think it spoke volumes to what people think about that particular policy proposal by the McCain-Palin ticket. The second aspect was Biden's response on the kitchen table issues. His response here was incredible and possibly one of the best moments in recent debate history. After being accused of being out of touch by Palin in a very gimmicky and winking manner, Biden told a story about his family that was deep, sincere, emotional, intense and real. I don't think he actually cried, but he came across as really understanding what people are going through. This, I think more than anything else this is what will be remembered from this debate. He took her attack and made her look small and childish, while he displayed deep empathy for being in tough positions. 

Overall, I think the debate went slightly to Biden, but in the end nothing happened tonight that should shift voters. While this last note may be lost on most voters Palin's closing statement was probably the sign that the McCain-Palin ticket is in trouble. She attempted to present voters with a clear division of which ticket to choose in Novemeber. The key aspect of this type of tacit is that you never say which ticket you are discribing. The key is to have the voter associate everything postive you are saying with your ticket and everything negative with the opponents. The problem that she had though is all of the McCain-Palin ticket's ideas that resonate with voters are issues they borrowed from Obama. Thus, when she listed the choices, it sounded like she was saying you can vote for the change ticket (Obama-Biden) or more failed policies and half baked ideas (McCain-Palin). It could just be me, but her closing statment seemed to confirm to me, who is winning control of the messages of this campaign.

Saturday, September 27, 2008

The Debate

So I apologize for not having a post up for a few days. Life has been a little hectic, but hopefully things will slow down just a tad in the near future.    

Last night featured the first of three presidential debates that are going to take place over the next several weeks (there will also be one vice presidential debate this coming Thursday). After some drama created by McCain stating that he may not attend the debate because of the need for him to be on the hill to get a compromise on the bail out bill, the debate itself went rather well for both candidates. The reason for this is that both candidates had different objectives coming into this debate and that made the result, in some ways, a non-zero sum game (i.e. that it was possible for both candidates to win and no one to lose).    

For Obama, success in the first debate was in accomplishing mainly four things: 1) being gaff free; 2) relaying that he is the candidate for change; 3) showing himself to be rational, level headed, and even keeled, while not coming across as aloof; and 4) portraying readiness to president. Obama clearly accomplished all four of these tasks by not getting frustrated when McCain made attacks and coolly refuting the claims made against him with well constructed, but simple, explanations. At no time last night did Obama become flustered and, in fact, many of his prepared responses and exchanges with McCain showed that he is deeply knowledgeable about key economic and foreign affairs issues. 

Obama's theme of the night seemed to be that we have had 8 years of impulsive executive leadership based on feelings and emotion. This leadership style lead us to the current crises we now face, and McCain embodies more of this style of leadership, while I (Obama) am collected, rational, and deliberate.    

As for McCain, success for him last night was also based on mainly accomplishing four things: 1) being gaff-free; 2) distancing himself from Bush on the economy and spending; 3) showing himself to be the candidate who could actually bring change to Washington; and 4) maintaining vigor and energy to assuage fears that his age is an issue. I think McCain pretty much accomplished all of his tasks as well. McCain drove home repeatedly that he is against spending and that he has a record to prove that he can reform Washington. His remarks were well animated  with a great deal of enthusiasm. 

In examining McCain's message of the night, it seemed to be that the voters should trust him on foreign affairs because he has been on the ground and he has surveyed the terrain on which we are going to fight, while Obama “doesn't get it” because he hasn't been there. This was an interesting attack strategy by McCain. I think it would have been very effective if Obama hadn't demonstrated each time that even though his feet may not have been on the ground, he had a very accurate picture of what needed to be done. However, I do think that this type of attack by McCain should play well with the Republican base, so I am sure we will see it used again and again.    

Thus, since both candidates accomplished what they set out to do, in some ways this debate was a win-win for both candidates. One thing to note is that unlike in recent past debates, such as Bush vs. Gore or Bush vs. Kerry, the candidates had to do a lot less to differentiate themselves on the economy and foreign affairs issues. Polls show that not only do voters recognize that Obama and McCain have different views on these issues, but approximately 65% can correctly place the candidates and their views together and provide at least one major difference between them. Thus, I think we saw a lot less time being spent on trying to say “here is how I am different from my opponent” and more time spent saying “this is why I am right.”    

