The Cattle-Prod Election

LRB 5 June 2008

The Cattle-Prod Election

David Runciman on the 2008 Presidential Campaign

The American philosopher John Dewey thought that democracy should be like a giant conversation: the nation talking to itself about its hopes and fears and listening to what other people have to say. Unfortunately (or perhaps fortunately) for Dewey, he never got to hear what such a conversation might sound like, because the technology wasn’t available. Dewey was born in 1859, which means the first election of his lifetime was one of the most consequential in American history, the 1860 contest that brought Abraham Lincoln to the White House. It wasn’t much of a conversation though, more an exercise in mutual incomprehension and loathing, with entirely different campaigns being fought in the North and the South (where for the most part Lincoln wasn’t even on the ballot). Dewey died in the summer of 1952, so the last election he was able to follow all the way through was the one four years earlier, when Harry Truman beat Thomas Dewey (no relation) in one of the great upsets in US presidential history. This was the election that is remembered for the photo of a triumphant Truman holding up an edition of the Chicago Daily Tribune announcing that Dewey had beaten him. If that election was a conversation, the American people had clearly been talking behind their hands.

What made American national politics traditionally so difficult to read was its sheer scale, with endless local variations and permutations cutting across the bigger picture. That started to change in the age of television, as candidates came to realise that here was a medium that allowed them to talk to the electorate as a whole. But they didn’t converse with the electorate: instead, in what came to be known as the ‘air war’, they began saturation bombing them with branded messages of universal appeal, leaving it to local organisations to get the vote out. It is only with the arrival of the internet that it has become possible to listen in detail to what a wide range of participants in the democratic process are actually saying. In 2000 and 2004, that mainly meant a more sophisticated version of the air war, as Karl Rove showed how to exploit the new information technology to produce a general message that could be endlessly tailored to fit the hopes of niche interest groups. But in 2008, politics on the internet has truly come alive – this is a campaign that is being talked out on the web.

One consequence, among others, is that it’s been relatively easy to follow the campaign close up without being there. TV interviews, campaign stops, set-piece speeches are all available to be viewed almost as soon as delivered, and though it’s impossible to know what it would be like to bathe in the warm glow of Barack Obama’s rhetoric at first-hand, the endless cut-away shots of swooning audience members make it easy to guess. Above all, there is ready access to the endless swirl of comment – instantly aired, constantly updated, limitlessly available – that surrounds all this talking by the candidates. Anyone who clicks onto the RealClearPolitics website each morning to find out what’s been going on will discover that the torrent of speculation has not let up for a minute, with twenty new articles to replace the ones from the day before, drawn from across the nation’s media, each with its own forthright point of view, each determined to be heard above the crowd. And this is only a small selection on a single website; RealClearPolitics will also link you to various of the blogs on which all the comment is itself commented on, pulled apart, reconstructed, fed back into the machine, where it can be reappropriated by the mainstream commentators further down the line.

What is so striking about all this talk poured out day after day is not simply its volume, but also the quality of much of it, and not only in the mainstream media; although many of the blogs are hideous, rambling screeds, many are not, and a selection of the best will always produce plenty of wit and passion, along with unexpected insights. No election in history can ever have generated so much nicely turned opinion. If nothing else, the existence of the internet has destroyed the claims of the mainstream media in Britain to be able to offer any insight into this election. The BBC, whose coverage of British politics looks increasingly lame, has been hopeless at Obama v. Clinton. It’s not enough any longer for a correspondent to paint some local colour about the weather or the quirks of the voting system before asking a seasoned observer from the New York Times or Washington Post to explain to a British audience what it all means. The seasoned observers no longer have even the appearance of a monopoly on wisdom. They are just shouting to be heard like everyone else.

The British media coverage has also been much too slow. The time difference doesn’t help, but too many newspapers have run stories based on polls that were out of date before they even went to press, forecasting turning points that never happened. The polling in this election has been particularly volatile, and not just in the Democratic campaign. John McCain was dead and buried in the polls last year, and Rudy Giuliani riding high, until it turned out that the opposite was the case. The other place where this campaign has seen wild swings in sentiment, and fortune, is on the internet betting sites, where large amounts of money have changed hands, particularly on Obama v. Clinton. The best British betting website covering politics – politicalbetting.com – has tracked these changes, as Clinton established herself as clear favourite last year, only to be overtaken by Obama in January, reclaim her position after Super Tuesday, lose it again, claw the ground back after Texas, Ohio and Pennsylvania, then see the market move decisively away from her after Indiana. Because real money is involved, a lot of the wishful thinking is stripped out, which is what makes politicalbetting.com such a refreshing place to be. It’s also a good place to pick up tips: the site’s founder, Mike Smithson, recommended Barack Obama for president at 50/1 more than two years ago, though it has to be said he entirely failed to pick up on the value in McCain (available at similar prices until late last year).

