History is Happening Now

Everybody says this country is in the middle of an economic crisis. I’m not an expert, but I think the economic crisis can be boiled down to this: A lot of investors on Wall Street gambled that housing prices would keep going up — and when the housing values started dropping and these investors lost a ton of money, it created a set of conditions such that the whole economy could now come crashing down, causing millions of hard-working, tax-paying, law-abiding Americans to lose their jobs and more.

We are also apparently facing a political crisis, which can be described this way: Although our top-tier political leaders — including the President, the Speaker of the House, the Senate Majority Leader, and Republican leaders in both houses of Congress, as well as both major party presidential candidates and the vast majority of the U.S. Senate – say it’s necessary for the government to spend $700 billion in taxpayer money to avert an economic catastrophe, a slim majority of Congresspeople (mostly Republicans) recently rejected that idea, largely because the American people are overwhelmingly against it.

There is also a crisis of trust: The American people do not trust President George W. Bush — and many Americans wish they could take a swing at him. So when George Bush went on television last week and told the American people that a $700 billion bailout was necessary to save the economy, most Americans were tempted to reject the idea for that very reason. Americans also do not trust Congress. They do not trust government.

This crisis is also a crisis of ideas. Over the past week or so, as I’ve discussed the economic situation and the proposed bailout plan with fellow news watchers, I heard the same complaint over and over again: It’s unfair — morally repugnant, even – that the government would spend $700 billion “bailing out” investors who made stupid, irresponsible decisions with their own money. And many people react with nearly equal disgust to the idea that the government should bail out irresponsible borrowers who took out a mortgage they couldn’t afford. People say, “We have to live with the consequences of our choices in life – so why do these Wall Street fat cats get a free pass?”

In an effort to support a bailout, I’ve responded this way. “We have two problems. We have an economic problem, and we have a moral problem. Let’s deal with the economic problem first, and then we can deal with the moral problem later.”

In other words, let’s pass this $700 bailout now to keep our economy from falling to pieces — and then we can do something to make life fairer and better for the hard-working, tax-paying, law-abiding Americans who will foot the bill. It may be a bitter pill to swallow, but we’ve got to pass this $700 plan for the sake of the hard-working, tax-paying, law-abiding citizens who will suffer if the economy goes down in flames.

Of course, I think I’m pretty persuasive. (I always think that about myself.) But I don’t seem to win over many converts to my way of thinking among the hard-working, tax-paying, law-abiding folks I talk to. I have a theory about why many of them don’t see things my way: The premise of the bailout plan – that we have to save the fat cats on Wall Street or else the little guys will suffer — is just too hard for many of us to fully accept. The idea that our personal, individual fates would be determined by factors so far outside of our control or understanding is a radical leap from what many political leaders — especially conservatives — have been telling us our whole lives.

For an especially blatant and obnoxious example, consider this rant I recently heard on Jay Severin’s right-wing radio program here in New England. Severin introduced his rant by first playing an excerpt from an interview with a woman who had just witnessed Sen. Hillary Clinton’s speech at the Democratic National Convention.

INTERVIEWER: What does this moment mean to you?

CLINTON SUPPORTER: Hillary Clinton proved to me tonight that she would have made an excellent president. She was presidential tonight. She’s evidence that women have come so far, and to let gender be a hindrance, to let a phenomenal and intelligent, a powerful, a moving, a motivating person not move us into the next generation, not move us into the future that that we deserve, not move us into the great economy that we deserve, not to be able to address the concerns that we deserve. And now everybody just wants us to (inaudible). I saw in Hillary what my potential future could be. I saw more than just dreams. I saw things that could be realities. In her eyes and in her words, I could envision the reality of knowing that we could actually have green jobs instead of (inaudible), that we could have the image that we once had of a United States that was respected … I saw the country that we strive to be and wanted to be. And she could have made it happen.

