We’re now 9 months into the Obama administration and, on a number of fronts, I think our country is more secure. Most of all, Obama has set a new tone in our relations with the world. But I continue to see our greatest source of our insecurity — our economy — as suffering from a failure of governmental leadership.

By now, everyone knows the story that got us into the current economic crisis. Primed by cheap capital and lax regulation, Wall Street took out huge sums of debt and gambled on everything from stocks to subprime mortgages. This bubble economy proved incredibly profitable for Wall Street and its executives took home tens of billions of dollars in bonuses. Then, the bubble burst. But instead of having Wall Street bear the brunt of this cost, a decision was made that its banks were “too big too fail” and so the government bailed them out.

As I wrote back in March of 2008, I’m not necessarily against the original bailout, but it should have been accompanied by a “new contract with Wall Street” where banks were regulated so they could never again be “to big too fail.” My point was that if the government’s thesis was right, that some banks were too big to fail, then we had a terrible set of market incentives. Banks would come to realize that they were immune from bankruptcy because the government would be there to bail them out. This would lead to a dangerous market system where banks got all the profits from gambling and society absorbed all the losses.

I hoped that the Obama administration would clean up this growing moral hazard on Wall Street, but we are unfortunately seeing more of the same. Obama’s central plan has been to make capital incredibly cheap for large banks so that they get credit flowing again. While the credit markets have admittedly improved, this cheap capital has also added to the risk-taking and the bigness of these banks. In other words, we’ve made the moral hazard worse. The recent profits by Goldman show that it has returned to its high-risk business. No one can fault Goldman for taking risk and making money–that’s capitalism. The problem is that they’re taking this risk with the government’s highly subsidized capital and implicit guarantee in the case of failure.

Obama’s economic team appears to believe that what’s good for Goldman, JP Morgan, and Citi is good for America. And recent reports show that our Treasury Secretary is spending much of his time with leaders of these banks. But the problem is that injecting more cheap capital makes these banks bigger and more likely to take catastrophic risks. That’s the formula that created our insecurity in the first place.

Even more importantly, the current approach goes against Obama’s core principles. He sold his candidacy as a way to “fire the whole trickle-down, on-your-own, look-the-other way crowd in Washington who has led us down this disastrous path.” But the current strategy is “trickle-down… look-the-other way” economics. We pump billions of cheap capital into banks and then look the other way as they put it into risky stocks and derivatives trading rather than into small businesses on main street. Stimulus funding that goes directly into main street’s pockets seems like a much smarter investment.

For America to be more secure, Wall Street needs a regulator, not a cheerleader. I still have hope that Obama can be the change that he promised. But it’s going to mean bringing the same determinism to changing Wall Street that he is currently bringing to the health care debate.

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The problem is that McCain seems willing to do anything to act like a “maverick,” even in situations where we need a steady and smart hand. When every economist was saying we were in trouble, he said we were doing well and Wall Street needed no regulation. Then, literally hours later, after his advisors got a hold of him, he said we were in crisis and proposed massive changes, including firing the head of the SEC and building a new regulatory apparatus to deal with unchecked corporate greed. There was no thought process to get him from one side of the debate to the other – he just seemed to jump from one unusual position to another on the opposite end of the spectrum thinking these unusual positions would show how he’s different. Indeed, his views are different – recklessly different than the mainstream. Now, he’s suspending his presidential campaign because he thinks we are in such turmoil that a 2-hour debate would dislodge our economy. Is this the stable leader we want with his hand on the red button?

And perhaps what upsets me most about all this is that McCain never had a preventive strategy. Until Wall Streeters started losing their jobs, the economy was strong in McCain’s mind. Never mind the massive home foreclosures. Never mind the crying out from economists on our unsustainable debt levels. Never mind the job losses among ordinary Americans. Then, Lehman traders lose their shirts and suddenly it’s a full-blown a crisis.

Listening to President Bush last night, I couldn’t help but feel that McCain shares Bush’s complete inability to comprehend nuance. Bush has gone from free market cheerleader to suddenly being so convinced that we need government action that he says if we don’t act immediately we will face a “long and painful recession.” Bush did not even acknowledge the possibility our economy could bounce back with a smaller initiative. It was the same oversimplified logic – do exactly what I say or there will be immediate and grave danger – that led us into the Iraq war.

We need a President who understands nuance and has the patience to make wise long-term decisions. And McCain seems to lack both nuance and patience. He frames his unusual decision-making style in terms of “change” and “reform,” but it is actually more of the same recklessness that got us into an unnecessary war in Iraq. The last thing we need right now is more firings, more angry rants about greed, or more stunts like canceling debates. What we need more than ever is smart, stable leadership that can inspire our country and the world to trust us again.

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The McCain campaign released an ad today called Celeb that argues Obama is a global celebrity who is ready to take the stage but not ready to lead. The ad plays scenes from the large crowds that greeted Obama in Berlin and makes it seem like Obama’s worldwide popularity is dangerous.

