Thomas Friedman: Economy to be Number One Election Issue

Although it’s probably obvious to readers of this blog that the economy is going to become a bigger and bigger issue as the election approaches, campaign strategies often are not as responsive to changes on the ground as one might imagine. Perhaps the most stunning example was a comment in the Financial Times on Friday by Grover Norquist, “How America’s right will be roused into action“:

The election is Tuesday, November 4, still four months away, and the case for a Republican resurgence is strong, if unseen by the establishment media….

Taxpayers want lower taxes. Businesses want low taxes and less regulation. Investors and owners of 401ks want low taxes on their retirement portfolios. Second Amendment voters – the 4m members of the National Rifle Association and 20m hunters – want their guns left alone. Home-schoolers wish to be left alone to educate their children. Social conservatives – the so-called religious right – are a parents’ rights movement that wishes to be left alone with their faith and families. They organised in the late 1970s when the government threatened Christian radio stations and Christian schools with new regulations.

Norquist thus thinks that the formula that worked in 1994 will succeed today. But somehow, I don’t think Republicans plan to shrink government, since that means shrinking the military, nor do I have any faith that they’d leave us alone by dismantling the post 9/11 security and surveillance apparatus. Indeed, the Christian right is abandoning the GOP precisely because they’ve learned they don’t walk their talk. While Norquist may not represent the Republican mainstream, his article struck me as wildly out of touch.

Thomas Friedman’s reading in his New York Times op-ed, “Anxious in America,” seems much closer to the mark. But it is still an open question as to whether and how the candidates will respond to deteriorating economic conditions.

From the New York Times;

Just a few months ago, the consensus view was that Barack Obama would need to choose a hard-core national-security type as his vice presidential running mate to compensate for his lack of foreign policy experience and that John McCain would need a running mate who was young and sprightly to compensate for his age. Come August, though, I predict both men will be looking for a financial wizard as their running mates…

I do not believe nation-building in Iraq is going to be the issue come November — whether things get better there or worse. If they get better, we’ll ignore Iraq more; if they get worse, the next president will be under pressure to get out quicker. I think nation-building in America is going to be the issue.

It’s the state of America now that is the most gripping source of anxiety for Americans, not Al Qaeda or Iraq. Anyone who thinks they are going to win this election playing the Iraq or the terrorism card — one way or another — is, in my view, seriously deluded. Things have changed.

Up to now, the economic crisis we’ve been in has been largely a credit crisis in the capital markets, while consumer spending has kept reasonably steady, as have manufacturing and exports. But with banks still reluctant to lend even to healthy businesses, fuel and food prices soaring and home prices declining, this is starting to affect consumers, shrinking their wallets and crimping spending. Unemployment is already creeping up and manufacturing creeping down.

The straws in the wind are hard to ignore: If you visit any car dealership in America today you will see row after row of unsold S.U.V.’s. And if you own a gas guzzler already, good luck. On Thursday, The Palm Beach Post ran an article on your S.U.V. options: “Continue to spend upward of $100 for a fill-up. Sell or trade in the vehicle for a fraction of the original cost. Or hold out and park the truck in the driveway for occasional use in hopes the market will turn around.” Just be glad you don’t own a bus. Montgomery County, Md., where I live, just announced that more children were going to have to walk to school next year to save money on bus fuel.

On top of it all, our bank crisis is not over. Two weeks ago, Goldman Sachs analysts said that U.S. banks may need another $65 billion to cover more write-downs of bad mortgage-related instruments and potential new losses if consumer loans start to buckle. Since President Bush came to office, our national savings have gone from 6 percent of gross domestic product to 1 percent, and consumer debt has climbed from $8 trillion to $14 trillion.

My fellow Americans: We are a country in debt and in decline — not terminal, not irreversible, but in decline. Our political system seems incapable of producing long-range answers to big problems or big opportunities. We are the ones who need a better-functioning democracy — more than the Iraqis and Afghans. We are the ones in need of nation-building. It is our political system that is not working.

I continue to be appalled at the gap between what is clearly going to be the next great global industry — renewable energy and clean power — and the inability of Congress and the administration to put in place the bold policies we need to ensure that America leads that industry.