The key aspect to remember of any debate, however, is that unless someone makes a gaff, very few people actually remember what was said. Rather, what people take away from presidential debates are feelings about the candidates and what the candidates represent. It is in this category that I think the edge went to Obama. It was clear from the debate last night that both candidates are for change. But, as we saw at the conventions, McCain is for change by fighting and defeating those who are resistant to change; he said he would be the sheriff of spending, veto every spending bill he deems no good, and make Washington change by bringing the fight to them. By contrast, Obama is for change by bring people together to work out differences and make compromises; he repeatedly stated that he understands that there are deep divisions, but that the president's job is to bridge these gaps, not to increase them. History has clearly shown that both strategies can be effective in the right situation.   

However, in today's political climate, the idea that voters want more division and fighting in politics seems silly. We have had 8 years of very derisive politics, and the situation created by the Bush era is unlikely to be fixed by the next president simply wielding a big stick. Rather, it is going to take carrots and compromise to really bring change to Washington. This notion of how to bring change is in many ways really the heart of the election. It could just be me, but my gut tells me at this decision node, voters don't want change through force, but through reconciliation that brings people together.    

Traditionally, debates do not have a huge effect on how people will vote unless one of the candidates makes a huge mistake. However, debates are important because they give voters a chance to not only hear the candidates’ issue positions side by side, but also their tone and message. While I don't think last nights debate will have any real impact on who votes for whom, it did reinforce what type of leadership style voters have to choose from in the next election. 

Wednesday, September 24, 2008

Political and Financial Bailout

Today Senator John McCain said he would suspend his campaign and return to Washington to work on the Wall Street bailout plan on which Congress is currently working. He also stated that he would work with Obama to make a joint statement delaying the debate on foreign policy this Friday in Mississippi. McCain said that the urgency of the situation requires that he and Obama put the campaign aside and go to Washington until the bailout is passed.

Obama later went in front of reporters to say that he and McCain had talked earlier that day - apparently Obama's campaign called McCain after Senator Coburn (R-OK) suggested it would be a good idea to give a joint statement - and their campaigns agreed to make a joint statement. Obama expressed his surprise at McCain's statement regarding the suspension of his campaign and a delay in the debate as Obama thought their campaigns would work on a statement before they went to the press.

McCain and the Republicans are saying that he is being bipartisan and that he and Obama are so needed in Washington that the debate can't go forward. On the other hand, Obama and the Democrats are saying McCain is attempting a cynical political move to delay the foreign policy debate - one he has the most likelihood of winning in the eyes of Americans - which would otherwise be lost in the turmoil of the financial crisis.

Regardless of either candidate’s political motivations, the economic crisis is extremely serious at the moment. McCain may have political reasons for wanting to delay the debate and suspend campaigning, but there is a legitimate reason why he and Obama will be returning to Washington soon and why they may even stay through the weekend.

Since financial institutions on Wall Street began to fail, starting this spring first with Bear Sterns and most recently with AIG, the financial system has been deflating. Bear Sterns Treasury Secretary Henry Paulson has been talking about governmental measures similar to taking out "bazooka" to reassure investors; by this he meant governmental intervention disproportionate enough to the problem to reassure investors such that money continues to flow into the credit markets. However, the size of the AIG failure, the lack of a recovery in the housing sector, and the constant stream of bad financial news has spooked investors to such an extent that massive government intervention is necessary to restore investor confidence.

It may seem odd to the average person that our markets are suffering from a lack of confidence; after all, business people and economists deal with money and numbers, things that have value and are absolute. Unfortunately, the market (and economics in general) is more of an experiment in social science and psychology than anything else. Value on the market is assigned by what people are willing to pay for something based on their needs and wants. When a major crisis like the collapsing housing market occurs, no investor is willing to buy a bad investment (such as a subprime mortgage backed security). This makes it difficult to value anything in the market, but it is widely known that those securities are dropping in value. Goldman Sachs and Morgan Stanely, the only significant investment banks left in existence, have been given a free pass to become regular banks in order to gain the greater security that comes with government regulation of that sector of the economy.