Now that the primary season has nearly run its course, a different pattern can be seen. Followed day by day, the race for the Democratic nomination has been the most exciting election in living memory. But viewed in retrospect, it is clear that it has been quite predictable. All the twists and turns have been a function of the somewhat random sequencing of different state primaries, which taken individually have invariably conformed to type, with Obama winning where he was always likely to win (caucus states, among college-educated and black voters, in the cities), and Clinton winning where she was likely to win (big states with secret ballots, among less well-educated whites and Hispanics, in rural areas). Even the initial drama of that week in early January – when Obama’s victory in Iowa had seemed to give him a chance of finishing Clinton off, only to be confounded by her victory in New Hampshire, which defied the expectation of the pundits and had them all speculating about what had swung it (was it her welling up in a diner? was it hastily rekindled memories of Bill? was it hints of hubris from Obama?) – turns out to have been an illusion. Iowa was Obama country (younger, smaller, caucus meetings) and New Hampshire wasn’t (older, bigger, voting machines). The salient fact about this campaign is that demography trumps everything: people have been voting in fixed patterns set by age, race, gender, income and educational level, and the winner in the different contests has been determined by the way these different groups are divided up within and between state boundaries. Anyone who knows how to read the census data (and that includes some of the smart, tech-savvy types around Obama) has had a good idea of how this was going to play from the outset. All the rest is noise.

Yet if the voting patterns have been so predictable, why have the polls been so volatile? One of the amazing things about the business of American politics is that its polling industry is so primitive. Each primary has been preceded by a few wildly varying polls, some picking up big movement for Clinton, some for Obama, each able to feed the narrative of a contest that could swing decisively at any moment. All of these polls come with warnings about their margins of error (usually +/–4 per cent), but often they have been so far outside their own margins as to make the phrase ridiculous. A day before the California primary in February, the Zogby organisation had Obama ahead by 6 per cent – he ended up losing by 9 per cent. In Ohio, the same firm put Obama ahead by 2 per cent just before the actual vote – this time he lost by 10 per cent. The sampling of national opinion is even worse. Before the Indiana primary, two national polls released at the same time claimed to track the fallout from the appearance of Obama’s former pastor Jeremiah Wright on the political stage. One, for the New York Times, had Obama up by 14 per cent, and enabled the Times to run a story saying that the candidate had been undamaged. The other, for USA Today, had Clinton up by 7 per cent, leading the paper to conclude that Obama was paying a heavy price.

The reason for the differences is not hard to find. American polling organisations tend to rely on relatively small samples (certainly judged by British standards) for their results, often somewhere between 500 and 700 likely voters, compared to the more usual 1000-2000-plus for British national polls. The recent New York Times poll that gave Obama a 12 per cent lead was based on interviews with just 283 people. For a country the size of the United States, this is the equivalent to stopping a few people at random in the street, or throwing darts at a board. Given that American political life is generally so cut-throat, you might think there was room for a polling organisation that sought a competitive advantage by using the sort of sample sizes that produce relatively accurate results. Why on earth does anyone pay for this rubbish?

The answer is that in an election like this one, the polls aren’t there to tell the real story; they are there to support the various different stories that the commentators want to tell. The market is not for the hard truth, because the hard truth this time round is that most people are voting with the predictability of prodded animals. What the news organisations and blogs and roving pundits want are polls that suggest the voters are thinking hard about this election, arguing about it, making up their minds, talking it through, because that’s what all the commentators like to think they are doing themselves. This endless raft of educated opinion needs to be kept afloat on some data indicating that it matters what informed people say about politics, because it helps the voters to decide which way to jump. If you keep the polling sample sizes small enough, you can create the impression of a public willing to be moved by what other people are saying. That’s why the comment industry pays for this rubbish.