“America and its political leaders, after two decades of failing to come together to solve big problems, seem to have lost faith in their ability to do so,” Wall Street Journal columnist Gerald Seib noted last week. “A political system that expects failure doesn’t try very hard to produce anything else.”

We used to try harder and do better. After Sputnik, we came together as a nation and responded with a technology, infrastructure and education surge, notes Robert Hormats, vice chairman of Goldman Sachs International. After the 1973 oil crisis, we came together and made dramatic improvements in energy efficiency. After Social Security became imperiled in the early 1980s, we came together and fixed it for that moment. “But today,” added Hormats, “the political system seems incapable of producing a critical mass to support any kind of serious long-term reform.”

If the old saying — that “as General Motors goes, so goes America” — is true, then folks, we’re in a lot of trouble. General Motors’s stock-market value now stands at just $6.47 billion, compared with Toyota’s $162.6 billion. On top of it, G.M. shares sank to a 34-year low last week.

That’s us. We’re at a 34-year low. And digging out of this hole is what the next election has to be about and is going to be about — even if it is interrupted by a terrorist attack or an outbreak of war or peace in Iraq. We need nation-building at home, and we cannot wait another year to get started. Vote for the candidate who you think will do that best. Nothing else matters.

Personally, I find the “nation-building at home” slogan to be a bit much, but Friedman is correct to highlight how disfunctional our political system has become.

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  1. Anonymous

    On top of it, G.M. shares sank to a 34-year low last week.

    Actually they sank to a 53-year low.

  2. Anonymous

    Hmm, I dunno.

    I take Thomas Friedman mostly as a contrarian indicator. Everything he says is either hopelessly platitudinous or utterly, terminally wrong. His analysis oscillate between a complete zero and an outright negative. He’s often so wrong it redefines wrongness and gives the category a headache.

    Yes, this country is badly f***ed-up, thanks in no small parts to the pseudo-elite Friedman is part of, the inbred caste that has encumbered power and politics for the past 30 years. But what of this is news?

    I’ll file that one in the trivial category.

  3. Anonymous

    Friedman is a horrid American. He justified the Iraq war as one of his flat-earth trends towards inevitable freedom in the world, one of the most Orwellian things I’ve heard any journalist state, and clearly proven to be a complete fallacy. The Iraq war has brought less freedom across the globe, as the US threw away its moral authority, and the rest of the world’s elites followed.

    Friedman is an idiot, and he wants the economy to be the number one issue, so that people wont notice we’re still getting our a** handed to us in Iraq which is also still bankrupting us, though they’re going to attack Iran for a host of reasons, including GW’s legacy delusions, and the tradition of starting a war in an economic down cycle. Regardless, Friedman, your place in history as a US Goebbels is assured, pretty ironic for a ‘reporter’ of jewish descent.

  4. Jojo

    Ah, taxes… I’ve found it consistently funny to watch Maria Batelomo and Joe Kirnan on CNBC over the past few months rail on trying to support their own interests and their Wall Street masters by actively insinuating against Obama’s proposed SMALL increase in the capital gains tax whenever the opportunity presents itself. They don’t care about our soldiers dying in Iraq and Afghanistan, about our huge debt or any of the other myriad problems we face. NO, they just want to pay less taxes.

    Too many of the wealthy in this country don’t want to contribute to a solution, they just want to continue to take as much as they can get. But the wealthy should be careful – If they continue to scalp the little guy, their gated enclaves could wind up being surrounded and burned to the ground by the commoner’s and peasants they bled dry. The People are going to vote the economy, an economy that was solidly mismanaged by the Republicans over the 1st 6 years of King George’s reign.

    I think the Republican’s are toast. McCain was an awful choice on their part. But regardless of who gets elected as president, I believe that the Democrats will fully control both the House and the Senate after this election. Then we’ll see if they can fix anything with King George gone.

  5. Anonymous

    Ditto re: TF being an idiot. He is a blathering travesty whose cheer leading about the Iraq war gave comfort to the treasonous, criminal Cheney/Bush crowd. At least Grover Norquist is transparently ideological. It’s a shame that the NY Times continues to sully its brand by giving TF a platform. Like the Washington Post, these two storied papers have completely lost touch with the real world — choosing instead to link their brands to the 25% who are dead enders, plutocrats interested only in careers, tax savings and plunder, and/or celebrity media hounds hoping to get the next mafia send off to heaven a la Russert.

