If you’re a citizen of the United States, then today is the most important day of the year: Election Day.

Millions of people have suffered, bled, and died to give you your right to vote. But voting is more than just a right: It’s a responsibility. Voting is the fundamental bedrock of a democratic civilization. When a citizen fails to vote they are, in a very real and definite sense, inflicting harm on society as a whole.

So if you’ve been thinking you might just skip this election, then you should take a moment to think about all the sacrifices which have been made to give you your vote. And then find the resolve within yourself to wait in line and perform what is both your duty and your privilege.

The stakes have never been higher.

Vote!

Your honor, I think you will find — if you just peruse this report — that I was not speeding when the state trooper pulled me over.

Hmm… Who prepared this report? Well, I did of course.

Now, if you’ll just turn to page 2 you’ll find the general conclusion of the report: I am not guilty of speeding. On page 4 you’ll find the detailed diagrams demonstrating that if I was driving no more than 30 mph, I could not have been driving 40 mph when the officer pulled me over. And if you flip to page 7–

What’s that? My protestations of innocence don’t automatically me innocent?

I don’t understand.

It worked for Sarah Palin.

So we’ve slapped an ill-conceived and pork-laden bailout bandage onto the current economic crisis.

But that’s all it is: A bandage. This bailout bandage contains no solutions for the fundamental problems that led to the current crisis. It’s the functional equivalent of pulling over a drunk driver, taking away the bottle of rum he’s clutching in his right hand, and then giving him back the car keys.

So the next step must be to address the fundamental failures that led to this crisis. It’s the only way to prevent another.

(1) The lack of regulation that allowed unfettered greed to flourish on Wall Street must be addressed. This means re-instituting the regulations that have been obliterated by the last thirty years of bankrupt Republican strategy — a strategy based entirely upon the facilitation of greed.

(2) The bad mortgages lying at the heart of the current crisis must be alleviated. Main Street has been guilty of making some bad decisions in its own right, but the middle class has also been victimized by predatory lending practices.

This means that bad mortgages held by homeowners (not speculators) need to be re-structured to ensure reasonable and consistent monthly payments. Barack Obama has proposed giving bankruptcy judges the power to restructure these bad mortages, but in my opinion that’s not good enough: If we see these people hurtling towards the cliff of financial ruination, we shouldn’t wait for them to go over it before trying to pull them back up.

And this also can’t be an effort limited to just bailing out those currently in trouble. It also means regulating the mortgage industry so that these types of bad mortgages can no longer be created. For example, adjustable rate mortgages were legalized in the same legislation that led to the Savings & Loan crisis.

(3) We can no longer slave our economy to the fate of a small handful of companies. Senator Bernie Sanders says that “if they’re too big to fail, then they’re too big to exist”.

Unfortunately, in the wake of the current crisis, we have actually exacerbated this problem instead of alleviating it. Mergers of the largest banks have resulted in even larger banks. This solves a short-term problem, but we’ve simply replaced it with a bigger problem down the road.

The current crisis clearly demonstrates the truism that, the larger they are, the harder they fall. These large institutions, on which our economy is apparently completely dependent, must be broken up into smaller entities. We shouldn’t be keeping all of our eggs in one basket.

(4) A happy balance must be found in regards to mark-to-market accounting rules. These rules (requiring that the value of assets be set to their current market value) were put in place as a direct result of Enron’s abuse and downfall. The problem is that they tend to exacerbate downward spirals, particularly when applied to long-term assets, by creating and then reinforcing destructive pricing volatility.

The SEC has now been given the power to suspend the mark-to-market accounting rules. But if they exercise that power to simply remove yet another layer of protective regulation from the system, we’re simply switching one form of economic catastrophe for another.

Newt Gingrich has proposed what appears to be a logical compromise between these two extremes: “Perhaps a three year rolling average to determine mark-to-market prices would be a workable permanent system.”

And now I’ll say something I rarely expect to say: I think Newt Gingrich is right. A three year rolling average for long-term assets evens short-term volatility in the pricing of those assets, without completely disconnecting corporate accounting from any kind of objective reality. (The rest of his proposals, on the other hand, are just the standard Republican refrain of “cut taxes and deregulate”… which shows a rather stubborn inability to learn from past mistakes.)

Now What?

That’s the real question. I’ll admit that I’m not an economic specialist. I don’t know the best way to accomplish these things. (Although you probably couldn’t go too far wrong if you started by rolling back most or all of the Garn-St. Germain Depository Institutions Act and the Gramm-Leach-Bliley Act.) But it’s clear that these are things that must be done.

Because simply slapping a bandage on an infected wound won’t solve the problem.

And, really, this is just the beginning — a first step. Because the current and most immediate crisis we’re facing is merely the tip of the iceberg. Years of mismanagement under Republican economic theories have left our economy fundamentally dysfunctional. We’ve got a lot of work ahead of us. But I think this is a decent outline for the first step in the right direction.