Investors are seeking to find the safest possible investments and hold back on lending, thereby freezing up the credit markets even for good borrowers and sound investments. Franchises of McDonald's are now finding it hard to get credit to repair their restaurants, and GM is taking out all the credit it has left for fear of not being able to find cash later. Businesses need access to credit to expand, but they also need it to pay the bills when they have no cash on hand. So not only will the economy not expand, it may contract once businesses start going under after they can't afford to pay their bills, and more importantly their employees. Even individuals with good credit may not be able to get loans for new homes, cars, or higher education tuition.

Secretary Paulson and Federal Reserve Chairman Ben Bernanke believe the situation after the AIG fallout to be so serious that they think the government must intervene and buy the bad mortgages - at a discount as they are so low in value right now - so that financial institutions can pay off their debts and prevent the credit markets from freezing up. However, the political problem here is that this will be an unprecedented bailout of incredible size. Americans are used to hearing billions of dollars being spent, but $700 billion is a massive amount of money. To put this in perspective, the Iraq War has cost $550 billion from its start through August 2008 and the entire budget for 2007 was $2,730 billion ($2.73 trillion).

Paulson and Bernanke believe that this bailout must be passed by next week or the credit markets will freeze. So far, many financial experts seem to agree. Experts also believe that this may not be a losing proposition to Americans, as the assets that are purchased - U.S. mortgages backed securities owned by U.S. or foreign financial institutions - will eventually rise again after institutions are relieved of their bad investments and credit markets begin to flow regularly again. If there is a loss, it won't be the full $700 billion, but there could be a $200 billion loss or even a $200 billion gain.

The key to the current bailout plan, and the reason McCain wants to claim a need to suspend debates, is the need for a speedy government reaction to stop the credit markets from freezing. So far, Republicans have been the more resistant to a bailout because of their faith in the free market and dislike of government spending or intervention. Regardless of what either candidate or party says, the politics of this crisis and the election will always be a major consideration in any decision that has to be made. Fortunately for Americans, both candidates and a majority of Congress agree with the Administration that bailout plan must be passed within the week. Hopefully this will be a big enough "bazooka" to stave off economic collapse such that future intervention of this scale will not be needed.

Monday, September 22, 2008

The Need For Speed?

Today, President Bush announced that the whole world is watching to see if we can act quickly to resolve/contain the U.S. finical crisis. The message he was trying to deliver was not directed at the American public, but at Congress, to act quickly in passing his 700 billion dollar bank bailout proposal. Bush felt that this was necessary as many congressional democrats and a fair number of republicans have questioned the wisdom of the Bush bailout in its current form.    
It is clear that Bush wants to react quickly to this financial crisis, but a key question to consider is whether speed at this juncture creates more problems down the road. In other words, while waiting to take action in the short term main cause additional drops in the stock market, if we take the time to work out a compressive rescue and correction for what went wrong in the financial markets, will we be better off in the long term?    

I am not an economics expert, so it is difficult for me to offer a real analysis of this inherent economic tradeoff. However, from a political standpoint, the current situation is rife with potential political gains and losses. To understand the likely outcome of this situation, it is important to take a look at the different political motivations for several key players: President Bush, congressional democrats, the Republican Party, McCain, and Obama.    

For President Bush, a large part of his legacy as president will be affected by how this economic crisis unfolds. If the crisis leads to another great depression, then regardless of any good he has done in his political career, he will always be remembered as the president who failed to prevent a great depression. President Hoover’s legacy supports this point of view. Hoover was an extremely accomplished public servant before he became president, and he was an immensely popular president until the economic downturn in 1929. The result of his presidency coinciding with the start of the great depression is that his legacy is forever tied to that event.  Thus, beyond any personal conviction Bush has regarding  the best present course of action, from a political motivation stand point, Bush is best served by having a short-term solution rather than a more long-term comprehensive fix.    