The ad strikes me as particularly odd on two levels. First, McCain has talked a lot about the need for America to use all of the powers at its disposal, not just the military. He regularly says we need to think in terms of cultural and economic influence as well as military might. Thinking in these terms, Obama’s crowds in Berlin are a promising sign that America could regain some of our cultural leadership and this could give us greater influence to tackle issues from Iran to Afghanistan with a broader alliance. How we could we be safer, as the ad suggests, to have our current President, who spends his overseas trips doing sword dances with Saudi royalty while demonstrators line up to protest his visit in each country he touches down?

The second irony of the ad is it specifically says that Obama is an actor and therefore not a president. Has McCain forgotten his hero? He was, as we know from every speech he gave in the primary, a “foot soldier in the Reagan revolution.” News to McCain: Reagan was an actor and a transformational President. And Reagan’s “celebrity style” was part of what allowed him to be such an effective communicator. Reagan’s famous “Mr. Gorbachev, tear down this wall!” was political theater… and it was highly effective.

If I were McCain, I’d stop putting out nonsensical ads criticizing my opponent for his worldwide appeal and try instead to learn something from my opponent about how to inspire others and create a vibrant movement for change.

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The most frustrating part of the book from the excerpts I’ve seen is that its author was literally playing the role of propagandist-in-chief. As the President’s press secretary, it was McClellan who pushed propaganda as his day job. And if he had such strong beliefs about how the President was misleading us during a time of war, why did he wait years (until a profitable book contract is signed no less) to make his opinion heard. Our nation literally lost some of our best and brightest every day during his time in office and yet he decided to postpone his moment of “courage” to “stand up” to the President until years later when the President’s approval ratings were at their lowest levels.

I marched in the demonstrations against the Iraq war. And I was called anti-American by many who said I did not care about our country. But, in fact, I was doing what I believed was right for this country that I love and cherish so deeply. What is truly anti-American is to do a job voluntarily (– press secretaries unlike our military have not made a time-specific commitment –) and believe that you are hurting our country in the process and not say a single thing for years while our nation loses our bravest young people. I understand those who supported the war. I understand those who were against it. On both sides, people did what they thought was best for this country. But for McClellan to think we were making a colossal mistake and go on pushing the propaganda anyway strikes me as the worst kind of coward.

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I find McCain’s behavior disturbing on many levels. For starters, why should he be giving voice at all to Hamas? I find it offensive that we are going to allow a Hamas leader to play any role whatsoever in our electoral process. Does McCain want us to make up our minds on this election based on the views of a terrorist?

Second, why in the world would we trust that a Hamas leader is saying what he actually believes? Perhaps he is saying he supports Obama because he wants McCain to win the election and thinks such an endorsement will help McCain. After all, he could not possibly think his support would help Obama.

Finally, it seems obvious to me that Obama is actually Hamas’ worst nightmare. Obama will end the war in Iraq. He will rebuild America’s relationship with the international community. And he will move the U.S. off dependence on oil. These combined policy changes will undermine Hamas’ recruitment tools and the governments that support them. At the same time, Obama will strengthen our alliance with Israel.

John McCain promised us a better politics. But from quoting Hamas to endorsing a foolish gas tax holiday, he has not delivered. I’m still waiting for the straight talk.

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Boy, have we moved a long way from the JFK days! Back then, leaders responded to challenges by challenging the American people to rise above. Facing a threat from the Communist exploration of space, Kennedy promised to put a man on the moon. One imagines that today Kennedy would turn our oil problems into an inspired call to reduce our energy dependence. Yet, somehow, Bush’s response is not to try to curtail our demand on foreign oil but to supply more oil. Yet, drilling in the Arctic would hardly impact oil prices. And cutting the gas tax would only spur more U.S. demand, which would further drive up prices, likely reducing the impact of the tax cut in the first place and leading us to send more of our money to Saudi Arabia instead of to the U.S. government.

The best way in the long-term to drive down oil prices is to make major investments in green technology that reduce our demand for oil and increase the supply of affordable substitutes. Even just announcing such a program could impact futures markets today. In the shorter-term, one way to drive down the price of oil is to strengthen our currency. According to a recent piece in the Wall Street Journal, “If the dollar had merely retained its value against the euro, oil would be in the neighborhood of $70 a barrel. Dollar weakness explains a large part of the oil price surge.”

Gas prices in the 1990s hovered around $20 a barrel; today, they’re closer to $120. President Bush has been a miserable failure in understanding and guarding against this rise, which has been tragic for many American workers. Unfortunately, he still has not learned the economic lessons of how to get us out of the mess he has led us into. Destroying our natural environment through drilling and reducing our gas tax so we send more money to the Saudis is not the answer. It will only lead us further down the path of oil insecurity.