  6. Anonymous

    “I predict both men will be looking for a financial wizard as their running mates…”

    Oh, boy. Now you’re REALLY scarin’ me. I mean, we’ve already GOT ‘financial wizards’ in charge. Such as GS-alumnus Hank Paulson at Treasury. Princeton wizard Ben Bernanke at the Fed. And don’t forget the previous ‘wizard’ in the pointed cap, who actually called himself the Maestro. A few more wizards like these, and we’ll really be in the soup.

    Probably not one ‘financial wizard’ in a thousand will deliver the plain truth: the U.S. can no longer afford its far-flung military empire. Demobilize from Germany, Japan, Korea, Iraq, Afghanistan, et al, and the U.S. would STILL have a negative net worth and a structural budget problem.

    But the candidates, interventionists all, will stick to the tried-and-true Thomas Friedman line: we can have it all — prosperity at home, power abroad. And that’s true, as long as the Ponzi debt machine keeps cranking out T-bonds and paper currency from thin air. But woe to us, the day CONfidence cracks. Indeed, it may have cracked already.

  7. Escariot

    I agree, just the thought of how Tommy would define the qualities of a “financial wizard” makes me shudder. The wizards of wall street are a pretty ingenious group to be sure, but I don’t know that handing them outright power AGAIN is the solution to the nation’s problem’s.

    Amen on the negative outlook on the state of our democracy. This is indeed a fundamental change I see already in action. The prolonged primary campaign in the Democratic Party recently concluded was an indication of an energized voter pool. And it is going to come down to the independents, who remain illusive and are probably not easily lumped into one box save “disgusted”.

    We are in terrible shape, and the need for Americans to buckle down and address our inherent issues (rampant consumption, lack of savings, gutting of local economies) are already foreground.

    The candidate that is able to challenge us to change while remaining a beacon of hope and project confidence will do well. Of course, for some that will translate into the McCain brand of known quantity and the “daddy party” but to others it may just be the idealistic future an Obama presidency seems to herald.

    I wouldn’t want the job for anything and whoever gets it is going to be working a LOT of late nights. Who’s answering the phone at 3am indeed.

  8. a

    ” After the 1973 oil crisis, we came together and made dramatic improvements in energy efficiency.”

    Sure Americans improved things at the margin, but they didn’t implement anything like the single biggest solution to their problem: a huge tax on energy. Instead they went off into the never-never land of cheap energy. If Americans can’t even understand how they arrived at their problems, how on earth are they going to be able to solve them?

  9. Marcus Aurelius

    Norquist’s stated goal is to destroy the US Government (that’s me and you, BTW). Too bad we don’t take “quaint” concepts like treason seriously, anymore.

    I see a rope and a trap door in his future.

  10. DownSouth

    “More often, public opinion makes itself felt indirectly through watershed elections. The election of 1980 is a good example. The country turned to the right-wing populist Ronald Reagan out of disillusionment with the policies of liberalism that had characterized both political parties in earlier years (including the Nixon and Ford administrations). The public forced the change in the country’s direction.”–(Daniel Yankelovich, Coming to Public Judgment: Making Democracy Work in a Complex World)

    This is shaping up to be one of those “watershed” elections. After almost 30 years of Ronnie/Maggie neo-liberalism, the public senses that something has gone off the track, and is poised to make a change.

    The problem is, no leadership is forthcoming from either party.

    This gives credence to a much more pessimistic outlook than that of Yankelovich, proffered by Jacques Barzun in his book From Dawn to Decadence: 1500 to the Present. He dubs our modern age “demotic life and times.” He says our government is not democratic. It is not representative. It is, instead, “demotic,” or “of the people,” he argues. When future historians look back upon the era, here’s how he believes they will view it: “It was the eutopian imagination at work making corrective rules as the path to the good life. The welfare ideal did not merely see to it that the poor should be able to survive, but that everybody should be safe and at ease in a hundred ways.”

    Barzun concludes that: “The point at which good intentions exceeded the power to fulfill them marked for the culture the onset of decadence.”

  11. DownSouth

    OH, by the way. I agree with all commenters back up the stream that say that Friedman is a buffoon.