It turns out that the best guide to what’s been going on during the ceaseless clamour of this election season comes from one of John Dewey’s contemporaries, the émigré Austrian economist and philosopher Joseph Schumpeter, who also died during Truman’s second term, in 1950. In Capitalism, Socialism and Democracy, written in 1942, Schumpeter pointed out that most people do not think much about politics at all: they simply respond to triggers in ways that require the minimum of mental effort. ‘The typical citizen,’ Schumpeter wrote, ‘drops down to a lower level of mental performance as soon as he enters the political field. He argues and analyses in a way which he would readily recognise as infantile within the sphere of his real interests. He becomes a primitive again. His thinking becomes associative and affective.’ The demographic determinism of this election campaign is evidence of the ease with which the main candidates have been able to exploit the instinctive reflexes of various segments of the population, and the difficulty that their opponents have had in overcoming these reflexes with competing arguments.

A great deal of the comment that has erupted during the contest for the Democratic nomination in particular has been fuelled by a deep frustration that this should be so, and a lingering hope that it might be about to change. The Obama camp can see clearly how stupid the Clinton supporters are being, as they cling to their prejudices and crass simplicities, refusing to listen to the elegant alternatives being offered by their candidate. Why can’t these people see how much smarter, better, more promising the black guy is? At the same time, the Clinton diehards can see just how dumb all the Obama supporters are, with their limitless appetite for empty rhetoric and naive protestations of faith in the future, unable to face the hard facts of political life. Why can’t these people see how much tougher, shrewder, more realistic the woman in the pant-suit is? So the commentators rehearse these arguments in endless permutations, trying to impose some kind of intellectual imprint on what is happening. They clutch at straws, in the hope that these might indicate a shift in the way the story is going. Underneath it all, the story remains the same.

At the start of the campaigning season, the hope was widely voiced that the 2008 election offered an opportunity to reflect on what had gone wrong in the United States, and to think seriously about how things might be different. Much of the increasingly regretful comment that is being passed on how things have turned out reflects the fact that this opportunity has not been taken. Each side blames the other, for dwelling on race, or gender, or youth, or age, or hope, or fear, or the future, or the past, and imagines some alternative campaign in which the real issues would be debated in serious and open-ended terms. It has to be said that the wistful tones of the Obama camp have come to predominate in this particular blame game, as befits their preponderance in both the mainstream and the new media, and the ease with which a high-minded tone of regret at the grubby reality of contemporary politics fits into their preferred narrative. But in truth, it is absurd for anyone to claim to offer a plausible alternative to the way this election has been conducted. For all the elegance, intelligence and wit on display in the many tens of thousands of words I have read over the past few months, nothing that’s been said appears to have made any real difference to how most people see the candidates.

Certainly, I know it to be true in my own case. From the start, I have wanted Clinton to win, because I decided she was tougher, shrewder, more realistic than her rival. Obama’s rhetoric has always sounded phoney to me, much too good to be true: so sweetly sincere as to be obviously insincere about the hard grind of daily politics. I also thought she had a considerably better chance of beating McCain in the autumn than he did, whatever the polls might say. What I’ve found is that nothing that has happened since has changed this set of beliefs, and that anything and everything can be accommodated to fit it. As Obama has racked up more votes and delegates, it’s simply evidence of the craziness of the Democratic primary system, so obviously skewed to misrepresent who has the best chance in the general election – no caucuses there! As Obama’s speeches have won countless new admirers, it’s just more evidence of how eager self-selected opinion-formers are to be sweet-talked, not of how ordinary people are likely to vote. As Clinton has shifted her ground and the basis of her campaign, from heir presumptive to picked-on woman to plucky and indefatigable underdog, it’s evidence of just how adaptable and determined she is. A couple of weeks ago, I thought I had reached my limit, as she pushed her bogus gas-tax holiday, accompanied with a side-swipe at economists who said it wouldn’t work (including Paul Krugman, one of the few economists who has been out there making the case for her candidacy). But as I write this, on the morning of the Kentucky and Oregon primaries, even though I know she can’t really win, I still want her to thump Obama in Kentucky and run him close in Oregon, to keep the race alive, and to puncture the awful, gloating presumption of his oh-so-easily pleased supporters. It’s like following a sports team: you know exactly why you want them to win (because of how it will make you feel), long after you’ve stopped thinking about why you chose them in the first place. As the novelist Kurt Andersen (who describes himself as a passionate ‘Obamaphile from the get-go’) has written, ‘My whole life, I’ve never cared about sports, never experienced that intense, emotional, extra-rational rooting interest in any team’s struggle to win the championship. I figure this must be what it feels like to be a hopeful, fretful, stressed-out fan during the Super Bowl or World Series.’

