Most big financial news these days has to do with Wall Street, but this big money news has to do with television advertising: "Obama is on pace to spend more on TV in the final 25 days of this election than John McCain's entire $85 million matching-fund check."
So writes Evan Tracey, frequent NDN contributor and founder and president of the Campaign Media Analysis Group, in yesterday's online Advertising Age. NDN has long argued that the Internet and other new tools and media are causing us to reimagine video and the dominance of the broadcast era, but there is no doubt of the massive impact that television advertising still has on the American electorate -- especially when you have the cash to buy it in unprecedented 30-minutes chunks on network TV, as the campaign of U.S. Sen. Barack Obama did earlier this week.
In the meantime, read the full text of Tracey's AdAge column below. It's a very smart take on what U.S. Sen. John McCain has to do given that the Arizone senator "is in a shouting match against a man with a bull horn."
Obama Airs 25,000 Commercials in Past Four Days
Will Spend More in Final 25 Days Than McCain Will in Entire General
Posted by Evan Tracey on 10.10.08 @ 05:03 PM
Evan Tracey
What a week. If a 30-minute purchase on network TV is not enough evidence that Barack Obama has more money than there is TV time left to buy, then I have a Bridge to Nowhere to sell you. In terms of message imbalance between the two presidential campaigns, it is clear that a critical mass has been reached. Obama is on pace to spend more on TV in the final 25 days of this election than John McCain's entire $85 million matching-fund check. For those keeping score at home, Obama has aired more than 25,000 commercials in the past four days alone.
McCain is in a shouting match against a man with a bull horn. Whatever McCain does in the final 25 days, it will not be enough to break through the noise unless his campaign finds a message that connects with voters. Timing is everything in politics, and McCain's campaign may have waited too long to play the Ayers, Rezko and Wright cards. These types of attacks do not work while voters are sweating the ups and downs of the economy and stock market.
So now what? If you are McCain? You must draw down ad buys in states you cannot win and focus on the states you must. Secondly, you need to find a message that connects with voters and their economic anxiety. You need a persuasive argument about how Obama would be worse for the already fragile economy. Anything less will not get the job done.
The big question for Obama is what will he do with his 30 minutes of primetime TV? I suspect it will be an epically produced closing argument that will rival those from the best courtroom TV dramas. This campaign is rewriting the rules on presidential campaign advertising.
Forget the Internet for now; this is a made-for-TV campaign!
The major Western nations are on the verge of adopting a strategy to deal with the financial crisis pioneered by Gordon Brown earlier this week. The FT has an interesting piece today that reflects on what this means for the previously struggling British Prime Minister.
As he has over the last few weeks Joe Nocera does a great job putting these extraordinary events in perspective. And yet another story warns of the possible devasting impact of credit default swaps, a subject that needs immediate attention from Washington's policymakers.
What exactly does the rise and fall of Sarah Palin say about John McCain and his judgement? Are we learning that the downside of mavericky behavior is that sometimes when crazy ole mavericks shoot from the hip, go with their gut, act impulsively, they just simply blow it?
With just 25 days left until Election Day, the airwaves and Web video are getting increasingly cluttered -- and increasingly ugly.
U.S. Sen. John McCain's campaign has two new guilt-by-association ads out, both questioning U.S. Sen. Barack Obama's motives and judgement.
One, a new Web ad, seeks to tie Obama to ACORN, a community organizing group under investigation for voter fraud. The McCain camp held a conference call today with reporters today to call for a federal investigation of Obama's alleged ties to the group. The ad does away with any such niceties and makes its own assertions:
The New York Times, which calls the second McCain spot "...a paint-peeling advertisement that highlights Mr. Obama’s relationship to Bill Ayers, one of the Weather Underground founders," reports: "The campaign says the commercial will air nationally. So far this morning, using the television monitoring service ShadowTV, we have found that it has only been shown by news programs — once on MSNBC and once on WINK-TV in Florida – and has not run yet as a paid commercial."
