The Paulson plan: He gets $700 billion to dispense, you get the tab.

This week in the Schultz Report, we discuss the only issue that matters at the moment–the financial meltdown on Wall Street and the Paulson plan that’s currently being bum-rushed through Congress, which would give the US Treasury secretary absolutely unprecedented power to buy up bad debt with public dollars, and without any public oversight or future public benefit in the form of equity in the companies we’re bailing out.

David Schultz

“There’s really no precedent in American history for anything like this,” says Schultz. “You don’t say that we’re going to pass the largest bailout in American history, one of the largest financial commitments we’ve ever made, and say you’re going to rush it through in five days without any serious examination. We have too many stories in American history where huge bills have been pushed through and later we find out they’re full of problems for down the line.

“We’re seeing stories emerge already about a lot of Wall Street types, on top of the already huge bonanza here, who are lobbying heavily to get other debt of theirs that is not related to the subprime crisis thrown in here. This is turning into one of the great pieces of pork barrel legislation of all time. It’s going to help out the people who caused the problem, and do absolutely nothing to stem the problems of foreclosure and falling equity for homeowners.

“Compare this bailout to what Sweden did when its banks were in crisis back in the 1980s. They too did a bailout, to the tune of 3-4 percent of their GDP. Ours is about 5 percent. But one of the things Sweden did was to demand equity from the banks. It got assets in return. It also got shares in those banks that it was eventually able to sell off to recoup its investment. We’re getting nothing. The taxpayers are only getting the bill, along with no guarantees and no equity. And no restructuring of the banks.”

Regarding the “muted” response of the presidential campaigns to this epochal turn of events, Schultz notes, “One sort of expects McCain to be dumbfounded about what to do here. The economy is not his strong suit, and he’s admitted that. More importantly, the problems of this economy are in part a result of a massive deregulatory movement that’s been going on since the start of the Reagan era. John McCain has been there voting for all this deregulation. He’s stuck in the sense that he’s got a voting record that’s helped produce this kind of problem. And his response in the last few days–saying, for example, he’d have fired SEC chairman [Christopher] Cox for not acting fast enough–has been very tepid.

“Barack Obama is a little more surprising. He wasn’t there; he wasn’t voting for this stuff for the past 20 years. The economy was supposed to be one of his strengths. And on his webpage, he has some fairly harsh criticisms of the past 20 years. But he also isn’t making any serious proposals in terms of where to go in the future. He says he supports the bailout but would like to see some caps on salaries for executives. That’s kind of nice, but it doesn’t solve anything down the line. He has a golden opportunity to make some serious criticisms of the Republicans and McCain, and to open it up and make some arguments about what to do.

“McCain doesn’t have much of an opportunity here. But Obama does. And it’s surprising that the two candidates have both been so muted. On first blush, this ought to be an issue [the Democrats] are jumping on. But when you step back a little more, you need to understand where the Democrats are getting their money from. Barack Obama, for example, is far outraising John McCain in Wall Street contributions. To a large extent, Wall Street’s driving part of his campaign. I suspect if we were to go through and look at the political contributions coming to the Democrats–I’m speculating on this, but I think you’d see a lot more money coming in from banks and Wall Street. I think they’re being pressured by their constituencies to go in this direction also.

“I also think at this point, Congress–and it’s happened several times under the Bush administration–gets buffaloed. They just don’t exert the backbone, and instead feel like they’ve got to give in to the Bush administration and to the political urgency [of the moment] instead of taking a breath and saying, no, there’s a process here of vetting legislation and looking at counter-proposals. The best thing that could happen in the next few days is for the whole process to slow down, so that you can see more criticisms coming out from economists, both mainstream and non-mainstream, and more introspection about the proposals. That might build up political capital that the Democrats need to be able to criticize.

“But at this point, because they’ve been totally reactive in dealing with this crisis, and because of the political contributions, I think they’re just not in a position to act at this point. They’ve been caught by surprise in not having their own proposals to deal with this problem.”

