The mortgage bailout could blow back on Obama
By: Chris Stirewalt
Political Editor
February 20, 2009
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| President Barack Obama waves as he arrives to deliver remarks about the home mortgage crisis Wednesday at Dobson High School in Mesa, Ariz. (Gerald Herbert/AP) |
Bringing class resentments into politics is like launching a nuclear bomb. You have to make sure that you’re way outside the blast zone before you press the button.
John Edwards used the dirty bomb approach with his “two Americas” spiel and became radioactive in the process. Neither America was interested in Edwards again until the National Enquirer caught him hiding in a men’s room.
Richard Nixon, conversely, made a strategic strike when he made common cause with the “silent majority” of middle-class folks against radicals and elitist intellectuals. Who wouldn’t want to be an “honest, patriotic American?”
Now, with the introduction of his mortgage plan, President Barack Obama has deeply altered the dynamic of class warfare in America. The question for the president is whether he can avoid the fallout.
In the near term, Obama will be sitting pretty with his $75 billion plan.
Many folks figure that with money blasting out of Washington like grapeshot at Gettysburg, a little help for Mr. and Mrs. Mortgagepayer might not be so bad.
If the people who busted banks or drove car companies off cliffs are getting money, why not a regular guy trying to make his monthly payments. Obama needed to do something politically that looked like it was good for the little guy instead of chief executive officers, bankers and earmarkers.
As time goes by, the outlays at the dynamic beginning of the Obama administration may fade into a blur in the electoral consciousness — He came. He spent. He sparkled.
People will not be able to tell the difference between a stimulative government worker and a non-stimulative government worker. A nationalized bank and a non-nationalized bank will also look pretty much the same on the outside. The bailed out car companies will look different in time, but General Motors and Chrysler were already looking pretty grim.
The political test of the bailouts and stimulus will be simple: Is the economy getting better by this time next year.
If we’re on our way back to 4 percent unemployment and the Dow is floating up toward 14,000 again, the fiscal frenzy of February 2009 will be a political positive.
If the economy stagnates and inflation is wiping out retirees, the borrowing and spending going on now will be a political negative. Or possibly a political nightmare.
The president has made a big bet on stimulating the economy and rescuing banks and automaker. His wager has the advantage of having fairly clear terms and stakes.
The mortgage plan, though, is trickier to make book on.
The Wall Street Journal’s lead editorial on Thursday reveals the potential pitfall.
Looking at the troubled home loans that were refinanced last year — often with government encouragement or direct help — the Journal found that even with more favorable terms, people still wouldn’t or couldn’t make the payments.
“The number of loans modified in the first quarter [of 2008] that were 30 or more days delinquent was 37 percent after three months and 55 percent after six months. The number of loans modified in the first quarter that were 60 or more days delinquent was 19 percent at three months and nearly 37 percent after six months.”
The people who get bailed out of their mortgages have continued to default, even with low rates unavailable to desirable borrowers who have always made every payment.
And no matter how many times CBS News finds a family forced into foreclosure by hardships of biblical proportions, voters will still think of people who borrowed more than they could afford to repay. Voters will think this because there’s been a foreclosure on their street and they drive home through neighborhoods of McMansions bought for no money down.
So rather than wiping out all of the bad loans and unscrupulous lenders by allowing the market to correct itself in the months to come, the president has undertaken to prolong the process. And if default rates for swamped borrowers remain high, he may even find himself calling for another bailout.
Americans who have played by the rules are coming to resent being forced pay to protect others from the consequences of their bad choices. And if the Americans who are footing the bill notice that the foreclosures are still rolling in and driving down their own property values, that resentment may turn into outrage.
If Obama is seen as having helped the irresponsible at the expense of the responsible, that could be politically radioactive in cul de sacs from coast to coast.
Political Editor Chris Stirewalt can be contacted at cstirewalt@dcexaminer.com.
