Who Can Lead Us Out of This Mess?
By David Von Drehle
They are different in so many ways: one Republican, one Democrat; one in his 70s, one in his 40s; one white, one black. But John McCain and Barack Obama share the genome of the alpha pol. Timing and instinct are among the dominant traits. How else to explain the fact that both men chose precisely the same day -- nearly the same hour -- to field press questions for the first time about the collapsing financial sector and the government's proposed $700 billion bailout? Like the cicada crawling up from the earth precisely 17 years after its mom lays her eggs, or the monarch butterfly fluttering a thousand miles to a particular spot, they were driven by something wired, not taught. And even more uncanny: they chose almost exactly the same words.
Here was Obama: "It is wholly unreasonable to expect that American taxpayers would or should hand this Administration or any Administration a $700 billion blank check with absolutely no oversight or conditions when a lack of oversight in Washington and on Wall Street is exactly what got us into this mess."
Here was McCain: "Never before in the history of our nation has so much power and money been concentrated in the hands of one person ... We won't solve a problem caused by poor oversight with a plan that has no oversight."
More McCain: "There must be a path for taxpayers to recover the money that is put into this fund."
More Obama: "If taxpayers are being asked to underwrite hundreds of billions of dollars to solve this crisis, they must be treated like investors. The American people should share in the upside as Wall Street recovers."
McBama: "This plan cannot be a welfare program for Wall Street executives."
O'Cain: "No Wall Street executives should profit from taxpayer dollars. It is wrong to ask teachers and farmers and small-business owners to fill the gas tanks of the helicopters of Wall Street tycoons."
Is this what they mean by putting an end to partisan bickering? Reaching across the aisle to share focus groups? The lifeblood of the world's largest economy was clotting, but the men who would be President answered with shared simplifications: muttered prayers to the god of oversight, an idle hope that taxpayers might awaken one day to a windfall, and the timeless amusement of humble millionaires bashing arrogant millionaires on behalf of folks who may never breathe debt-free.
So the first thing the crisis revealed about the would-be Presidents is that they are Senators not just in name but also by disposition. Americans were angry and confused about the crisis on Wall Street. The moment seemed to cry out for someone to make sense of it all. Instead McCain and Obama explained how they would amend a draft of the bailout legislation. Then they got up the next morning and tried to negotiate a joint statement urging patriotic calm.
And being Senators in today's Washington, both took the stage while shadowed by dubious supporters. Obama has ties to the men who pocketed fortunes while running Fannie Mae off a cliff. McCain's campaign manager was a high-priced adviser to, among others, the equally screwed-up Freddie Mac.
One of these two Senators is about to be thrust into the White House, however, where the gravest financial crisis since the Great Depression will shape his agenda and probably narrow his options for years to come. Beneath the armor of two politicians in crisis mode, there were signs of the kind of President each would be.
Who Speaks for Thrift? Obama went first, repeating words that have become a sort of mantra for him as he surveys the economy: "It's not the time for fear or panic." Image is a very real part of the presidency, and it seems safe to say now, nearly two years into this campaign, that President Obama would do well should times call for unruffled calm. He wore a gray suit that fit like a mother's caress, nary a wrinkle or bead of sweat visible, and spoke in the same laconic tone you might use to discuss the weather with a co-worker while sorting your e-mail at the same time. He met the press in Clearwater, Fla., the western end of a wide belt of suburbs along Interstate 4 that usually decides who wins the state's 27 electoral votes. A regional poll out that morning showed him surging, and not even a bank panic was going to make him lose his cool.
(Click here for photos of John McCain.)
Another part of the job is choosing advisers, and in preparing for this moment, Obama consulted a glittering cast, including former Federal Reserve Chairman Paul Volcker -- the man who whipped inflation -- and former Treasury Secretary Robert Rubin, who briefly erased the deficit. Yet another role of the President is to set priorities. That's where Obama stumbled.
Asked what impact this trillion-dollar crisis might have on his expansive and expensive array of policy proposals, Obama essentially answered, Maybe none. That's defensible in theory, because each of Obama's big ideas could be, in the long run, good for the U.S. economy. Overhauling the energy sector by selling credits to emit carbon could ignite a big new industry around alternative fuels. Reforming the inefficient health-care system could rein in the cost of insurance and allow employers to put more money into wages rather than into benefits. Drastically improving education ought to lead to a more skilled workforce that produces more valuable goods and services.
But all these reforms would involve massive up-front costs, and the current crisis seems to mean that there will be less money available for the next President to invest. If you say, "Well, let's borrow some," you run into the very problem that underlies the financial meltdown in the first place. At every level of American life -- from the struggling homeowner who can't afford his mortgage to the failing investment banks that can't meet their collateral requirements to the Federal Government, which can't prop up the drooping dollar -- the bottom line is that we've borrowed too much money. We're all over-leveraged.