Listen: David Schultz on the Paulson and Dodd bailout plans and the presidential candidates’ response to the Wall Street crisis (14:22)

“Think about the tasks he had going into this speech. There was the criticism that he’s just another pretty face and there’s no substance there. I think he had to do three things: He had to bond with the American public–tell a story about his life and who he is that connects with middle class Americans. People want to believe that the president understands them. Second, he had to make the case against McCain and draw out the linkages to Bush. And third, he had to lay out his vision and add some details to what he means by change.

“I think clearly on the last two, he did an exceptionally good job. When he started defining what change meant, it was the first time he’s laid them out in detail. The only area I’m wondering if he could have done a better job of is bonding. I hate to use the old Bill Clinton ‘feel your pain’ line, I think the connection he made with the American public could have been better. I think that’s still a challenge at this point.”

The convention, says Schultz, “started off slow. But by the end, the theme of unity had come across, they projected the image of change, and they made themselves out to be the party of the working class. What will be interesting to see is, there was a 6-point [convention] bump in the polls before Obama’s speech. I want to see what the numbers are after. The second thing is, how many people actually viewed the speech? Because Wednesday night, the night of the Bill Clinton and [Biden] speeches, was actually the weakest [in viewership] of the first three nights. We all presume that more people tuned in last night, but how many people did watch?”

Listen: David Schultz on the Obama speech and the Dems’ good week in Denver (11:07)

The view on the floor last night in Denver (Jason Kosena/Colorado Independent)

In this edition of the Schultz Report audiocast–and we’ll have another tomorrow, after Barack Obama’s Democratic convention-closing speech in Denver tonight–we examine developments at this week’s DNC. Hamline University political science prof and Minnesota politics analyst David Schultz gives the Democrats mixed grades for their handling of the party’s quadrennial infomercial. “The convention in some sense is just a media event anyway,” says Schultz, “a big long advertising campaign, and the theme they’ve been trying to stress is unity uber alles — that somehow, despite all the disagreements, there is actually a marriage between Clinton and Obama.

“On a superficial level, they’ve achieved that. But once you go beneath the rhetoric, what they haven’t said is much more interesting. Hillary Clinton’s speech on Tuesday said she would support Obama and that it was important to defeat McCain. But at no point did she ever recant the criticisms she had made earlier in the year about foreign policy. Bill Clinton’s speech last night, while he did say that Obama is ready, there was still the sense that it was kind of a pro forma endorsement. I listened to Bill Clinton and thought we could have filled anyone’s name into that speech. It was very generic.

“As I listened to both Clintons speak, there was a sense that the convention was still about them. There’s still this backwards tug, and Obama hasn’t yet made it about the future. Perhaps the speech tonight will do that. But for now I still feel this sense of dissension, and that Obama hasn’t yet taken control of the party.

“What the Democrats need to do at this point is remember something that the first George Bush was criticized for when he dismissed the vision thing as just ‘the vision thing.’ Vision matters, but especially this year, specifics matter. No one likes where the Republicans have taken this country for the last eight years. Everybody concedes that. I think what the American public is listening for is, what are the Democrats going to do? Do they have a specific blueprint? That is the challenge for Barack Obama tonight. He has to articulate not just the vision, but to get below that vision and say, here’s what I’m going to introduce, here’s what I’d like to work for. The Democrats need that to succeed. What’s fascinating is seeing how Obama’s greatest asset–being an orator, an inspiring speaker–is being turned against him. He needs to address issues and get specific now.”

Also in this edition: Joe Biden’s speech; is Dean Barkley hurting Coleman and helping Franken?

Listen: David Schultz on the Democratic convention and the surging Franken campaign (13:03)

The campaign has unmistakably shifted gears in the past month since bringing in Karl Rove protege Steve Schmidt, Schultz notes: "Given all the gaffes that he’s made in the last few weeks — not getting borders straight, misspeaking about countries — he’s increasingly using political commercials and highly scripted town hall meetings. The Republicans are significantly protecting the candidate and protecting his image. And it seems to be having positive effects for McCain at the expense of Obama.

"McCain’s older [than in past campaigns], clearly. He’s old, and he’s looking old. He’s been campaigning hard for a while, and probably anyone would be fatigued by running for president. But increasingly I think we’re going to see the whisper campaign about his age and whether he’s up for the job start to get elevated into something beyond whispers. It’s something people are going to start to raise. Clearly it’s happening at the blog level now, and at some point [it will go] further.