JAY SEVERIN: The woman you heard is at best an unfortunate. And, in fact, an old fat loser. I haven’t seen her but I’ll bet you she’s fat. I don’t have to see her to know she’s a loser. So getting back to my point, “You know, Uncle Jay, what’s the difference, at least in theory, between a Republican and a Democrat, a conservative and a liberal?” Here it is: the words of this fat loser you just heard. She, she — two things. She sees her own personal potential, her life, is not merely related to, but inexorably tied, to what a politician says and does. And two: Her life is going to be better or worse based on whether a Democrat or a Republican is elected president. And by the way, on that second count, I’m not sure that’s entirely untrue, because a Democrat president is going to take your stuff and mine and give it to fat losers. Now the difference, kids, between a liberal and a conservative, a Republican and a Democrat, is that when I wake up in the morning, from the moment I open my eyes til the moment later on I close them again, the only thing I want to be is … left alone! I don’t want government to touch me, tell me, take my stuff. Just leave me alone! The notion, to me, that the government and who it is or what it is would have a daily impact on the quality of my life, is so humiliating and embarassing that, by definition, makes you one of life’s losers.

As I’m sure you can guess, Severin is against the bailout plan — as are most right-wing radio blowhards, and I believe their influence extends far beyond the relatively small number of Americans who listen to them and take them seriously. Severin’s words are powerful because they tap into a way of thinking that many people consider fundamentally American — although I personally don’t believe these ideas are any more “American” than racism or hating homosexuals. (The truly “American” ideas are in the U.S. Constitution and other founding documents, in my opinion.)

So when I try to convince people that their own futures are somehow contingent upon the federal government spending a vast sum of money saving banks in New York City, many just can’t fully accept it. They may understand it at an intellectual level — but they don’t accept it in their gut. It’s too … unfair.

This is a crisis. And it’s hard to see how this will all end.

I think many Republican Congresspeople are stuck between a rock and a hard place. On the one hand, they can oppose a bailout and risk economic catastrophe for which they may be blamed. On the other hand, they can support a bailout which (a) contradicts everything they believe about the proper role of government, and (b) is hugely unpopular. Clearly, most would rather risk economic catastrophe.

Democrats are similarly stuck: They have the votes to pass their own version of the bill — but any partisan bill they pass will be hugely unpopular and will probably lead to their defeat, if not in 2008 then later, in 2010. Or, Democrats can do nothing and risk economic catastrophe. If Congress does nothing and catastrophe ensues, Democrats will probably be able to blame Bush and the Republicans for it, since the catastrophe came at the tail end of a Republican president’s second term. So Democrats also have an incentive to do nothing. (The only person with a clear incentive to get something done is Bush, who knows his legacy will be worse than the worst if he leaves America fighting two wars and facing an economic disaster not seen in this country since the Great Depression.)

So here’s my question: Instead of spending $700 billion now, why not let the catastrophe happen — and then spend $700 billion — or more if necessary — providing a safety net and a recovery plan?

Allowing the economy to collapse will address the crisis of trust, because the catastrophe will effectively indicate that Paulson, Bush (oh, the irony) and the other political leaders who told us the crisis was coming weren’t just pulling our chains. It will also resolve the political crisis: People may oppose action now to prevent the pain, but once the pain is upon us, the American people will support politicians who help the country recover. It will also resolve the crisis of ideas: When millions of hard-working, tax-paying, law-abiding Americans lose their jobs, their homes, etc — they will be compelled to acknowledge that their own fates are determined by more than just their own hard work and good sense. 

Allowing a catastrophe to occur would be painful — and as readers of this blog know, I’ve spent the last week arguing that the government needs to act and act fast, even at the risk of passing an ill-considered bill — but if the American people aren’t willing to endorse the logic behind this bailout, doesn’t it make sense to let the economy play itself out, at least for now? (With Obama in the White House, there’s a good chance the recovery would be swift and effective, I think.)

Am I being irresponsible to even suggest that we allow the economy to play itself out without government intervention?

Every poll I’ve seen about the audience’s reaction to last night’s presdiential debate suggests McCain put in solid performance but Obama did even better, emerging in a stronger position than when the debate began.

