The Giant Blow to the Soloplexus

McCain's big mistake in this cycle was not Palin, rather it was how he reacted to the housing crash. As the market fizzled in September, Americans were ready to do what we do best when such mistakes occur - find a scapegoat. And, as usual, in such a financial catastrophe, the scapegoat ready to be slaughtered was "greed" or "lack of regulation." And of course, the common-man media was all to happy to oblige in framing it this way.

One problem - it isn't accurate. Stupidity, not greed, caused the financial crisis. Basically, for five/ten years we embarked in a global overinvestment in housing based on faulty premises. Large scale societal investments are not something that merely Capitalism does - command economies do them as well. The difference is that through the signal effects of prices and lost profits, the free market is more nimble at diagnosing when an overinvestment has occurred. In other words, if it were not for the free market system's signals, the stupidity of pumping our societal wealth into unwanted houses (or some other grand thing) would have continued for additional years on end.

Into this environment McCain should have fought back against the greed charge. Furthermore, he should have gone on the offensive. Something along the lines that "At this dangerous moment in America's financial history, the last thing we need is put a man (Obama) in charge who had the poor judgment to have a corrupt enabler of the crisis as one of his chief advisors (Jim Johnson, former Fannie Mae). It was the stupidity of men like Johnson, not greed that put us in this mess - something I foresaw when I tried to pass a reform act three years ago only to be stopped by the Democrat party." Instead, McCain blamed the crisis on deregulation and threatened to boycott the first presidential debate so that he could go to Washington to solve the crisis.

This mistake hurt McCain on many levels. First, he allowed his party to be portrayed as responsible for the crisis when he had powerful arguments that it was Dems (and by extension, Obama's) fault. Second, he missed a golden opportunity to diminish America's impression of Obama's judgment through tieing Obama to the corruption at Fannie Mae/Freddie Mac. Finally, by trying to cancel the first presdiential debate, McCain made himself look like he was unable to handle the 3 a.m. crisis phone call because he was unwilling to walk and chew gum at the same time.

As a result, it was in these weeks that McCain went from a small lead in the polls to being blown out. Of course, Palin may have played a role as well, but I think this was bigger.

About the author (updated in July 2012): Elliot Fladen is an attorney practicing law in Colorado Springs, Colorado.  Nothing in this blog is meant to constitute legal advice unless explicitly stated to the contrary.