Here’s the two-bit tour of the current financial crisis: In an attempt to cure the woes that led to the Great Depression, the banking industry was regulated. These regulations were designed to rein in unchecked greed from running us, lemming-like, off a financial precipice. Over the past thirty years, the Republican philosophy of de-regulation — championed by conservative leaders like Reagan, Bush, and McCain — systematically dismantled these protections. The warning flags were raised with the S&L crisis in the late ’80s (which included significant scandals including George W. Bush’s brother and John McCain himself). But, after the S&L bailout was paid, these warning signs were largely ignored and the Republicans continued on their de-regulating crusade.

Which brings us to today. With a significantly deregulated mortgage market, lenders issued riskier and riskier mortgages in the pursuit of more and more money. And because the banking industry had been deregulated, they were able to package these risky mortgages into unregulated securities… which could be sold to give them more money to make even riskier mortgages. In many ways it resembled a pyramid scheme and eventually, like all pyramid schemes, it collapsed as the risky mortgages started failing.

Today the value of these securities has completely flat-lined. They’re worthless paper because nobody has any confidence in the value of the risky mortgages on which they’re based. But our entire deregulated financial system is so heavily invested in these worthless mortgages as a result of the unregulated securities they were packaged into that the entire system is in danger of eminent collapse.

(Warning: The previous paragraphs contains gross over-simplification of a complex issue.)

So, enter the bailout: The government will buy up these bad mortgages (although no one is sure exactly what they’re worth), which will hopefully save the financial institutions which foolishly invested in them. If you think of the bad mortgages as a thug with his foot on the windpipe of the financial institutions, we’re grabbing the thug and giving the financial institutions a chance to get back on their feet.

But there’s a problem with this analogy: There is no thug and no innocent victim here. The financial institutions we’re trying to help get back on their feet were the ones putting their feet on their own windpipes.

What’s needed here is not a rescue. It’s an intervention.

Here’s a better analogy: Our financial institutions are cutters. They like to hurt themselves. It’s not really their fault. It’s just that, collectively, they’re incapable of controlling their own greed. We need to get them help. And an important part of that help will be putting them in a straitjacket so that they can’t keep hurting themselves.

The name of that straitjacket? Regulation.

And this is my primary objection to the Bush bailout plan: It throws money at a symptom without actually curing the disease. The fact that the symptom itself (the dead weight of these sub-prime mortgage securities) is bad enough that it needs to be addressed doesn’t mean we should be ignoring the disease. And that means that part of this bailout needs to be a re-institution of the post-Depression regulations that were put in place to stop exactly this kind of disaster from happening again.

But there’s also another problem to be addressed here: The bad mortgages.

The bailout is designed to buy up those bad mortgages, wave a magic wand over them, and make them disappear. (This looks like another analogy, but it isn’t. The Treasury Department really has no idea what they’re going to do with these mortgages once they buy them.)

But, again, that’s just a crude attempt at treating the symptom. The problem is that these are bad mortgages. Just transferring ownership to the public isn’t going to change that fact.

So why are these bad mortgages? Because (a) the people who borrowed money under these mortgages are likely to default on their payments and (b) the value of the property itself has been devalued so that foreclosure won’t recoup the lender’s investment.

And why are these people likely to default on their payments? It’s not as if anyone wakes up one day and says, “You know what would be fun? Getting foreclosed and ruining my credit!”

Well, there are two primary reasons:

(1) They have lost the income that allowed them to make the payments on the mortgage. (They may have lost their job or the other costs of living may have risen to a point where they can no longer afford the payments.)

(2) The size of the payment has increased to the point where they can no longer afford the payment. (The result of an adjustable rate mortgage, a balloon payment mortgage, or similar “teaser rate” schemes.)

There’s little that can be done about the former (short of strengthening our economy in general), but the latter is — once again — the direct result of deregulating the mortgage industry. The types of mortgages are predatory in nature, irresponsible for both lender and borrower, and (as we have seen) extremely dangerous for our economy.

It should be obvious to anyone looking at this crisis objectively that these types of loans need to be regulated out of existence. Like usury interest rates, there is no reason for them to exist.

But I would go one step further. We shouldn’t just be getting rid of these loans going forward, we should be figuring out a way of retrofitting the existing loans so that the people currently holding these loans can continue making their monthly payments.

I’m not a mortgage expert, so I don’t know the best way of accomplishing that. But we know that the homeowners with these mortgages were (and probably are) capable of making a reasonable monthly payment. The goal is to find a way to restructure these mortgages to lock in this reasonable monthly payment. And that may be offering a lower interest rate; extending the term of the loan; or any number of other things.

For the loans that we end up purchasing as part of this bailout, this type of retrofitting should be relatively easy to carry out under the auspices of a properly formulated agency. For other loans of this nature out on the market, we can probably offer incentives to encourage/bailout the financial institutions needing to restructure these “assets” on less favorable terms.

REHABILITATION PLAN

So instead of talking about a “bailout”, let’s instead talk about a Rehabilitation Plan based on three pillars:

(1) We will treat the immediate symptom of this crisis by buying up these bad loans, giving our financial institutions some breathing room.

(2) We will re-institute proper regulation of our financial system to insure our economic security in the future.

