Grasping Reality on TypePad, by Brad DeLong

You know, we have llike seen this before. On health care:

• McCain started with a tax credit that was equal in aggregate to the additional tax he levied on employer-sponsored health benefits in the first year--in later years the credit became much smaller than the tax.
• Then it was like ooops, that's not popular. We know--we never intended to subject employer-sponsored benefits to the FICA tax, only to the income tax.
• Then it was like ooops, now we're scared that the plan is fiscally irresponsible and will raise the deficit. We know--we will cut Medicare!
• Then it was like ooops, we have to carry Floria. We know--have Sarah Palin say that McCain will not cut but will protect your entitlements.

Can't anybody play this game? If we lose the election to these clowns, I am going to be really embarrassed. It seems as though nothing is competently staffed out--as if nobody in the McCain campaign cares about actually having policy proposals, but only about having something incoherent that an ignorant and lazy reporter can be deceived into thinking is a policy proposal.

The latest installment of this: after demonstrating John McCain's bad character and unfitness for the presidency trying to "turn the page" from issues like the financial crisis that people care about to "character," John McCain further demonstrates his bad character and unfitness for the presidency by trying to turn the page back. And look what we have:

Last night McCain said that he had a housing plan--and that "it's my proposal, it's not Sen. Obama's proposal, it's not President Bush's proposal. But I know how to get America working again, restore our economy and take care of working Americans...":

Transcript of second McCain, Obama debate - CNN.com: You know that home values of retirees continues to decline and people are no longer able to afford their mortgage payments. As president of the United States, Alan, I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes -- at the diminished value of those homes and let people be able to make those -- be able to make those payments and stay in their homes. Is it expensive? Yes. But we all know, my friends, until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy. And we've got to give some trust and confidence back to America. I know how the do that, my friends. And it's my proposal, it's not Sen. Obama's proposal, it's not President Bush's proposal. But I know how to get America working again, restore our economy and take care of working Americans. Thank you.

But it soon develops that much of Senator McCain's proposal is not his but Barney Frank's, and that the differences make it not a homeowner relief bill but an imprudent banker profit and rescue bill:

Victoria McGrane: Details provided to reporters by senior adviser Doug Holtz-Eakin Wednesday morning make one thing clear: Taxpayers would directly pick up the tab for the difference in cost between a homeowner’s old, too-expensive mortgage and the cheaper one provided by the government... something that congressional lawmakers, led by House Financial Services Chairman Barney Frank (D-Mass.) specifically avoided when they crafted their own landmark housing bill... which Holtz-Eakin says provides at least part of the authority McCain would need to carry out his plan.... “Clearly we face the trade off that we would in fact be taking the negative equity position and putting it on the taxpayers books instead of putting it on the private lenders books or the homeowners books,” Holtz-Eakin told Politico. “We think the balance of risk has shifted to the point where this is the way to go”...

And the bill as described on McCain's website is still different:

Ginger Yellow: Holtz-Eakin's description may be the true one (it's the only way this makes sense as a financial rescue package rather than a homeowner bailout), but it flatly contradicts the description on McCain's website, which says "For those that cannot make payments, mortgages must be re-structured to put losses on the books and put homeowners in manageable mortgages. Lenders in these cases must recognize the loss that they’ve already suffered." Now, given that the plan presented on McCain's website is utterly incoherent and probably illegal, I'm willing to give Holtz-Eakin the benefit of the doubt. But we have a right to know whether McCain's website or his economic adviser is lying.

But by the time I got to the website, it read differently:

JohnMcCain.com - McCain-Palin 2008: For those that cannot make payments, mortgages must be re-structured to put losses on the books and put homeowners in manageable mortgages. Lenders in these cases must recognize the loss that they’ve already suffered.

Apparently the schmuck who was assigned the job of writing up the web description did not believe the plan could possibly be what he was told it was.

Jackie Calmes has more. She does not sound happy:

Taxpayers, Not Lenders, Would Bear Costs of McCain’s Mortgage Proposal /a>: The campaign of Mr. McCain’s Democratic rival... condemned the proposal Wednesday. It said in a statement, “The biggest beneficiaries of this plan will be the same financial institutions that got us into this mess, some of whom even committed fraud.” Beyond the costs, the proposal could encounter a backlash from voters, especially those who have had to work hard and sacrifice to keep current on their mortgage payments and who might resent bailing out fellow homeowners who got themselves into financial trouble.

Mr. Holtz-Eakin suggested that “the taxpayers’ contribution” would be the price of getting the quickest possible relief to homeowners.... Though Mr. Holtz-Eakin spoke of the urgency for action, he said Mr. McCain did not propose the idea as part of the recent bailout negotiations between Congress and the White House. So it would not begin until after Mr. McCain, if elected, takes office in January and issues an executive order. The White House and the Treasury Department declined to comment on the McCain proposal.... Mr. Holtz-Eakin... said the process of applying for a replacement mortgage would be “very simple,” though clearly administering such a program would not be.... If [homeowners] passed a credit check, they would qualify for a Federal Housing Administration loan based on the reduced value of the homes, with lower principal and a lower interest rate. The government would pay off the original loan, Mr. Holtz-Eakin said. That would take the bad debt off the books of the institutions...

JohnMcCain.com - McCain-Palin 2008: Homeownership Resurgence Plan: The direct cost of this plan would be roughly $300 billion because the purchase of mortgages would relieve homeowners of “negative equity” in some homes...

And let's not get into the massive confusion about the powers of the president to order the spending of money found in McCain's:

Transcript of second McCain, Obama debate - CNN.com: As president of the United States, Alan, I would order the secretary of the treasury to immediately buy up the bad home loan mortgages...

On matters like these, presidents don't order treasury secretaries, they ask congress to authorize.

JohnMcCain.com - McCain-Palin 2008: Homeownership Resurgence Plan:

John McCain will direct his Treasury Secretary to implement an American Homeownership Resurgence Plan (McCain Resurgence Plan) to keep families in their homes, avoid foreclosures, save failing neighborhoods, stabilize the housing market and attack the roots of our financial crisis. America’s families are bearing a heavy burden from falling housing prices, mortgage delinquencies, foreclosures, and a weak economy. It is important that those families who have worked hard enough to finance homeownership not have that dream crushed under the weight of the wrong mortgage. The existing debts are too large compared to the value of housing. For those that cannot make payments, mortgages must be re-structured to put losses on the books and put homeowners in manageable mortgages.

The McCain Resurgence Plan would purchase mortgages directly from homeowners and mortgage servicers, and replace them with manageable, fixed-rate mortgages that will keep families in their homes. By purchasing the existing, failing mortgages the McCain resurgence plan will eliminate uncertainty over defaults, support the value of mortgage-backed derivatives and alleviate risks that are freezing financial markets.

The McCain resurgence plan would be available to mortgage holders that:

• Live in the home (primary residence only)
• Can prove their creditworthiness at the time of the original loan (no falsifications and provided a down payment).

The new mortgage would be an FHA-guaranteed fixed-rate mortgage at terms manageable for the homeowner. The direct cost of this plan would be roughly $300 billion because the purchase of mortgages would relieve homeowners of “negative equity” in some homes. Funds provided by Congress in recent financial market stabilization bill can be used for this purpose; indeed by stabilizing mortgages it will likely be possible to avoid some purposes previously assumed needed in that bill.

The plan could be implemented quickly as a result of the authorities provided in the stabilization bill, the recent housing bill, and the U.S. government's conservatorship of Fannie Mae and Freddie Mac. It may be necessary for Congress to raise the overall borrowing limit.