First, there’s this from Politico:

A USA Today/Gallup poll released Sunday showed 46 percent of debate-watchers believed Obama outperformed John McCain, while.just 34 percent said McCain got the better of the exchange.

Thirty percent of debate-watchers said they had a more favorable opinion of Obama following the debate, compared with just 14 percent who said their opinion of him had worsened.

Respondents whose opinion of McCain changed as a result of the debate were evenly split, as 21 percent said their view of McCain had improved because of it and 21 percent said it had worsened.

The poll surveyed 701 adults who watched Friday’s debate, and all interviews were conducted on Saturday.

Obama’s numbers have ticked up nationally since the debate, the first of three scheduled this year, along with next Thursday’s vice-presidential face-off.

There’s also this:

“Who won the debate polls” are notoriously subjective, of course, so take them for what they’re worth. But according to three post debate polls, respondents think Obama got the best of things tonight:

CBS News: Obama won 39%, McCain won 25%, Draw 36%

Insider Advantage: Obama won 42%, McCain won 41%, Undecided: 17%

CNN: Obama “did better” 51%, McCain “did better” 38%

This Huffington Post article includes some data on this score, including:

A focus group of 45 voters with an “unmistakenly Republican tilt” believed that Obama won the night handily:

[B]y a 38 to 27 percent margin these voters said that Obama won this debate. … A look at the underlying numbers shows that Obama made important gains that could endure through Election Day. These undecided voters had a strong positive reaction to Obama on a personal level. Before the debate, just 40 percent viewed Obama positively, but this skyrocketed to 69 percent after the debate – a remarkable 29-point gain that left him more personally popular than McCain despite this group’s conservative leanings. He also made large strides on being seen as independent, from 44 percent to 65 percent. And in head-to-head matchups against McCain, Obama made significant gains on who “shares your values” and is “on your side.”

And this:

A CBS News instant poll finds:

40% of uncommitted voters who watched the debate tonight thought Barack Obama was the winner. 22% thought John McCain won.  38% saw it as a draw.
68% of these voters think Obama would make the right decision
about the economy. 41% think McCain would. 49% of these voters think Obama would make the right decisions about Iraq. 55% think McCain would.

And here’s what the right-wing Wall Street Journal Editorial Board had to say:

The Wall Street Journal editorial board felt that McCain won on foreign policy while Obama won on the economy:

As planned by the commission on debates, most of the night was devoted to foreign policy and there we give the clear edge to Mr. McCain. This is the ground where the 72-year-old is most comfortable, and you could see it in his self-confidence, as well as his command of history and facts.[...]

Where Mr. Obama did score better was on the domestic front, where he tried repeatedly to link Mr. McCain to President Bush and to what he called a failed “economic philosophy.”

And here’s a little tidbit from the NewsHounds website:

Not long ago, at 2:25 AM ET, on September 27, 2008, FOXNews.com’s question of the day on the America’s Election HQ page asked whether John McCain or Barack Obama won last night’s debate. Obama is currently ahead 54-46%. It’s not a scientific poll but given that FOXNews.com readers are probably more conservative than a representative sample would be, we have to view this as a very good sign for Obama. Screen grab after the jump.

This was the debate Obama was supposed to lose, and he apparently won it.

Meanwhile, here’s what John McCain had to say about the debate:

“I was a little disappointed the media called it a tie, but I think that means when they call it a tie that means we win,’’ Mr. McCain was recorded by a television crew as saying on Saturday afternoon in a telephone call to Representative Chip Pickering, Republican of Mississippi.

I invite anyone to read the debate transcript and comment about their favorite exchanges or lines.

It’s Thursday night at about 10:15 p.m. Here is what’s going on right now, if I understand what I just saw on television:

1. Congressman Barney Frank, D-MA, cancelled an appearance tonight on The Rachel Maddow Show so he could attend an emergency meeting with House Republicans to try to crank out a plan to bailout the economy which is teetering on the verge of depression.

2. The House Republicans — who care more about their party than their country and know that most Americans do not support the $700 billion plan now on the table — refused to meet.

