I’m no economics expert. I find it darkly humorous that just days before the current — well, what is it, exactly? — near collapse of the banking and credit system, I wrote the following in an election-related post:

The economy so far has been weathering some pretty bad circumstances pretty well. If oil prices continue declining, it seems to me that things are likely to get better.

So I’m just listening to the various arguments about the 700 billion dollar bail-out. Will it work? What does “work” mean in this context? I saw Senator Chuck Schumer (D-NY) and Senator Jim DeMint (R-SC) arguing about it this morning on TV. Ideologically, there was much about DeMint’s point of view that appealed to me. As he phrases it on his website:

“After reviewing the Administration’s proposed bailout plan, I believe it is completely unacceptable. This plan does nothing to address the misguided government policies that created this mess and it could make matters much worse by socializing an entire sector of the U.S. economy. This plan fails to oversee or regulate the government failures that led to this crisis. Instead it greatly increases the role for Secretary Paulson whose market predictions have been consistently wrong in the last year, and provides corporate welfare for investment firms on Wall Street that don’t want to disclose their assets and sell them to private investors for market rates. Most Americans are paying their bills on time and investing responsibly and should not be forced to pay for the reckless actions of some on Wall Street, especially when no one can guarantee this will solve our current problems.”

“This plan will not only cause our nation to fall off the debt cliff, it could send the value of the dollar into a free-fall as investors around the world question our ability to repay our debts. It’s also very likely that this plan will extend the cycle of bailouts, encouraging other companies to behave in reckless ways that create the need for even more bailouts, triggering an endless run on our treasury. This plan may make things look better for Wall Street in the next couple months, but the long-term consequences to our economy could be disastrous.

“There are much better ways of dealing with this problem than forcing American taxpayers to pay for every asset some investor doesn’t want anymore. We should start by reforming government policies and programs that created this mess, including the Federal Reserve’s easy money policy, the congressional charters of Fannie Mae and Freddie Mac, and the Community Reinvestment Act. Then Congress should pass a number of permanent and proven pro-growth reforms to encourage capital formation and boost asset values. We need to make permanent reductions in the corporate tax and the capital gains tax rates. We have the second highest corporate tax rate in the world, which encourages companies to take jobs and investment overseas.”

It’s appealing to think that the crisis could be addressed not by taking $700 billion from the taxpayers, but by reducing the burden on taxpayers instead. But, as said, I’m no economics expert. It is good at least to hear arguments for and against the Paulson/Bernanke approach, versus a concerted rush by every one in Washington to simply implement it.

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Another flashback to some, um, canny prophesying that has appeared in this space. From August 30th:

Barring an enormous perception-shifting event for the electorate, I believe that [McCain] is positioned for a substantial win in November. This is not about today’s poll numbers; it’s about how things will shake out as the Republican convention comes and goes and as the debates take place and as we get down to the wire and all the gloves come off. Nevertheless, a day’s a long time in politics, as they say, so I for one will still be holding on tight.

Is the financial crisis “an enormous perception-shifting event for the electorate”? I would think so. Polls are starting to come out showing that it is benefiting the Obama/Biden ticket. No doubt many swing voters are starting to think that — putting all nuance aside — it’s just time to change the party that controls the White House. This means that for McCain to pull out a victory he again needs to shift the momentum in a significant way. The upcoming debates loom large as the opportunity for such a momentum shift. Arguably now, Obama needs only to hold his own (whereas before he needed to do very well indeed).

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