"Investors are always responsible for their investment decisions, but the hard earned savings of Americans should not be penalized by the erratic behavior of politicians."
That sentence is included in the prepared remarks distributed to the media before a speech John McCain will give in Blue Bell, Penn., today. But if he actually utters those words, I will be dumbfounded. "Erratic" is the word that Obama's strategists have chosen as the sound bite of choice to describe McCain's dramatic zigzags on the campaign trail. In fact, I've been surprised at how much media coverage of McCain has included the word "erratic" without mentioning how central it is to the Obama campaign's attempt to fix in voters' minds an image of McCain flitting from issue to issue and tactic to tactic like a drunken bumblebee. But for McCain himself to include the phrase "erratic behavior of politicians" in his own stump speech is just mind-boggling.
The speech itself offers ample evidence of McCain's inability to pick a course and stick with it. Last week was all about the negativity and character assassination: "Who is Barack Obama?" he asked, as audiences booed and sharpened their pitchforks. This week, that entire approach has been jettisoned.
Today, McCain is all about the economy. But there's a "Twilight Zone" aspect to his pronouncements on Wall Street. Take a gander at the following paragraph:
We're going to get government out of the business of bailouts and equity stakes, and back in the business of responsible regulation. We will learn from this crisis to prevent the next one, with much stricter oversight. No more wild overleveraging, no more liabilities concealed from the public and from shareholders, no more bundling of assets to maximize profit by assuming insane risks. Those days are over on Wall Street. With new rules of public disclosure and accounting, my reforms will make certain these betrayals of shareholders and the public trust are never repeated.
Line by line, I agree with every word of that paragraph. Then I slap myself in the face as I recall that Phil Gramm was his campaign chairman in 2000, and McCain has long called himself a "deregulator." Which raises the obvious question: Who should Americans trust more to responsibly regulate Wall Street? The candidate who has been consistently advocating a new regulatory structure throughout his campaign, or the candidate from the party that is most closely associated with deregulation?
As for his new economic plan, it strikes me as pretty thin gruel. His plan for the government to buy mortgages has now been further refined to explicitly state that variable rate mortgages should be replaced by 30-year fixed-rate mortgages. That makes sense. But as far as I can tell, the plan still includes paying the full face value of the mortgages to the lenders who made the bad loans. Isn't that continuing to keep the government in "the business of bailouts"?
Like Obama, McCain calls for eliminating the tax on unemployment benefits. But he also pledges to "cut in half the capital gains tax on stocks purchased and held for more than a year -- from a rate of 15 to 7.5 percent." I'm not sure I understand how reducing the capital gains tax on stock appreciation during a year when, even after Monday's big stock market gains, the market is still 40 percent off its peak a year ago, will do anything to provide relief to Americans from current economic pain.
As for the bailout itself: On this point McCain and Obama now sound almost identical.
When the government does provide funds to shore up companies, the terms will be demanding, there will be complete transparency and the safety net for our financial system will not become a golden parachute for failed executives. Moreover, we will not merely inject billions of dollars into companies and walk away hoping for the best. We will require that those companies be reformed and restructured until they are sound assets again, and can be sold at no loss -- or perhaps even a profit -- to the taxpayers of America.
But we must make sure this plan is implemented in a way that helps homeowners and does not enrich Wall Street CEOs at the taxpayers' expense, something I have warned against from the first day of this financial crisis. Taxpayers who are now invested in Goldman Sachs should not be treated worse than when Warren Buffett invested in Goldman Sachs. Injecting capital into our financial institutions is essential to stabilizing our economy, but we must make sure we are not giving sweetheart, insider deals that shift the risk to taxpayers without giving them sufficient upside... Finally, the plan appears to extend a broader set of guarantees to banks without requiring any additional regulation, which represents more of the same failed philosophy that got us into this mess.
McCain's "pivot" to the economy, capital gains tax cuts aside, makes him sound like a standard Democrat. I imagine the remaining undecided voters might be thinking: Why not just go for the real thing?
UPDATE: As I was writing this post, in comes an e-mail from Obama spokesman Bill Burton:
SUBJECT: On this point in McCain's speech, we agree...
"...the hard earned savings of Americans should not be penalized by the erratic behavior of politicians."