Wednesday, May 07, 2008

McCain Must Focus and Fight -- Starting Now

The day after North Carolina and Indiana the Intrade pay-to-play betting odds in the race for president show Obama at 54 percent and McCain at 38 percent. But wait — it gets worse. The Democrats are favored to win the House and Senate by over 90 percent.

This is the investor class’s worst nightmare: A very left-liberal President Obama presiding over, well, a very left-liberal Democratic Congress.

If it moves, tax it. That’s the future. It’s not hard to predict higher taxes on investors, small businesses, oil companies, and corporations across the board. There will be a big move toward nationalized health care. Regulatory liberation for the unions. Trade protectionism.

None of this is good. But it’s realistic. Very few people in the financial punditocracy expect the three-house sweep, but the possibility is now out there for all to see.

Stocks are down today. Of course, it’s still early in the game. In fact, one of John McCain’s best calling cards in the campaign is that electing him president will stop the three-house sweep.

The last sweep of this kind was the 1993-94 Clinton victory. Financial markets did poorly. When the Gingrich Congress came in, markets quickly headed north. But I suspect the current conditions for a three-house sweep are more like they were in the late 1970s. The Clinton episode came in the aftermath of the Reagan years. Now it’s more like the stagflationary Jimmy Carter years with inflation running much faster than growth.

All these news stories about the declining Republican brand in Congress are certainly worth reading — including Newt Gingrich’s attack on the GOP House. Mitch McConnell believes Senate Republicans will stay in the mid-forties. He acknowledges they are the ultimate firewall. (Sixty is the magic number in the Senate for presidential vetoes.) But I don’t want to write McCain off. I’m just citing the Intrade numbers.

Nonetheless, the Arizonan has got to mount a Herculean effort from here on out. He’s got to lay out a clear economic-growth strategy; a clear foreign-policy wartime strategy; and a pro-production, pro-growth energy strategy. All the while he has to stay on track for conservative social values.

Hillary Democrats and Catholics (especially) can be brought in by McCain. But he has to work on it. This whole summer-gas-tax-holiday flap is a distraction right now. McCain should be hammering on the huge differences between himself and Obama on taxes, spending, trade, and energy. He’s got to focus, pick up his game, and fight.

He also should separate himself from President Bush on the key issue of the U.S. dollar. He should promise a restoration of King Dollar, or say he’ll turn King Dollar into a Strong McCain Dollar. A Strong McCain Dollar would curb inflation, gas, and food prices and restore American prestige around the world.

The philosophical differences between McCain and Obama are huge. (McCain has said as much.) I believe a McCain presidency is there for the taking. But he has to energize and punch hard. Take the gloves off. Start immediately.

Yesterday’s Democratic primaries were a true game changer. Now the real race begins. The betting markets are pessimistic about Republicans and optimistic about Democrats. It’s up to McCain to turn this around.

Let the real games now begin.