Schumpeter didn’t think that intellectuals understood politics any better than anyone else; instead, he thought they were simply more likely to mistake their own impulsive judgments for reasoned ones. The ‘reduced sense of responsibility’ and ‘the absence of effective volition’, he noted, ‘are if anything more shocking in the case of educated people and of people who are successfully active in non-political walks of life than it is with uneducated people in humble stations. Information is plentiful and readily available. But this does not seem to make any difference.’ Super-smart Obama-lovers who wish that everyone would see things the way they do exemplify this aspect of democratic politics, even as they kid themselves that they are trying to confront it. Though as a Hillary supporter, I would think that, wouldn’t I?

If, as now seems almost certain, it will be McCain v. Obama in the autumn, hopes will be raised again for a real debate about the issues, between two principled candidates. These hopes will then be dashed as the campaign settles back into the associative groove, and spews out electronic reams of associative comment bemoaning that this should be so. There is at least some uncertainty at this stage in knowing which particular associations will be decisive. The key demographic – unaffiliated 40+ white voters in the swing states – may be pulled in two different directions. On the one hand, many of them clearly have an instinctive dislike of Barack Obama, because of his sanctimony, his cool demeanour, or because of the colour of his skin. On the other hand, many of them also appear to have developed (if recent state and congressional results are anything to go by) an instinctive dislike of the Republican Party, because of its complete inability to govern successfully. It will be interesting to see which set of associations gets more firmly entrenched by November, because that is what will decide the election. My guess is that people will divide pretty evenly on this question, as the party machines prod them from both sides, and that the final result will be extremely close. What is certain is that the surrounding noise will not diminish, and there will doubtless be a poll to suit every taste, and an elegant piece of analysis to suit every hope. The democratic conversation will continue, but it’s not the one that Dewey had in mind. People are talking, but no one is really listening. For all the fun and fantasy that can be had following this election on the internet, the overriding impression it gives after a while is of tuning into thousands of people as they sit in their cars and complain about the traffic.

Sub-Prime Crisis: LA Times

Bitter lessons learned from refinancing
When their need for cash met the hard sell, many homeowners bit. Now they can't afford to pay the mortgage.
By Maura Reynolds
Los Angeles Times Staff Writer

July 5, 2008

WASHINGTON — Vicki Miller bought her childhood home in Altoona, Pa., from her mother's estate for $32,000, using a nice, traditional mortgage from the local savings and loan.

Seven years later, her debt has more than doubled, her once-significant equity has shrunk to zero and she's behind on her payments. The lender has begun to threaten foreclosure.

"I grew up here. My son grew up here. And I had hoped my grandchildren would grow up here," Miller said woefully.

Miller said she was persuaded to refinance her mortgage twice into sub-prime loans she didn't really understand, along with taking out a second mortgage. As such, she reflects what experts say is the true face of the sub-prime mortgage debacle.

Discussion of the problem often focuses on first-time home buyers who stretched to buy homes they couldn't afford. But experts who've crunched the numbers say 90% of people who took out sub-prime loans from 1998 to 2006 were already homeowners.

Many, like Miller, had conventional, prime loans that were well within their means. What often got them into trouble was that they refinanced their mortgages without really understanding the terms and without realizing that the sales pitches and loan documents were sometimes deliberately opaque to snare the unwary.

The result is thousands of cases like Miller's, in which the damaging outcome is clear but it's very difficult to figure out how it happened or exactly who's to blame.

"I should have just stayed with the loan I had. I realize that now," said Miller, who earns a modest income as an office worker. "I'm not mortgage smart. I've since become mortgage wiser."

Lawmakers debating a mortgage rescue bill have spent a great deal of time trying to make sure that they don't reward careless or greedy mortgage holders. But lawyers working with troubled borrowers say few of them were trying to finance outrageous lifestyles.

Most were like Miller, they say, existing homeowners who found themselves in need of money and responded to aggressive advertising for refinancings.

"There's this myth out there that this was a bunch of people overreaching," said Patrick Cicero, a lawyer with MidPenn Legal Services in Harrisburg, Pa., who represents low-income homeowners who are facing foreclosure.

"But the vast majority of these loans were refinancings," Cicero said. "These were elderly people trying to fix up their homes. These were people lured in by promises of lower monthly payments and the consolidation of their debts who didn't understand they were putting their homes at risk."