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Even in an ideal world, I’m not sure that a boycott is the most effective way to influence China’s deeply concerning human rights record. After all, Nixon’s trip to China was arguably the most impactful U.S. act in shaping China’s future and Nixon went there more in friendship than in protest. At the same time, he delivered a clear message. Similarly, I tend to think America should fully participate in the Olympics while wearing a clear symbol of our support of human rights and making clear our hope that China will change its ways.

What’s sad, though, is that our country, which for so long has been an image of freedom despite all our shortcomings and our continued inequities, is now seen so negatively worldwide that it is not clear even if we tried to make a statement anyone would take us seriously. It is yet another sign of one of the great casualties of the Bush years: America’s image in the world.

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As taxpayers, you and I are literally paying the over-stretched salaries of Wall Streeters. Here’s how this works. Every time, a Wall Street firm makes an investment, they take a salary and pay their investors based on the difference between the expected value of the asset they take on and the value they paid. Over the last few years, these firms have been wildly overvaluing the worth of mortgage-backed securities. They took large bonuses on these over-sized valuations. Now, that the real value is turning out to be much less than expected, the Federal Reserve is taking on these assets by printing U.S. dollars to cover them, literally devaluing the greenbacks you and I have in our wallets to fund the past bonuses of wealthy executives.

I understand the argument that this bail-out was necessary in this single case to help insure we don’t have a much broader liquidity crisis. I’m even willing to go along that the Fed made the right move in this particular case in authorizing the bailout. But at the least, the Fed should be making a clear statement along with its generous gift of money that our country needs regulations in place in the future so this kind of extreme leverage does not happen again. And the Fed should be making clear it is not going to be there for investment banks in the future so they should watch their balance sheets more closely. Unfortunately, the Fed made the bail out without even a statement on the grotesque unfairness of what is taking place and without a statement that this should not happen again.

All this, of course, is two more blows to America’s economic security.  First, our sinking dollar only further undermines our economic might in the world. Our economy’s ability to compete with the EU and China has been hit hard – just compare our dollar to the Euro. And, second, our country’s unfairness and continuing divide between rich and poor undermines the social fabric that makes this country so great, so proud and so free. Americans say overwhelmingly today that they’re unhappy with the direction this country is headed. It is easy to see why.

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In the long-term, we need three fundamental changes in our economy to improve our financial security. First, we need far greater financial transparency. We are living in a world where not even those on Wall Street understand what they are trading. This has become clear during the sub-prime debacle as financial analysts have been clueless as to how much and what kind of debt banks actually own. The lack of transparency puts the market in a roller coaster mode because one small, unexpected release of bad numbers leads analysts to worry that all the apples in the basket might be rotten.

Second, we need regulation. One problem over the Bush administration years especially has been that credit was given out with no background checks and often with teaser rates that confused the consumer. The problem was not that interest rates were too high, but that credit was too confusing and so many borrowers got in over their heads without even knowing it. Despite this, we’ve had only minimal changes in regulation since the subprime debacle.

Third, we need to balance our budgets. This is one of the reasons for our economic stability in the 1990s and our debt is one of the reasons that our dollar is declining so rapidly today because investors worldwide are losing faith in our country and our currency as our debt extends beyond our grandchildren’s ability to repay.

All of these policy issues should be part of the discussion as we figure out how to get our economy out of the current mess. I agree that at the moment we need a short-term stimulus but we also need to be repairing our economic house so we are more secure in the future.

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Amidst all this, the administration position appears to be to beg and hope. Last week was the begging. The President went to Saudi Arabia to plead with the government there to lower their oil prices. And this week comes the hope. The Federal Reserve this morning cut interest rates by 75 basis points in the apparent hope that traders will forget the record writedowns by Wall Street and short earnings statements. But just like the economic stimulus plan, it is likely to be too little, too late.

One might ask why this is all so detrimental to our security. I think the best illustration is last week’s trip by President Bush to Saudi Arabia. He literally spent his time there begging for a cut in prices on oil and doing a sword dance with Saudi leaders. An onlooker would hardly know from Bush’s antics that this is the non-democratic country where 15 of the 19 terrorists of September 11 are from. The leaders there are despised even by many moderates in the Muslim world. And Bush is dancing with them, sword in hand. For Bush to try to promote democracy in the region while dancing around with a large sword next to his non-democratic friends from Saudi Arabia sends precisely the opposite signal we are trying to give to the region. It says we are willing to do anything, even compromise our democratic principles, for oil because our current economy is in such turmoil. And, indeed, as David Isenberg points out below, we’re even willing to sell large quantities of arms to the Saudis.

So, here’s where our increasingly unregulated and unequal economy has brought us: we’re selling non-democratic governments in the Middle East arms, while they’re buying up our banks. I’m the first to acknowledge that this is not just about economics, but we can’t begin to think clearly in our foreign policy until we get our economic house in order.

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