Economy -- McCain Bails Out Of The Debate

September 25, 2008

by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Benjamin Armbruster, Ali Frick, and Ryan Powers

ECONOMY

McCain Bails Out Of The Debate

At the University of Mississippi on Friday, Sen. Barack Obama (D-IL) and Sen. John McCain (R-AZ) are scheduled to engage in their first presidential debate. But that plan was thrown into doubt yesterday when McCain abruptly announced "that he would temporarily stop campaigning" in order to "return to Washington to help forge an agreement on a proposed $700 billion bailout of financial institutions before Congress." Obama, who will meet at the White House today with McCain, President Bush, and congressional leaders, responded to McCain's call for him to join him in suspending his campaign by arguing the debate should go on as planned because "it is going to be part of the president's job to deal with more than one thing at once." The McCain campaign, however, is insisting that "if there's no deal before the debate, McCain is staying in Washington, period." Both the University of Mississippi and the Commission on Presidential Debates plan to "move forward as though the debate is still going to happen." But Friday's debate might not be the only thing derailed by McCain's surprise decision to interject himself into the bailout negotiations. As the New York Times notes today, "McCain's actions not only cast doubt on whether the highly anticipated debate would come off, but also thrust an unpredictable new element into the negotiations for the bailout."

INJECTING PRESIDENTIAL POLITICS: In his announcement yesterday, McCain declared that "all we must do to achieve this is temporarily set politics aside, and I'm committed to doing so." But in reality, McCain's bailout gambit has resulted in "a highly charged, even dangerous political atmosphere," as Politico noted, ahead of the today's negotiations. Asked by reporters "if McCain's announcement is more about politics than a desire to help with the bailout plan," Rep. Tom Davis (R-VA) replied, "There is politics in everything you do." Though some conservatives welcomed the political cover provided by McCain's move, others were not pleased at the thought of McCain's hand in the negotiations. "Asked by reporters if he wanted McCain sitting in blow-by-blow negotiations, Rep. Adam Putnam, the No. 3 House Republican, simply smirked, mute for 10 seconds as reporters laughed," writes Time's Jay Newton-Small. Democrats were even less pleased with McCain. "It would not be helpful at this time to have them come back during these negotiations and risk injecting presidential politics into this process," said Senate Majority Leader Harry Reid (D-NV). Some felt that McCain was seeking to steal credit for a deal that was already being worked out. "All of a sudden, now that we're on the verge to make a deal, John McCain airdrops himself in to help us make a deal?," said House Financial Services Committee Chairman Barney Frank (D-MA).

PROGRESS BEING MADE: The Bush administration's bailout proposal, which called for Treasury Secretary Henry Paulson to be given unprecedented and unilateral authority to buy up $700 billion in souring mortgage assets from the very financial institutions that "engineered the current crisis," was initially greeted with great doubt by both lawmakers and economic experts. While the White House is still working to "line up support among lawmakers appalled by its cost, doubtful of its methods and outraged by the speed with which they were being pushed to act," negotiations on Capitol Hill have made progress this week. For instance, in his address to the nation last night, Bush finally embraced putting "limits on executive compensation at companies that accept taxpayer money," saying that the legislation "should make certain that failed executives do not receive a windfall from your tax dollars." Over two days of testimony, Treasury Secretary Henry Paulson has "shown a greater openness to revisions in the plan to win needed votes," including a reluctant openness to phase in the $700 billion. After Bush's speech last night, Frank told reporters that there was now agreement between House and Senate Democrats on what should be in a rescue bill and they would be meeting with Republicans today. A Democratic aide told The Hill last night that "not too many" issues remain unresolved between congressional Democrats and Republicans on key committees. Despite this progress, concerns still remain about whether the emerging plan will address the root problem of defaulted home loans and rising foreclosures that are putting the economy at risk. Any bailout will be fundamentally flawed if it doesn't allow the restructuring of underlying mortgages that are troubled, as the Center for American Progress has set forth.

FALSE CONSERVATIVE ALTERNATIVE: Though McCain's call to delay the debate in order for him and Obama to directly engage in the bailout negotiations has been met by widespread skepticism, it has been embraced by opponents of a direct federal intervention in the financial crisis. Former House Speaker Newt Gingrich, who came out against the bailout earlier this week, whole-heartedly embraced McCain, claiming that he had "put everything on the line to try to put together a bipartisan sizable economic package to replace the failed Paulson bailout package." Gingrich is likely hoping that McCain will now embrace his unrelated claim that the crisis can be solved by suspending the capital gains tax. As Center for American Progress Action Fund Vice President for Economic Policy Michael Ettlinger has pointed out, there are serious flaws in Gingrich's proposal. One of these flaws is that capital income wouldn't be drawn into the market because the money has to come from somewhere. If the money were to come from "interest bearing accounts, the banks would be hurt by as much as Wall Street benefited. If it’s treasury bills, the cost of government borrowing will go up. And there’s nothing about a capital gains tax cut that brings back money invested overseas."

HEALTH CARE -- WORKERS' FAMILY HEALTH CARE DEDUCTIBLES UP 29 PERCENT: According to a study released by the Kaiser Family Foundation, "workers are shouldering higher health care costs as more employers demand bigger out-of-pocket payments from employees before their insurance kicks in." The study notes that "annual deductibles -- the amount employees pay out of their own pockets for medical care before their insurance coverage starts -- jumped an average of 29%, to $1,344, for those with family coverage." Kaiser surveyed 1,927 employers and "found that 18% of insured employees pay at least $1,000 before their coverage starts - up from 12% in 2007." "The shift has been most dramatic for workers in small businesses with three to 199 workers," the study found, "where more than one in three (35 percent) covered workers must pay at least $1,000 out of pocket." Kaiser concluded that "this is partly, but not entirely, driven by growth in consumer-directed plans such as those that qualify for a tax-preferred Health Savings Account." Kaiser President Drew Altman this growth in high deductibles means "we may be seeing the tip of the iceberg toward less comprehensive, skimpier coverage."