"The two areas in which the media have been unwilling to question McCain on are his experience in foreign affairs and the age issue. A few weeks ago when Wesley Clark made the comment that being a prisoner of war for several years doesn’t qualify you to be president of the United States, that was an accurate statement from, what, a four- or five-start general? The media went ballistic on that one, as did a lot of bloggers. But that question is starting to come back now, too, because McCain has made several statements about international affairs, and no timetables, and all of this has been eroded by events in the world. And the media started paying more attention to his gaffes.

[The campaign is] retreating so he doesn’t keep making those mistakes. But the age issue becomes a factor at this point, because he’s not a good speaker publicly to start with, and he seems to be stammering a little bit more. I’ve heard a couple of people use the phrase, doesn’t McCain have kind of a "Reagan-esque" look about him, referring to the late Ronald Reagan and to Alzheimer’s. It’s a fascinating question as to when this [issue] cracks through, and I suspect that if McCain continues to hammer away at Obama, then if Obama doesn’t raise the question, his bloggers and his operatives are going to start to respond with commercials that will raise something along the lines of, ‘When the crisis occurs at 3 in the morning, is John McCain even going to be able to get up for it?’

"I think those are going to be real concerns. Polling data is suggesting at this point that while 10-20 percent of the population might not vote for somebody because of their race, there is also 10-15 percent of the population that says age is an issue, and stamina is an issue."

Listen: David Schultz discusses the age issue and McCain’s advertising appeals to the Christian right (17:10)

"There’s no question he’s been in a downturn, probably for several months," says Schultz.. "It pre-dates the recent attacks. In some sense, Obama probably peaked around three months ago when he won 13 primaries or caucuses in a row against Clinton. Ever since then, he’s really struggled. Clinton and Obama pretty much dueled to a tie in the remaining primaries. Obama’s never really recovered from a series of things that included the Clinton attacks and some [problems] of his own. She did a very good job — and McCain has picked up on this — in terms of alienating him from white working class voters.

"There seems to be a cultural gap, and maybe a racial gap, where polls are suggesting that the white working class just can’t identify with Obama. They don’t feel comfortable with his worldview, whatever they think that is. Some of it may be racism, but some of it may be that Obama has failed to broaden his constituency beyond people of color and young people. The second thing it could be is that a lot of what made Obama exciting is that he was new and fresh and he was running as a progressive candidate. Or at least he was thought of as a progressive candidate. He’s no longer as fresh, his stump speech, even though he’s varied it a little, is getting kind of stale. And there’s a sense in which, on a lot of issues, he’s running away from that supposed liberalism that a lot of his supporters originally tagged on him. He’s now moving and changing his positions on issues of trade, energy, Afghanistan and so forth, he now seems far more conventional.

"On a lot of scores, it looks like Obama may have peaked, and he hasn’t done a very good of refining his message in a way that expands his base. This creates a dilemma for him. If he seeks to hold on to the liberal base, does he risk losing the broader middle class? I’m not sure he does. I think that message of economic populism, of questioning free trade, of trying to cross racial lines in a lot of his speeches, is what made him a powerful candidate. As he gets more conventional and more cautious, he’s weakening as a candidate."

Schultz also begs to differ with those who think McCain’s recent spate of negative advertising will damage him more than Obama in the end. "These are actually very effective ads. McCain is taking a playbook from George Bush and the cultural conservatives in the Republican party," he notes. "This is still running against Hollywood. It’s tying Obama and Hollywood to all the cultural things that religious conservatives don’t like in America. [Thomas Frank's] great book What’s the Matter With Kansas? talks about the Republican strategy for almost the past 20 years of running against the Hollywood glitz culture — running against the Paris Hiltons and Britney Spearses of the world. McCain is doing the exact same thing in tying Obama to everything these conservatives don’t like about Hollywood and mass culture. Obama. Hollywood. Drugs. Abortion. Gays. Tolerance. Pornography.

"What’s surprising about these ads is that it’s McCain doing them and not his surrogates. Usually it’s third-party groups doing this stuff. But otherwise it’s not a surprise that McCain is using this strategy. It’s been an effective strategy to alienate Democrats from the heartland and the working class.