The New Policy Institute, a non-partisan NDN affiliate, is excited to announce that the Adelante Spanish-language voter education and mobilization effort is picking up steam, with ads going up on the air today on radio stations in New Mexico and on station KRNV in Reno, Nevada.
The ads already have been running in Colorado, the Las Vegas media market and the greater Washington, DC, metropolitan area market, which includes northern Virginia and southern Maryland. Adelante launched its first ad in Colorado with an extensive buy on Denver (stations KBNO, KXPK, KJMN, and KMXA), Colorado Springs/Pueblo (stations KNKN and KRYE) and Ft. Collins/Greeley (station KGRE). Two days later, the effort expanded into the Las Vegas media market on stations KISF, KWID, KQRT and KRRN. On October 2, Adelante started airing on stations WILC, WACA and WZLZ in the greater DC area and two new ads were released the same day that started airing in all the markets. Ads will continue through November 3.
The media campaign, Adelante, Spanish for "Moving Forward," is a public education campaign that encourages people to vote, explains the process of voting (including early and absentee voting), and targets what is projected to be a large pool of first-time Hispanic voters.
The three ads currently on air include "Acuérdate," ("Remember"), “Siglo” (“Century”) and “Premios” (“Awards”). To listen to the ads and read the scripts in Spanish and English, click here.
Radio advertising is only half of Adelante.The effort also includes a Web site, www.Adelante08.org, which provides comprehensive information, in Spanish and English, about voting laws, absentee and early voting, voter rights, voting deadlines and other critical information. The Web site contains such information about all the states in which radio spots are airing and also will feature information about voting processes in Arizona, California, Florida, Illinois, New York, Pennsylvania and Texas.
Courtesy of Politico's Ben Smith, we learn that on a conference call about ACORN earlier today, McCain campaign topper Rick Davis gave McCain credit (blame?) for blowing up the first bailout vote in the House.
Davis expressed outrage that, "in the middle of the greatest disaster in our financial system that we’d had in our lifetime, that the Democrats in the United States Senate would actually link payments to ACORN in the bailout package that they promoted -- prior to Sen. McCain coming to town and actually blowing that package up. So we can actually say that in addition to saving taxpayers millions of dollars, and we’re very happy that no more taxpayer dollars were added to the pile of money going to ACORN."
As Smith goes on to point out, it was the McCain campaign that first blamed Obama for the failure of that first vote in the House - despite the fact that McCain suspended his campaign and threatened not to debate if the bailout package wasn't passed with all haste.
So why is Rick Davis trying to reinvent the past?
As was discussed on MSNBC's Morning Joe today, the only way McCain could have used the financial crisis to his political benefit was to oppose the bailout. McCain's camp has no doubt realized that and probably wants a re-do. (During which they would have likely ditched that gimmicky "suspension.") In the coming days, watch for Davis and Co try to recreate McCain's actions on the bailout in a manner that is more to their liking. If they don't, well...
The assault continues, as a new RNC ad links Barack Obama to three "shady" politicians. Bill Ayers makes another appearance. Tony Rezko is a new face in these ads-- he was convicted of fraud and bribery earlier this year, and surely represents some of what is worst in politics. Obama has called his association with Rezko "a mistake." The third is William Daley.
As Big Bird would say: One of these things is not like the others.
The other two are criminals, but Daley, as the ad says, is nothing more than "heir to the Chicago machine." Seems a little harsh to lump him in with the other two.
The plummeting financial markets dominated the news this week, and NDN was there to provide guidance and cogent, insightful analysis. Rob was quoted in the Associated Press in an article that was reprinted in hundreds of sources across the country. Rob was also featured extensively in The American Prospect's blog, Tapped, and Michael had a great piece in the Huffington Post blog called "Fear and Reason on Wall Street."
Despite the financial crisis, the NDN team still broke through in other areas as well. Our recent poll of Hispanics in battleground states was covered in the Huffington Post, and Simon was quoted on Hispanics in American politics in Politico, as well as in a great new PBS documentary, "Latinos '08."