SCIENCE -- TOMMY THOMPSON SAYS ROVE CONVINCED BUSH TO REJECT EMBRYONIC STEM CELL RESEARCH: In August 2001, President Bush sharply curbed embryonic stem cell research, funding only research on “existing stem cell lines." Since then, Bush has vetoed legislation increasing funding for embryonic stem cell research. This week, former Health and Human Services Secretary Tommy Thomspson told the World Stem Cell Summit that Bush came to the decision in August 2001 after consulting with Karl Rove and him over lunch. "He says, 'Gentlemen, I want you to debate embryonic stem cells for me,'" Thompson said. "He says. 'Karl, I know you’re opposed to it, and Tommy, you're for it. I want to learn about it.'" "I'm absolutely certain if that lunch had not taken place, the research of the 78 lines would not have taken place," Thompson added. In contrast to Thompson's claim, Bush's decision was harmful to science -- not a small victory. Rove has no background in health care or science. In the past, Rove falsely claimed that science has "far more promise from adult stem cells than from embryonic stem cells."

ECONOMY -- RICE SAYS 'FUNDAMENTALS OF THE U.S. ECONOMY ARE STRONG': Despite being amidst the worst financial crisis in the United States since the Great Depression -- maybe ever -- Secretary of State Condoleezza Rice said in an interview with CNBC this week that "the fundamentals of the U.S. economy are strong." Rice comments were similar to ones made by Sen. John McCain (R-AZ) last week when he said -- just as financial crisis became apparent -- that the "fundamentals of our economy are strong." McCain walked back from his statement, saying he was referring to American workers and Rice echoed that sentiment: "Everyone understands our great ability to innovate, the productivity of our workers, the ability of the country to move quickly. And so I believe the United States' standing has not been really affected." Even the White House has refused to make this claim in recent weeks. Press Secretary Dana Perino would only conclude, "We have a mixed picture."

The Congressional Budget Office director yesterday told Congress that the proposed bailout may worsen the current financial crisis. "Ironically, the intervention could even trigger additional failures of large institutions, because some institutions may be carrying troubled assets on their books at inflated values," Peter Orszag said. "Establishing clearer prices might reveal those institutions to be insolvent."

Lobbyists for the financial industry are engaged in a "feeding frenzy." Wall Street firms, commercial banks, and insurers are lobbying on an array of issues -- "from beating back proposals to make it easier to reduce mortgage debts in bankruptcy courts to fighting, unsuccessfully so far, to retain control over executive pay."

In a questionnaire submitted to the Senate Armed Services Committee, Condoleezza Rice admitted to discussing torture techniques in the White House in the spring of 2002. In meetings led by Rice and attended by Donald Rumsfeld, John Ashcroft, and other administration officials, officials authorized waterboarding and other coercive methods to interrogate al Qaeda detainee Abu Zubaydah. ABC News first reported the meetings in April.

A prosecutor for the Military Commissions at Guantanamo Bay, Lt. Col. Darrel Vandeveld, resigned this week, alleging that the government had denied a defendant access to "potentially exculpatory evidence." Army Col. Lawrence J. Morris, lead prosecutor for the tribunals, denied the reports and said that Vandeveld resigned for “personal reasons."

"Dr. Elias A. Zerhouni, director of the National Institutes of Health, who shook up the agency when he barred scientists from consulting for drugmakers," announced that he would leave at the end of October "so there is a clear sense that whoever wins the election, N.I.H. has to be a clear priority in their mind."

And finally: Yesterday, actor Michael Douglas held a news conference "urging the United States and eight other holdout nations to ratify a nuclear test ban treaty." However, reporters began asking him questions about the current financial crisis, because of his role as fictional banker Gordon Gekko in the 1987 film "Wall Street." One reporter asked Douglas, "Are you saying Gordon that greed is not good?" "I'm not saying that," Douglas replied. "And my name is not Gordon. He's a character I played 20 years ago."

Yesterday, the House passed Alternative Minimum Tax Relief, "to provide critical tax relief to 25 million middle-class families by protecting them from the Alternative Minimum Tax."

THINK PROGRESS: Fox News's Bill Hemmer: "It's fascinating how little we know about" how the Internet works.

WONK ROOM: Why Newt Gingrich is wrong about mark-to-market accounting.

YGLESIAS: The political economy of bailout nation.

HUFFINGTON POST: Today is the last day to submit comments to the Health & Human Services Department about their rule change that could end up denying patients critical services and information.

OHIO: "The state agency in Ohio that administers food stamps and health care for low-income families is cutting nearly $80 million from its budget."

ENERGY: Post-Hurricane Ike gas crisis may take weeks to end.

WOMEN'S RIGHTS: Attorneys general from 13 states protest a proposed Bush administration rule giving stronger job protections to health care workers who refuse to participate in abortions.

"[T]he fundamentals of the U.S. economy are strong."
-- Secretary of State Condoleezza Rice, 9/23/08

VERSUS

"[The credit crisis] threaten[s] American families' financial well-being, the viability of businesses both small and large, and the very health of our economy."
-- Treasury Secretary Henry Paulson, 9/23/08

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McCain Bails Out Of The Debate

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