"The second thing that’s surprising about these ads — they’re like the Swift Boat [replay] of 2008. Back in 2004, not only did the Swift Boat ads attack Kerry. Kerry also did an ineffective job of responding to them. He let them pass over his shoulder. Obama’s running into the same danger. He’s not taking them seriously…. These are very effective attacks that have contributed substantially to the erosion in Obama’s support in the past few weeks."

Listen: David Schultz on the Obama campaign’s malaise (16:10)

"The whole rationale for Franken running was to put Coleman’s record on trial," says Schultz, "to make the argument that Coleman was simply a toady for Bush. In what appears to be a very effective commercial launched last week, Franken starts to lay out the contrast between himself and Coleman–talks about making Bush’s tax cuts permanent, talks about the differences in how they would approach high fuel prices, but then also points that Coleman has a 90 percent voting record with Bush. And the most effective thing in the commercial is [the photo] showing Bush and Coleman literally hugging each other, shoulder-to-shoulder.

"It’s the first time, I think, that Franken has really gotten his message out in terms of  saying, look, this is about Coleman. It’s about the fact he’s been an almost certain vote for Bush–supported him on the war, supported him on taxes, everything. It’s the first time in the campaign I’ve seen him go on the offensive, and that’s a good sign for the Franken campaign.

"The other sign that’s pretty good is on the fundraising front. Coleman has raised about $15 million, but Franken has raised about $12 million. It’s already the most expensive Senate race in Minnesota history and the most expensive US Senate race in the country in 2008. But if you start to look at the money, Coleman and Franken have different patterns. Coleman has taken $3 million from PACs, and Franken is now pointing that out, saying Coleman has taken money from big oil and other special interests.

"There is one downside to Franken’s fundraising. He says in a press release–which is kind of odd–that he has 114,000 donors, and of those, 18,000 are from Minnesota. The rest are out-of-staters, a lot of Hollywood [money] and traditional big  donors. So Franken doesn’t have a deep fundraising base in Minnesota, but nonetheless he’s staying pretty much toe-to-toe with Coleman on individual donors, and he’s getting his message out with a very effective commercial."

Listen: David Schultz on the new, improved Franken campaign, the Third District House race, and Obama v. McCain on the foreign policy front (18:00)

Photos: WDCpix

"It’s interesting how Jesse Ventura decided to flirt with the media," Schultz notes, "almost in a sense trying to get even with them again. He hates the local media, and he got them all hot and bothered about running for the US Senate, and then at the last minute saying he was going to take his bat and ball and go home. On one level, it looks like another effort to stick it to the media.

"He eventually said his decision not to run was based on conversations with his family. Now I think that’s perfectly legitimate. But Jesse had been flirting with a Senate run for a few weeks. One would have thought that before launching that public flirtation, he’d talk with his family first. What was really more interesting was the particular aspects of the family issue he raised. He said he didn’t want to run because his daughter was concerned that the media would put the family through the same thing they went through when the media covered his son a few years ago when [Ventura[ was governor. If you recall, that story involved his son basically trashing the governor's mansion on Summit Avenue in St. Paul. I think they were doing some joints there. And while probably no one cares on one level if anyone wants to do a couple of joints in their own house, or trash the place, this was done on public property.

"And he was still upset about that story. And it showed me that he hasn't grown up. He hasn't learned to move beyond a story that's six years old at this point. It kind of struck me -- I hate to say it -- as immature or babyish in terms of how the media covered him."

One of the stories buried by Ventura drama on Monday was the entry of local attorney Priscilla Lord Faris, the daughter of retired federal judge Miles Lord. "The Democratic challenge speaks to the underlying unease that many Democrats have with Franken and his inability to gain a lead in the polls against Coleman," says Schultz. "Her entering the race is probably not going to dislodge Franken, but it does provide Democrats some opportunity for a protest vote. More importantly, it probably makes Coleman jump up and down, because now Franken has to worry about a challenger in the next two months instead of focusing solely on Coleman.