A couple of articles caught my eye this week that make the case for increased government spending. Such a proposal may seem out of synch with our melting personal investment accounts and the expensive government bailout of Wall Street. If you’re U.S. John McCain, you’re even ready to put the kibosh on any government spending, except for defense, veterans and entitlement programs. So what's with the argument for deficit spending right now?
The New Republic’s Jonathan Cohn makes the case from the perspective U.S. Sen. Barack Obama – note the title of his article – “President Obama, ignore this bailout.” Cohn provides several examples as to how government spending right now can help either reduce longer-term, economy-wide costs or help the economy grow faster. For example, Obama administration-led health care reform can help reduce treatment costs and allow the government to exert more pricing power, thus decreasing the costs of Medicare and Medicaid. Cohn also advocates for greater investment in education and infrastructure – two areas that affect our rate of economic growth and resulting tax revenues. On energy, Cohn says that government subsidies that help businesses, offices, stores, and factories be more environmentally friendly can help to lower economy-wide energy costs, create new jobs, and wean the United States off foreign oil. Cohn is optimistic that Obama won’t bail on some of his spending proposals:
Obama himself also seems to get it, notwithstanding his statement about delaying some projects. Speaking in Wisconsin on October 1, he said, "There are certain investments in our future that we cannot delay precisely because our economy is in turmoil." (The emphasis was his.) To prove it, he went on to promise spending on health care, education, infrastructure, and energy independence.
In the New York Times, Robert B. Reich, Secretary of Labor under President Bill Clinton, also opines on this issue. In “Saved by the Deficit?,” Reich suggests that under our current economic conditions – deepening recession; relatively high unemployment rate; reduced consumer spending – “deficit spending is not unwelcome.” He argues that “not all deficits are equal”:
As every family knows, going into debt in order to send a child to college is fundamentally different from going into debt to take an ocean cruise. Deficits that finance investments in the nation’s future are not the same as deficits that maintain the current standard of living.
Like Cohn, Reich calls for greater public investment in education, infrastructure, energy reform, and health care reform. Both also point out that the bailout itself shouldn’t thwart future government spending. From Cohn:
…. The perception that Obama must radically pare back his ambitious spending proposals--a perception widely shared in Washington--makes several fundamental errors. For one thing, it misunderstands the nature of a Wall Street "bailout"--which, properly constructed, shouldn't seriously deplete federal funds. More important, the conventional analysis ignores the fact that we face deep economic problems besides the financial crisis--problems that only government can fix. The case for Obama's spending agenda hasn't suddenly become weaker. If anything, it's actually grown a bit stronger.
And from Reich:
Yet all is not what it seems. First, the $700 billion bailout is less like an additional government expense than a temporary loan or investment. The Treasury will take on Wall Street’s bad debts — mostly mortgage-backed securities for which there’s no market right now — and will raise the $700 billion by issuing additional government debt, much of it to global lenders and foreign governments. As America’s housing stock regains value, as we all hope it will, bad debts become better debts, and the Treasury will be able to resell the securities for at least as much as it paid, if not for a profit. And if there is a shortfall, the bailout bill allows the president to impose a fee on Wall Street to fill it.
….It should not be surprising … that the Wall Street bailout has generated so much anger among middle-class Americans. Let’s not compound the problem by needlessly letting it prevent the government from spending what it must to lift the prospects of Main Street.
In the coming weeks, keep your eyes out for a second fiscal stimulus proposal from the House. Although neither Cohn or Reich sees stimulus packages as the most effective tools for improving our economy’s fundamentals over the long-term, we appreciate Congress taking measures to help Americans in the short-term.
New York City -- In his classic 1841 book Extraordinary Delusions and the Madness of Crowds, Scottish journalist Charles Mackay pinned the blame for financial panics on the herd instinct. As interpreted by financier Bernard Baruch who wrote an introduction to a reprint published after the 1929 Crash, otherwise intelligent people in a herd "act like blockheads." As fear trumps reason and emotion rules, people in panics lose their ability to act rationally and instead move with the herd.