3. House Speaker Nancy Pelosi says she won’t allow a bill to go before the House unless it has significant bipartisan support. In other words, she won’t have Dems passing a $700 billion spending bill to bail out Wall Street without Republican support, which Republicans aren’t ready to give because they care more about winning an election than the economic future of this country.

4. Congress was getting close to agreeing on a bill today, until Bush — under pressure from John McCain — held a meeting at the White House with Congressional leaders and both major party candidates. The meeting unnecessarily injected presidential politics into this issue. Barack Obama reluctantly attended, but when he arrived he represented the Democratic position forcefully, while McCain effectively refused to take a position, frustrating the other attendees.

My predictions/fears: It will be quite a while — a week at least — before Congress passes a bill to bailout the economy. Over the course of the next week, the stock market will become increasingly volatile as the financial world loses confidence in Congress’ ability to act. Finally, Democrats will be forced to pass a wildly unpopular spending bill which will be attacked by Republicans as unnecessary. Democrats will spend the next decade trying to convince a skeptical public that this bill was necessary to save the economy.

The takeaway: John McCain and House Republicans would rather see another Great Depression than face personal embarassment or political losses. They are the opposite of patriots. From this point on, any Republican who questions the patriotism of a Democrat deserves a punch in the face. (But don’t punch him/her yourself — take the nonviolent approach, please.)

It’s hard to convey in words the horror we should all feel watching/reading this:

COURIC: Why isn’t it better, Governor Palin, to spend $700 billion helping middle-class families who are struggling with health care, housing, gas and groceries? Allow them to spend more, and put more money into the economy, instead of helping these big financial institutions that played a role in creating this mess?

PALIN: That’s why I say I, like every American I’m speaking with, we’re ill about this position that we have been put in. Where it is the taxpayers looking to bail out. But ultimately, what the bailout does is help those who are concerned about the health care reform that is needed to help shore up our economy. Um, helping, oh, it’s got to be about job creation, too. Shoring up our economy, and putting it back on the right track. So health care reform and reducing taxes and reining in spending has got to accompany tax reductions, and tax relief for Americans, and trade — we have got to see trade as opportunity, not as, uh, competitive, um, scary thing, but one in five jobs created in the trade sector today. We’ve got to look at that as more opportunity. All of those things under the umbrella of job creation.

The best I can do is direct you to this parody in the New Yorker by George Saunders.

I’ve been reading through the transcript of Sarah Palin’s interview with Katie Couric.  When I read this part of the exchange, I felt an irrepressible urge to whip up a blog post:

Couric: You’ve said, quote, “John McCain will reform the way Wall Street does business.” Other than supporting stricter regulations of Fannie Mae and Freddie Mac two years ago, can you give us any more example of his leading the charge for more oversight?

Palin: I think that the example that you just cited, with his warnings two years ago about Fannie and Freddie – that, that’s paramount. That’s more than a heck of a lot of other senators and representatives did for us.

Couric: But he’s been in Congress for 26 years. He’s been chairman of the powerful Commerce Committee. And he has almost always sided with less regulation, not more.

Palin: He’s also known as the maverick though, taking shots from his own party, and certainly taking shots from the other party. Trying to get people to understand what he’s been talking about – the need to reform government.

Couric: But can you give me any other concrete examples? Because I know you’ve said Barack Obama is a lot of talk and no action. Can you give me any other examples in his 26 years of John McCain truly taking a stand on this?

Palin: I can give you examples of things that John McCain has done, that has shown his foresight, his pragmatism, and his leadership abilities. And that is what America needs today.

Couric: I’m just going to ask you one more time – not to belabor the point. Specific examples in his 26 years of pushing for more regulation.

Palin: I’ll try to find you some and I’ll bring them to you.

At first, my mind was racing excitedly with all sorts of sarcastic comments about Palin’s clear inability to answer Couric’s question, or even to artfully lie, her clear failure to meet the standard we should all except of someone who might soon be a heartbeat away from the oval office.  All sorts of partisan zingers were bouncing around in my head.  I was ready to attack. 