Congressional democrats have competing political interests. From one perspective, they should be in favor of a short-term fix because if it temporally rights the economy, they can go back to their districts and say "see I was there to protect you. I saved the economy." However, initial responses by the democratic base have been very negative towards the Bush bail out plan. Thus, if they were to fast track the bill with just an up or down vote with no amendments, they risk being seen as weak to these key supporters.    

In addition, congressional democrats don't want to be seen as obstructionists (because they held up necessary legislation at a critical juncture) or partisan (since conventional wisdom argues that economic downturns favor the party out of power for the presidency), as it could result in an electoral backlash from voters who are hurt by an increasingly worsening economy. A key fact to remember is that even after the election, the new president will not take office till the end of January. If no action at all is taken, a lot could go wrong in those four months. As a result, if we weigh all of these pressures, it appears that the motivation for congressional democrats would be to pass some package to rescue the economy, but likely some altered form of the Bush Plan.    

As for the Republican Party, its motivation is quite similar to that of President Bush. Survey research has shown that up until Carter, the Democrats were consistently rated as more competent in handling the economy. When experts studied this empirical regularity in detail, they found that this opinion was the result of the Republican Party's association with control of the White House at the start of the Great Depression. For voters who lived through the Great Depression, the Republican Party was, in their minds, inextricably linked with economic failure. Thus, the Republican Party should do everything in its power to make sure we do not enter another depression while it holds the presidency. Therefore, republicans should also be in favor of quick action to ensure that the economy doesn't slide into recession or depression while they are in control.    

The last two actors to take a look at are the two presidential candidates. As both are senators, they are both going to have to cast votes on the Bush Plan. This is one of the few opportunities that voters are going to get to see how both candidates act at the same time and at the same level of policy making. Both candidates are running on a message of change. Well, I can almost guarantee that the bail out plan is going to get spun as more of the same in Washington. So the question becomes whether both candidates can take the comprehensive change approach and vote against a simple bailout of the banks and get away with it with their supporters.    

In looking at Obama, he clearly cannot support a simple bailout; that would go against all of the themes of his campaign about reform in Washington. However, he cannot be seen as not working to find a solution for the crisis. The problem for him is that he is not the President of the United States in the senate. Thus, he is just one of 100 and it would be difficult for him to dictate a completely different plan. As a result, it would appear that Obama's best course of action would be to vote against the Bush Plan, but support any modification that provides some regularity reform. This way he can say "I have fought for reform in good and bad times and if you elect me, you will keep seeing reforms coming."   

In the case of McCain, he is in a much tighter spot than Obama. If he is truly a candidate for change, then how can he simply vote for the Bush Plan? He has tried so hard to distance himself from Bush, and there is no way he could cast a “yea” vote for the Bush Plan and win the presidency; in the minds of most voters that would be the same as saying he endorses how Bush has handled the economy for the past eight years.    

However, McCain also could not easily vote for a Democratic Party sponsored bill that calls for reforms and regulations. If he were to sign on to the bill, he would look like a follower of the Democratic Party and a deserter of the Republican Party. In addition, a lot of his support comes from fiscal and small government conservatives who are outraged over the level of government spending and intervention that democratic reform plans for the finical markets call for. As a result, McCain is stuck in a hard position of not being able to support the Bush Plan, but also being equally unlikely to support a democratic reform bill. His best bet is to try to sponsor a bill himself, but in a democratically controlled senate, that is very unlikely to happen.    

Taking all of this analysis together, it seems that the likely outcome of this crisis is that the democratic controlled Congress will write their own bill that incorporates large aspects of the Bush Plan (so that they can move quickly), but that also provides for additional regulation and protections for the taxpayers (thinking more long term). I am not sure this is the best outcome as it may rush the passage of critical reforms for the finical markets, but given the nature of the crisis, it is probably the best-case scenario.