McCain a Greek Tragedy

McCain's campaign has been floundering for a lot of reasons, but the final nail in the coffin may be his continued adherence to the failed concept of campaign finance "reform". Conceptually, this argument flows from the dubious principal that money is bad and it's bad to have money in politics. Money may allow "special interests" to influence an election. These arguments are very old indeed. They were also made at the constitutional convention were talk of foreign gold and other abstractions were similarly lamented.

So the solution is to have the government regulate through very well intentioned and politically connected bureaucracy, the amount of free speech permissible on the air waves, especially during the interval immediately before an election. In practice this works similar to the way gerrymandering has worked to create election districts that achieve near perfect re-election victories for the politicians in charge. This is one of the major reasons our nation has become so politically polarized as these candidates only need to pander to their distinct base of constituents and make no attempt to provide for the common good. Remember E Pluribus Unum, our former motto? It no longer applies.

McCain the author of McCain/Feingold followed this bad idea to his doom, by agreeing to take government fiance and all its spending restrictions even though Obama, who originally stated his intention to do the same, reneged and raised enough cash to impress Croesus. There is an order of magnitude difference in the amount of money these candidates have to spend and this will become clear when Obama airs his 30 minute television commercial on network prime time. Fortunately, as Michelle Obama says they are not putting ads on Nick and Disney channel to bore the children. General McCain went into battle as under prepared and under stocked as George W went into Iraq.

Campaign fiance is another well intentioned measure that achieves exactly the opposite result as its stated purpose. By limiting donations to small amounts and putting stiff restrictions and reporting requirements on them, it forces candidates to continuously forage for funds and pushing them into the arms of organized groups that have a large number of boots on the ground. These groups often represent unions, government workers, religious groups - otherwise known as special interests. Meanwhile, the barrier to entry into politics is raised for newbies a/k/a challengers. The established candidates control all the levers, plus they have the free franking privilege allowing them to send free mail as well as ready access to the news media. There are valid reasons an overwhelming majority will be re-elected even this year.

The Obama fund raising effort shows great sophistication in that a huge number of small donations has been funneled into his campaign. This diversity of funding sources also implies more independence from - special interests. The fact the most politicians do not have the fund raising resources as Obama does not detract from the lesson learned. It is the diversity of funding sources that would allow a politicians to break free of the interest groups that control them.

In fact as long as major campaign contributors are specifically identified, what concern is it to limit their political donations? A candidate will have more funding choices to choose from and is even less beholden to single set of constituents or special interests. If Malcom Forbes, Bill Gates and Warren Buffet decide that candidate X is the man or woman that must be elected to save the nation, why can't they bankroll him as long as they identify themselves? In 1968 Eugene McCarthy entered the race Democratic primary against Lyndon Johnson to oppose the Vietnam War. Sounds like that might have been a good idea to air in public. Today, campaign finance "reform" would prevent that, Johnson would get a pass.

This attempt to regulate free speech in the context of political campaigns is also a symptom of the larger decline in support for free speech in general. The Supreme Court ruled that money does not equate with free speech and upheld much of this campaign finance reform package. In other words you are free to speak, just that you may not use money to purchase space on the airwaves or print media to have anyone actually hear you speak. Effort are underway in the Democratic party to crack down on talk radio by reintroducing the "fairness doctrine" so that they can clobber Rush Limbaugh and Shawn Hannity - all in the interests of fairness.

One must always question the motives of these politicians making these decisions especially when they start using slogans like reform or fairness. One of the more obscure reasons that Republicans were all for alcohol prohibition in the 1920s was the fact that in states like New York, the democratic power base was run out of the taverns and barrooms. Shutting them down was a good idea - for Republicans.

Politicians will always seek ways to suppress their opponents and boost their own fortunes. That is reason enough to keep them away from managing elections, setting up election districts or deciding who is eligable for run for office and how much money can be spent. These schemes always have a way of working to the advantage of those already in power.

Strike While the Iron is Hot

Congressmen that voted down the bailout measure on Monday must be pretty pleased with themselves. After blowing $1.2 Trillion dollars of stock market value the next day - heavily damaging pension funds and 401K plans across the country, they finally passed a heavily loaded up bill that swelled from 3 pages to over 400. Now we have more sheep studies, new Nascar track facilities, subsidies for Rum producers and even some money to help bail out Hollywood. Considering the country is just about tapped out and bankrupt, what did these Congressmen vote for - saving the country's economy or their own smelly job? Of course the voted for their jobs not for the good of the country.

Where will this extra $120B come from? Will we one day raise taxes to pay it off. No, it will be monitized in the form of future inflation and further erosion of our pensions, savings and our standard of living.

The time wasted before the measure was finally approved saw further weakening of economy increasing the odds against this $700B bail out bill actually working. Credit continued to implode and asset values fell quite a lot last week. At least we did not see banks shutting down in waves like 1932.

The wisdom of the Paulson approach to get the measure voted quickly was a good one, even if the salesmanship was lacking. This episode further confirmed what has been learned over the past few centuries in dealing with these finanancial crisis by Bagehot, Hamilton, Milton Friedman and many other great economists - that time is of the essence in dealing with a crisis like this.

We can now add a striking new dimension to our understanding - the startling revelation that our elected officials will still take the time to loot the treasury even while being warned the country is on the verge of a collapse. Sherman's bummers would never have gone that far.