Bryan Caplan  

How McCain Could Have Won

Insurance or Mass Delusion?... Voting...
Yesterday my RA, Brian Blase, made the smartest point about political strategy that I've heard all year.  In fact, if Blase were McCain's right-hand man instead of mine, the Republican candidate's probability of victory would be about 40% instead of less than 10%

Blase's magic bullet is simple: McCain should have opposed the bailout.  There was a lot of popular resentment of it; it would have put a mile's distance between McCain and Bush's failures; it would have given McCain a great populist issue to ride; and it would have put Obama in the awkward position of defending Bush to the country.  Even though the public wanted to "do something," McCain could easily have screamed "Yea, but not this!" from the rooftops - and people would have listened.

The main counter-argument: If McCain had opposed the bailout, it might not have passed - making it much harder to campaign against it.  Indeed, Obama might have seen the trap and opposed the bailout, too, making it even harder for McCain to make the bailout his central issue.  I wouldn't dismiss these possibilities.  But even if they came to pass, an anti-bailout McCain would have had better chances than he does today.

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COMMENTS (19 to date)
shayne writes:

Well, I'm glad you and Blase got that sorted out.
Now can we get back to economics?

(the poli-sci department is down the hall)

Brian Shelley writes:

I made this exact point back on Oct. 23, here

Joshua Herring writes:

Completely agree. And of course if Obama had "seen the trap" and opposed the bailout too, we'd all have been better off no matter which of them won.

D L writes:

What if McCain opposed the bailout, and Obama didn't? What would stop him from taking sunspots and throwing them to the plebes for their enjoyment (eg "The Dow fell 800 points because McCain doesn't care about the working backbone of the country, he doesn't care about tax cuts for those making less than X, and he doesn't want to do anything about it. He doesn't want to see middle class children eat....[more rhetoric], I say we take a little bit and [get this country started again, [or some such]]").

Also, if the first incarnation were to have failed after a McCain opposition, what would stop Obama from supporting a tweaked version with few substantial changes (maybe even claiming it was better by saying it has less pork, or adding in more spending that voters like)?

Ex post, I'm pretty sure that Brian (and Bryan) are right, but have to wonder whether hindsight is making this seem clearer than it is.

Shayne - sorry to hear you're not up for reading applied game theory, and am curious that you don't think fiscal policy touches on econ.

tim writes:

McCain also could have stopped the pandering to the wingnut base and acted more like he did in 2000. I would of voted for him then but I couldn't this morning.

Ed writes:

I couldn't agree more. His poll numbers sank right around that time. So instead of running against Washington, McCain ran with Washington. I know Obama voted for the same bail out, but I guess the fact that he's just new to the scene makes supporters overlook this.

As a side note, the press in general has not explored what effect the bail out has had on the average person's opinion of the federal government. This is probably because most of the members of the press were for the bail out and didn't wish to explore sentiment against the bail out.

Tom DeMeo writes:

The problem with this strategy is that it would have placed McCain at the point of the debate. He would need to propose a politically and economically viable alternative strategy, and would need to be capable of defending that strategy under enormous pressure. He doesn't have those skills.

Gary Rogers writes:

I can see two reasons why McCain could not have taken that strategy. One makes him a better candidate and the other a worse candidate.

The first reason is that John McCain believes we needed the bailout. I believe John McCain, with all of his other faults, is principled and would rather lose an election than take a stance on something he does not believe in. Yes, this is paraphrased from his campaign rhetoric, but in the end it makes him a better candidate.

The second reason is that John McCain believes we needed the bailout. The exact same reason with a different perspective. The fact that he thinks the government is the answer to too many things makes John McCain an unacceptable candidate. Maybe not as unacceptable as Barack Obama, but unacceptable nonetheless.

Nathan Smith writes:

I think Gary Rogers is right about why McCain didn't take the chance to oppose the bailout. And yes, it blew his chances for the White House. It would have been his big opportunity to distance himself from Bush, while doubling down on the populism that the Palin pick represented. I think he thought about it, and then blinked. And the country got disillusioned with him right then.

Cowcup writes:

Instead, he played the Suspend-Campaign card.

He's more personal than idealogical. I find this sentence best summed up his politics.

eccdogg writes:

Yeah, I thought the same thing at the time.

He also could have used it to support his limited government cred.

As it was the whole thing made him look silly.

8 writes:

McCain didn't have to propose anything. All he needed to say was, the people who profited from this mess don't deserve to be bailed out, and propose vague plans for boosting the economy. Here's an easy one, "We ought to be spending $100 billion on alternative energy instead of putting it in the pockets of Wall Street bankers!"

Obama wouldn't defend Wall Street. If homeowners came up, McCain only needed one stat: the number of homes owned by speculators.

I made precisely the same argument at the time:

McCain lost my vote because of this singular issue. He spoke in his debate about opposing pork then voted for this bill. He really messed up if he was a Maverick he should have done what Maverick's do and gone against this wall of waste, pork, and corporate welfare. I didn't vote for Obama either for the same reason.

Barkley Rosser writes:

Tom DeMeo has this right, only it is worse. Mccain would have been asked what he would do instead. At the time of the original negotation, coming a few days after McCain declared that the "economic fundamentals are sound," the main opponents of the bailout among the House Republicans were pushing a "let them (the banks) buy insurance." Of course the fact that there was pressure for a bailout was due to the main insurer of the credit-default swap market, AIG, was threatenign to go bankrupt, and this caused the total financial panic that happened on Sept. 17, resulting in negative interest rates on US Treasuries briefly. There was nobody to do any insuring.

As it is, McCain has proposed some things, such as buying up bad mortgages, but this has not gotten much traction on that one. After his statements claiming economic fundamentals were sound while the markets were wildly crashing, McCain's crediblity on economic matters was hopelessly in the mud.

John Thacker writes:

However, from early returns it appears that House and Senate candidates who opposed the bailout aren't doing better than those who supported it.

After his statements claiming economic fundamentals were sound while the markets were wildly crashing, McCain's crediblity on economic matters was hopelessly in the mud.

I think that the case for rejecting the bailout rested partially on the idea that economic fundamentals were sound despite the markets (and some Wall Street firms) wildly crashing. I'm not completely sure that I understand the reasoning behind mocking stating that underlying economic fundamentals was sound while opposing the bailout. Such mockery is part of what made the bailout much more likely. Public opinion turned in favor of the bailout after it was rejected initially.

John Thacker writes:

For example, opposing the bailout certainly didn't help Liddy Dole.

Tim writes:

[Comment removed for supplying false email address. Email the to request restoring this comment. A valid email address is required to post comments on EconLog.--Econlib Ed.]

liberty writes:

The polls support your theory:

$700 Billion to Failing Financial Companies

                                    Obama     McCain
Strongly Support (9%)         62%     36%
Somewhat Support (30%)     58%     41%
Somewhat Oppose (27%)     53%     45%
Strongly Oppose (29%)         46%     50%

Although the somewhat-oppose group went for Obama by a margin, the more that people opposed the bailout the more that they went for McCain. McCain could have capitalized on this and actually taken a stand against it. Then perhaps some people on the fence would have had a reason to go over to McCain.

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