Regarding the Independence Party, which found itself still lacking for a Senate candidate after Ventura's announcement, Schultz says the pressure is squarely on Dean Barkley now to enter the race for reasons of party standing: "Barkley has to make a decision by 5 on Tuesday. In part, the Independence Party is under some pressure to have a candidate [in the US Senate race], because they need to have 5 percent in election returns to keep their major-party status [in Minnesota]. So Barkley may be resorting to the role he played in the 1990s, when he ran to get the party its 5 percent without major prospects of actually winning. While he’s in many ways a more serious candidate than Ventura–the brains behind The Body–he clearly doesn’t have the name recognition or the media star power that Ventura had. Where he might become a problem in this race is by drawing a few percentage points of the vote–I would argue, more from Franken at this point than Coleman."

Listen: David Schultz on the Coleman/Franken race and Barack Obama’s upcoming European trip (14:34)

Photo montage via Flickr.

"But having said all that, it really did spin out of control. Where the spin started was on outlets like Fox News, but it carried all over the place. The real story was how the GOP was spinning it as an attack on McCain. McCain himself, and the GOP, will use his military record when it’s to their advantage. What’s ironic about this is that four years ago, when we had John Kerry running for president, and he had received two or three Purple Hearts, the Republicans and the Swiftboaters had absolutely no problem in questioning his military record and his integrity, based on what he did in Vietnam. They even went to the extreme of saying he won those three Purple Hearts because he wanted to get wounded and end his deployment in Vietnam very quickly.

"There’s hypocrisy here. It’s okay to invoke McCain’s military record to his advantage, it’s okay to attack a John Kerry for his military record, but it’s not okay to attack or even question what the military record says about fitness to be president if we’re talking about John McCain."

One factor in the wildfire was Barack Obama’s speedy disavowal of Clark’s comments. Schultz views it as another signal that Obama is tacking right at an extraordinary pace. "What Obama has done so far is something no Democrat has done in a long time," Schultz says of primary-season Barack, "which is to run as a somewhat progressive candidate. And in the process, he has given a whole bunch of disaffected voters a reason to get involved. He’s drawn heavily from people of color, he’s drawn heavily from students–he’s brought in a different group of people. That seemed to amount to rejecting the Clinton/Democratic Leadership Council strategy of running from the center–running almost from the right–to outflank Republicans. What Obama has done now is he’s stolen a page from the Clintons’ campaign book in terms of triangulation–he’s out-Republicaning the Republican.

"Last week the Wall Street Journal said that Obama was running for Bush’s third term. And there’s a lot of truth in that in some sense. Many Democrats, for example, don’t like the FISA bill. But Democrats [in Congress] are capitulating on that, and so is Obama. He also capitulated on campaign finance, and two other things: He’s now backtracked on the timetable issue, and said he may not be able to bring all the troops home as soon as promised. And he’s revised himself on some other critical issues, like Bush’s faith-based initiatives. He said last week that he would expand faith-based groups’ eligibility for federal money. Yes, [there are] some important changes from Bush in terms of saying these groups couldn’t discriminate. But he’s adopting some of Bush’s strategy. He seems to be going after the religious fundamentalists, trying to splinter some of that coalition away from the Republicans, going after Republican working-class voters.

"At the same time he’s said in other places that, you know, my criticism of free trade and NAFTA–sometimes you say things that get heated during a campaign. So he’s backing away on that. On a lot of issues that were hallmarks of his campaign, he’s moving away [from prior positions] in ways that are even more rapid than normal [Democratic presidential] gravitation toward the center, and at a time when I don’t think he needs to do it. He has a chance to run viably as a left-of-center candidate, but he’s moving away rapidly from that position.

"I suspect he’s going to be able to do that and be very successful, though, because with the weakness of McCain as a candidate–a lack of support from religious conservatives, and a lot of potentially disaffected working people out there who could bolt and go back to the Democrats. I think he’s going to use a Clinton strategy, and leave the progressives saying, "Well, gosh, I have nowhere else to go. I guess I’ll have to stick with him," even as he’s chasing conservative and moderate voters at the same time. I think the real concern is, at what point do some of the progressive voices in the Democratic party and the new voters decide to stay home on election day.

"He may be morphing into Hillary Clinton at this point."

Listen: David Schultz discusses Wes Clark v. John McCain, Obama’s right turn, and the Dems’ growing advantage in voter affiliation (14:14)