While Mackay's analysis was prescient for its day, if panics were due only to irrationality, they would be a lot easier to solve. Neither Mackay or Baruch had available to them modern tools for understanding decision making by participants in a market. However, the branch of economics known as game theory suggests that people acting entirely rationally can still cause a disaster. And this, more than just irrational panic, is the problem we face today.
As bubbles inflate, it can be entirely rational to go with the herd since, as the saying goes, "the market can stay wrong longer than you can stay solvent." And when the market crashes, it is rational to sell with the herd as well. At the moment, it is all too rational for banks not to lend to other banks whose balance sheets they mistrust -- the root cause of the current freezeup in credit markets. Thus, the current panic cannot be resolved merely through the return of calm and rationality alone.
The best known game in game theory is the so-called prisoner's dilemna. Without going into all the hoary details, it describes a case in which two people, if they act in their own interests, ie rationally, achieve a worse outcome than if could only cooperate.
This problem is known as a collective action problem. A simple version might be two children who want the same toy. If they share the toy, they both benefit. However, if they fight over the toy, each hoping he or she can wrest if from the other but break it, neither gets to play, a worse outcome than if they had shared. Similar situations occur all the time in business negotiations and diplomacy as in international disputes that lead to costly wars.
In the current financial world of complex derivatives that have sliced and diced the rights to streams of income among a galaxy of players, some regulated, some not, in the hope of spreading risk, what we have is a collective action problem on steroids.
To provide just one example, mortgage holders are currently engaged in a game of chicken with borrowers. Too often, mortage holders have been unwilling to modify loan terms so that borrowers can actually repay. The result is foreclosure and the forced sale of the asset, a lose-lose situation for both parties in which each achieves a worse outcome than if they had worked out a deal. Yet it is rational for each party to hold out for a better deal.
Fortunately, there are several answers to collective action problems. All involve shifting the decision from a collective or group to a single person able to cut the Gordian Knot to do what is best for all concerned. This can be achieved by turning the matter over to a higher power such as a court or judge. It can be achieved by the government passing a law that determines how the spoils are divided. It can be achieved by the two parties merging into one. Or it can be achieved, if the parties will need one another in the future -- though this would not seem to help in the current case.
In the Panic of 1907, JP Morgan locked the heads of finance of the day in his library and forced them to come together to provide funds to stop the panic. More recently, in 1998, New York Fed President Gerald Corrigan knocked Wall Street heads together to get them to bail out Long Term Capital Management (with only Bear Stearns refusing to play ball). If you seek a more extreme measure, in the famous panic of 33AD, Tiberius banned all interest payments for three years among other measures. One of the disappointments of the management of the crisis so far has been the inability of the Fed to force Wall Street to act together in its collective interest. There has been no shortage of meetings with the Wall Street titans locked in a room. Again and again, however, they have put their individual interests ahead of their group welfare and the Fed has come up short in forcing them to work together.
In contrast, earlier this week a number of Attorneys General negotiated a win-win settlement with Countrywide that cut through the Gordian Knot by modifying loan terms to make loans sustainable for customers. This is a good example of a higher power, in this case the government, settling cases involving borrowers and a lender in a way that will ultimately benefit both -- but that the two sides negotiating alone probably would never have achieved.
To tackle the collective action issues in the current crisis, the Fed, Treasury and other regulators, attorneys general and judges working with the Congress should take the following steps:
Get tougher in forcing financial institutions to work together to solve the crisis.
Accelerate the process of merging weaker banks into strong ones.
Work to replace the disaggregated complex securities that currently splinter ownership into simpler securities amenable to decisionmaking. In this regard, a plan that replaces unsustainable loans with sustainable ones -- but that does not give a blank check to banks as with the McCain plan -- would be helpful.
In the context of real estate securities, where legally possible, pass rules simplifying loan terms and allow bankruptcy judges to modify loan terms.
These steps are needed to address the very real collective action problems that, until remedied, will continue to feed the financial crisis even if fear subsides.
Thoughts about our content? Suggestions for how we can improve our blog? Anything else on your mind that you want to share with us? Please, send it our way - shoot me an e-mail at dboscov-ellen@ndn.org. Thanks, and hope to hear from you!
Evan Tracey