Obama has said little about how he would tackle that fundamental issue as President. Indeed, his short-term proposals -- a second round of stimulus checks, for example, and some of his refundable tax credits for working families -- could have the opposite effect, spurring more consumer spending. That might make voters happy and briefly goose the economy, but it won't persuade America to stop living beyond its means.
As far back as the penny-saving Ben Franklin and the conquistadores chasing their dreams of golden cities, this has been a country of mixed minds about how to get rich. We extol the conservative Warren Buffett model: selling 4 cent Cokes for a nickel and conscientiously saving the proceeds, investing in quality goods and well-run enterprises and shunning a penthouse on Central Park when a five-bedroom home in Omaha, Neb., will do. At the same time, we're always on the lookout for the next gold rush, the next Powerball, the next bubble. The fact that Wall Street banks were recently borrowing 30 or 40 times their available capital to place bets that home buyers would pay off mortgages 10 times the size of their annual paychecks suggests that America's cultural pendulum has swung too far in the direction of the casino. And Obama hasn't yet shown he's the man to put us back in touch with our thrifty side.
Who Has the Courage to Cut? McCain strode to the microphones a short time later in Freeland, Mich., a little town near the spot where the thumb of the Michigan mitten meets the palm. The state's economy is the weakest in the country, and McCain was there to visit one of the few bright spots, a Dow Corning plant devoted to solar-power technology.
Dressed in tan trousers, a blue blazer and a striped tie -- the unofficial uniform of the small-town Chamber of Commerce -- McCain cut quite a different figure from his opponent. He radiated toughness with an overlay of irritation. He tried to warn us two years ago that Fannie Mae and Freddie Mac were screwed up, he began, but did America listen? Now look at the trouble we're in.
(Check out Pictures of the Week here.)
People like a President who seems to share their passions, tastes and grievances, so McCain probably struck a chord with his obvious loathing of the "Wall Street tycoons" and backroom Washington dealmakers he holds responsible for this mess. It's his nature to see problems in terms of personal culpability; while other leaders were debating the best way to set a price for distressed debt, McCain was calling for the head of Christopher Cox, chairman of the Securities and Exchange Commission. Both Obama and McCain maintained that greed is the root cause of our troubles, but in Obama's mouth it sounded like a diagnosis, whereas from McCain the word landed like an indictment.
McCain's advisers, like former Treasury Secretary Nicholas Brady, have helped him identify a tax proposal that speaks to the underlying cause of the meltdown. Compared with most other developed countries, the U.S. has relatively high taxes on corporations that produce goods and services and relatively low taxes on consumption. "For example," McCain observed, "Ireland now has an 11% business tax. The United States of America has a 35% business tax. Where are businesses going to go?"
McCain's solution is pretty basic: Cut the corporate tax. The trouble is that his corporate tax cut isn't part of a larger overhaul of the tax code that would reward savings and investment while curbing deficit spending -- whether by individuals, private institutions or the government. The cut is only one among many in a budget that is wildly out of balance. How would President McCain convince people that they can't have a bigger flat-screen than they can afford while he's running a government that promises more services than it has money for? Neither McCain nor Obama has put forth any concrete plan for deficit reduction. If, as the latest polls suggest, McCain is seen as less credible on the economy than Obama is -- and losing ground as a result -- the reason is probably that his evasion of reality feels staler than his opponent's. A Republican offering specific tax cuts but only vague pledges to reduce spending is old hat for today's voters. Although Sarah Palin helped McCain reclaim his maverick mantle for a few weeks, this meltdown has once again marked him with the Bush brand.
Where Do They Stand? A year ago, most people thought this would be an election dominated by foreign policy. More recently, it looked like an election about gas prices. The candidates are still adjusting to a campaign about collateralized debt obligations.
Obama and McCain have been cautious in adapting their messages to the new reality because no one is sure what the new reality actually means. But they may be reluctant to show their hands in an economy that can turn from forgiving to punishing overnight. On balance, McCain would be a lower-tax, lower-spending President who would agree to stiff regulation when necessary. Obama would be quicker to spend, quicker to regulate but also probably faster to react to economic weakness at home. The choice might be as much about reflexes as about ideology.
Clearly, the meltdown poses a problem for the next President. But is it the problem -- a force so fundamental that it flattens everything in its path? Are the agendas and ambitions, the pet policies and platforms of Senator Maverick and Senator Change about to be squashed under the weight of a long, deep recession?
Neither of these men is an economist, and after eight years of an MBA President, America will forgive them for that. What we seek is a leader who can size up a problem, explain it in a way that seems both true and hopeful and match the nation's priorities to its needs. Here's the crisis -- which man is up to it? They have a month left to give us their answers.
-- With reporting by Jay Newton-Small and Michael Scherer / Washington
(Click here for photos of Barack Obama.)