(3) We will retrofit existing ARMs and similar mortgages to reduce the foreclosure rate. This will benefit homeowners, help to stabilize these rocky segments of our financial markets, and reduce foreclosures (which will also help the real estate market recover and further stabilize the market).

Immediately after the first Bush/Gore debate in 2000, preliminary polling showed that Gore had won the debate (56% to 42%). But Bush’s surrogates hit the airwaves like a hurricano: Bush had performed well considering that he sucked at debating. And did you notice how Gore was sighing a lot? How disrespectful!

By the end of the week, Gore’s debate win had been flipped and he found himself completely on the defensive going into the second debate.

It’s hardly shocking to point out that televised Presidential debates have always been about more than making strong and compelling arguments based in fact. You don’t have to look any further than the poll results which showed that people listening to the Kennedy/Nixon debate on the radio thought Nixon had won while people watching the same debate on television thought that Kennedy had won. And while that poll has been disputed, the belief that visual presentation is an important factor has nevertheless shaped the media’s coverage of the debates.

The media’s coverage has two significant effects: First, it defines the criteria that people use to determine whether a debate was won or lost. Second, the media’s “consensus narrative” of the result of the debate will reshape the opinions people have of the debate. (The Bush/Gore debates are the most pertinent example of that effect, but it’s really a manifestation of the same psychological factors that contribute to peer pressure. Ever known someone who saw a movie and liked it, but then decided it sucked after discovering that Rotten Tomatoes rated it at 15%? Same thing.)

The recent conviction has been that Sarah Palin is destined for an epic failure when she goes to debate Joe Biden. But even if we assume that Palin’s shortcomings in knowledge and experience on the national stage will manifest themselves, there are still three ways in which she could achieve a significant upset.

First, there’s the Expectations Game. It seems absurd to me that the candidates should be graded on some kind of personalized curve, but that’s nevertheless the reality of it. (“Well, Candidate A is clearly not as intelligent or insightful as Candidate B. But, frankly, Candidate A is a complete idiot and he did manage to walk to the podium without walking into a wall… so I think that’s an A+ performance. Candidate B, on the other hand, mispronounced the name of a the Vice President of Paraguay, so I give him a C.”)

And could expectations be any lower for Sarah Palin at this point?

The McCain campaign’s decision to sequester Palin from the press has met with ridicule and criticism. The clear narrative that has developed is that the McCain campaign has decided that they can’t let her answer questions because they don’t believe she can answer them. And I’ve heard plenty of people express the idea that she must be “even worse than we think” because the McCain campaign apparently believes that the damage it’s taking from sequestering her is better than the damage it would take if it didn’t.

But it’s also possible that the McCain campaign has simply decided that this is the best way to lower the expectations for Palin going into the debate.

Basically there is a strategic advantage to making Sarah Palin look like the Uwe Boll of politics. If you go to a Uwe Boll film you can easily find yourself saying, “Well, that wasn’t so bad. I mean, it didn’t make blood actually run from my eyes.” Whereas if Steven Spielberg had made the same film, the words “that wasn’t so bad” wouldn’t have even crossed your mind.

Similarly, with expectations set so low, Sarah Palin has a pretty low hurdle to clear. They did the same with Bush in 2000: Set the bar as low as they possibly could and then deliver a decent debate that looks positively amazing compared to the expectations.

Second, there’s the matter of Looking and Sounding Presidential. This has absolutely nothing to do with actually saying anything insightful or intelligent. It’s a matter of visual presentation; a smooth speaking style; and not saying anything that’s factually incorrect.

It’s very clear that Sarah Palin is good at delivering a canned speech. But she’s also apparently very good when it comes to political debates. Her opponent in the Alaskan gubernatorial debate cites her performance in that debate was the turning point in the campaign. And a large part of her success lay in delivering simple answers in an authoritative fashion.

The McCain campaign has forced changes in the format of the VP debates in order to simplify the questions and shorten the answers. You can rest assured that they are spending all of their free time coaching Palin in short, canned responses.

Finally, there’s the Post-Debate Spin. This is where the campaign surrogates try to establish the narrative of what happened in the debate. And this is crucial because (a) more people will see this post-debate narrative than will actually see the debate itself and (b) as we’ve discussed, even people who actually saw the debate can have their opinion of it re-shaped by the media’s narrative.

My point with all this? Simply that we shouldn’t be setting our own expectations too high in hoping for a complete Palin meltdown at the debate. And that, in some ways, by exaggerating our own expectations of Palin’s failure we end up feeding into the anti-intellectual process that Republicans use to “win” these debates.

I’m hopeful that we will see Palin screw-up and become an even bigger millstone around McCain’s neck when it comes to independent voters. But I think that the growing consensus that this is some sort of guaranteed slam dunk certainty is about as naive as the certainty everyone had that Gore would use the debates to solidify his 3-5% lead over Bush in the national polls.

I’m actually much more hopeful about this Friday’s debate on foreign policy between Obama and McCain. The expectations game favors Obama; Obama looks and sounds more presidential; and if Obama can win that debate it will end up establishing a narrative that will be almost impossible for McCain to overcome as they move towards the final debate on domestic policy.