When lenders ramped up sub-prime lending in the mid-1990s, it was touted as a way to expand homeownership among people with low incomes or shaky credit histories. And many have pointed to the modest growth of homeownership -- from 64% of households in 1994 to 69% of households by 2005 -- as evidence that sub-prime lending had genuine benefits.

But Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies, notes that most of that expansion in homeownership occurred in the late 1990s, before sub-prime lending exploded.

Elizabeth Renuart, a housing attorney with the National Consumers Law Center in Boston, said many sub-prime lenders and brokers targeted people such as Miller.

They were promised cash, based on the equity in their homes. And the solicitations were rarely clear about the fees and interest rates, advocates for homeowners say.

Moreover, sub-prime loans always charged higher interest rates. That meant bigger commissions for the loan agents and brokers who sold the loans, and provided higher returns to investors who bought securities composed of bundled sub-prime loans.

"It was push marketing," Renuart said. "As the engine revved up from Wall Street to invest in these things, the pressure was on the brokers to make these loans."

Miller, a 52-year-old single mother, is typical of many who ended up with such loans. She was making about $26,000 a year working in the accounts payable office of a local lighting manufacturer. Although the cost of living is lower in Altoona, a town of 47,000 in hardscrabble central Pennsylvania, than it is in major metropolitan areas, the housing boom largely passed Altoona by. Home prices appreciated just 2% to 3% a year for the last decade.

Miller moved into her mother's modest brick-and-siding house in 2001. It had become somewhat run-down in her mother's final years, and Miller quickly piled up debt on repairs. By 2004, she was burdened with about $15,000 in credit card and other debt.

She sought financial help and got phone calls from Ameriquest Mortgage Co. of Orange, the big sub-prime lender that has since collapsed. The sales agent suggested that Miller could pay off her debts by refinancing her mortgage.

In June 2004, her sister was flown to Pittsburgh with a life-threatening brain aneurysm. As a distraught Miller sat in the hospital, she called Ameriquest and said yes to the refinancing.

"My mind wasn't on it," she recalled. "I thought I was getting a good deal, but obviously I wasn't."

Like many others, Miller's goal was not profit but relief from financial pressures.

"People equate sub-prime lending with people getting homes. But I think more of it had to do with access to credit," Harvard's Retsinas said. "This is the way people were trying to make ends meet."

Miller, who discussed her situation in extended interviews and provided a thick bundle of financial records, said she thought her new loan was a fixed-rate mortgage at 7.5% interest. Records show it was an adjustable-rate mortgage with an 8.9% interest rate.

The outstanding principal on her old mortgage had been $32,000. The new mortgage was for $60,000, which covered the cost of the new loan and allowed Miller to take out about $23,000 cash to pay off debts and make home repairs. But her monthly payment nearly doubled to $559.

Months later, a man knocked on Miller's door and said it looked like she needed a new roof. He promised to help her get a loan, and she wound up taking out a second $13,000 mortgage from a different lender to pay for it.

Then in 2006, faced with rising heating bills, Miller decided to spend $5,000 for more energy-efficient windows.

By this time, her mortgage had been sold to Countrywide Financial Corp., and every payment notice suggested that she refinance again.

"Your estimated home equity: $24,818," stated one of many letters and e-mails Countrywide sent her. "You may be able to GET CASH from your home equity. . . ."

Countrywide employees Miller talked to by phone in Californiasent her forms suggesting that by refinancing her home she could take out $5,000 in cash and her payments wouldn't change.

She mulled over the documents for a month, Miller said, and then one day a notary public showed up at her workplace with what he said were her new mortgage papers. Miller was taken by surprise. The documents didn't look quite the same as the ones she'd received in the mail, Miller said, but the visitor assured her that Countrywide would correct any error.

Miller signed the documents. "I'm a Christian. I'm a trusting person. I believed him," she said.

"I called and called and called and never heard from Countrywide again," Miller said. "I was stuck with the mortgage."

Her monthly payments, now more than $700 a month, constitute more than half her take-home pay. This winter, as her heating bills topped $3,000,Miller fell behind on her mortgage. She's now three months in arrears. Countrywide is offering a "loan modification" that would raise her payments to $1,165.

"How can I afford that?" she asked. "I have asked if I can make partial payments and they say no, it's all or nothing."

Yet each mortgage notice she receives from Countrywide still includes this message:

"If you need cash for your financial needs, now may be a good time to apply to refinance and tap into the equity in your home. Call Countrywide today!"

maura.reynolds@latimes.com
http://www.latimes.com/business/la-fi-refi5-2008jul05,0,7891725.story