    The guy is a real prodigy when it comes to looking in the rear-view mirror. I suppose the NY Times had to contract William Kristol to make him look good. Kristol can’t even see clearly when looking in the rear-view mirror.

  12. VoiceFromTheWilderness

    And here I thought I was going to have to blast TF.

    This appears to be an enclave of sanity – don’t worry I won’t tell.

  13. Zippy in Annapolis

    The two most powerful entities in the world are:

    1) the credit rating agencies/ monolines that have Zero oversight and mis-allocate capital around the world apparently as they very well please;

    and 2) the Fed and other central banks that appear to be accountable to no one but the investment banks.

    The investment banks created $1.3+ trillion in AAA toxic waste aided and abetted by incompetent or corrupt, take your pick, credit rating agencies/ monolines and sold this AAA toxic waste to the world.

    They are now crying because they got stuck with their excess inventory. Now the Fed, BoE and European Bank are going to be “told” by the investment banks to eat the toxic waste and permanently swap the waste for money good Treasuries or the equivalent thereby creating money and inflation. If not “systemic failure” tied to CDS, derivative exposure wooo wooo scary!

    Who is President is a complete sidebar, and so to it appears the congress and the committee’s who are supposed to provide oversight of the CRA’s Fed and the SEC/CFTC.

    The fox is not only in the hen house it has turned the hen house into a chicken wing bordello.

  14. Anonymous

    the thing that scares me is that americans are begging for action, but they don’t really know what they want.

    and even if we did, i don’t think we know how to get there. the public’s support of ethanol to ween us off of imported oil is a prime example of this: we somehow made gasoline AND food more expensive.

    we say we want change, but most people really want things to go back the good ole greenspan days, (cheap energy, low interest rates, overconsumption, flying asset prices, etc.) which is what caused the problem in the first place.

    we need *intelligent* change, but i don’t know if our populace has the ability to discern a bad idea from a good one any longer.

    it’s really scary that we make our decisions off of soundbites and marketing pitches.

  15. Unsympathetic

    ” After the 1973 oil crisis, we came together and made dramatic improvements in energy efficiency. “

    Really? Who, exactly, is this “we” ? This kind of gratuitous lie masquerading as assumed fact is the entirety of what the US has become. The US didn’t come together. The US didn’t make ANY improvement in energy efficiency.

    Rather, the US voted out Carter because Carter was brave enough to state that the US should view energy independence as another war.

    Reagan’s answer was to JAWBONE, wait for oil to come down in price, and take credit for doing nothing.

    Republicans had their chance. They failed miserably. Now they need to climb back in their hole for another 40 years before we need them to privatize profits and socialize losses once more.

  16. donna

    Damn shame Friedman didn’t think of this before inventing the Friedman Unit…

    He shoulda hung out more with Krugman.

  17. Anonymous

    I am no TF fan, but this thread is over the top. Tommie is right about this, entirely right.

  18. John

    The election is going to be MUCH closer than you think. Don’t forget, your majority ethnic groups is still paranoid – and almost psychotic – about what “those people” are doing, and how “those liberals” are always helping “those people” at “OUR expense”. Sorry, the majority America ethnic group would much rather cut-off-its-nose-to-spite-its-face – and vote Republican – on the slim HOPE that the Republicans will help them “get even” with “those people”. Isn’t THAT what the Republicans have been running on for the last 30+ years: “gittin those people off-a welfer”? “Gotta deregulate the hard workin bidness men, and stop them welfer-queens from gittin the hard-workin tax payer’s money. So… they can… keepit for themselves, see?!”

    I can see the bumper stickers now:

    “Help Jesus get even: Vote Republican”

    You guys are toast.

  19. Anonymous

    The economy is more resilient than Summers will allow. The best outcome would be political paralysis resulting in enough economic desperation to decimate the current regime in legislative as well as executive offices and permit a period of pragmatic experimentation. It probably won’t take a full-fledged depression like last time, but societal homeostasis requires a fair amount of destitution at this point.

  20. Anonymous

    joebhed here –

    who’s tommie?

    and, I hate to admit how much fun we THOMAS FRIEDMAN haters are having out here today.

    i think he’s looking for one of those VP offers.

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