But the more I reflect on this exchange, the sadder it seems.  I am sad for the state of our democracy.  Sad that the news media has to act as if Sarah Palin is a serious candidate.  Sad that there are some people — serious people — who might read this exchange and genuinely not see anything wrong with Palin’s responses.  Sad that one of our two major political parties, whatever the content of their policies, would think to nominate (by fiat, mind you, not via election) someone so clearly unable to answer a question coherently.

I mean, I understand that our democracy is largely bought and paid for in a million overt and subtle ways, but can’t the major parties at least nominate competent bought-and-sold candidates?  Is that asking too much?

The McCain campaign is in big trouble.  Following its post-convention bump, the McCain-Palin ticket has fallen precipitously.  Sarah Palin’s negatives are way up.  Some polls show McCain-Palin 9 points behind Obama-Biden.  Polls indicate that the American public overwhelmingly trusts Obama more than McCain on economic issues, which means that the ongoing financial crisis plays right into Obama’s campaign narrative.  In what may be a desperate bid to inflate his reputation on the economy, McCain has “suspended” his campaign in order to “deal with” the emerging financial crisis.  And he now wants to back out of Friday’s debate.  This isn’t going to help him at all, I think.  Has any candidate ever in the history of presidential elections “suspended” his campaign?  The first debate, which was on national security, was perhaps McCain’s only hope for a dramatic recovery from his decline in the polls.  By asking to suspend the debate, McCain has basically ceded that potential gain to Obama, who needs only remain firm on the debate.  If McCain opts out of the debate, Obama can claim that McCain doesn’t take his presidential bid seriously; if McCain backs down, it looks as if he has blinked in the face of Obama’s firmness.  Are we witnessing the beginning of the end — the final, dramatic implosion of the McCain campaign?  Perhaps the only remaining question is whether Obama can win by a margin greater than ten points.  That, and what Obama should prioritize after he wins.

ANOTHER UPDATE: (Wed., 6 pm) Anybody on the left who sees this economic crisis — and the proposed $700 billion bailout plan now being debated in Congress – as an opportunity to wage political warfare should know that right-wingers are jumping on the same bandwagon:

Filling in last night for Keith Olbermann on “Countdown,” MSNBC’s David Schuster reported:

On a Republican blog, one consultant is urging Republicans in tight races to vote against the bailout, and attack Democrats who vote for it. Quote: “God himself couldn’t have given rank-and-file Republicans a better opportunity to create political space between themselves and the administration. Let this be the political establishment, Bush Republicans in the White House plus Democrats in Congress, saddling the taxpayers with hundreds of billions in debt – more than the Iraq War, conjured up in a single weekend, and enabled by Pelosi, by the way – while principled Republicans say no, and go to the country with a stinging indictment of the majority in Congress. A bailout may be inevitable, but so too can be the political benefit for Congressional Republicans if played correctly.” This open call for Republicans to vote based based not on, say, country first, coming from PatrickRuffini, a former RNC staffer…

More info about Ruffini’s advice to Republicans is available on The Huffington Post.

I’m sure they are asking themselves the same question Adrianna Huffington is asking Dems to ask ourselves: “How dumb, or frightened, do they think we are?”

I’m frightened when I read this in the Financial Times:

As officials struggled to address the mounting political objections, Ben Bernanke, Federal Reserve chairman, told Congress turmoil in the markets could lead to greater economic pain. Peter Orszag, head of the Congressional Budget Office, warned lawmakers of possible “chaos” if Congress did nothing. “You would have a financial market meltdown that would cause very severe dislocations  . . . maybe on the magnitude of the Great Depression.”

ANOTHER UPDATE: I’m getting nervous that with every passing day, the likelihood increases that Congress won’t pass a necessary bailout of the financial markets.

Consider this nugget from a New York Times article on the latest from Capital Hill:

“We’re anxious to act, and to act quickly, to restore confidence in the markets and in our country,” Senator Mitch McConnell of Kentucky, the Republican leader, said after the meeting.

Democrats, however, grew concerned that a lack of Republican support, particularly in the House, could leave them in an undesired alliance with the Bush administration.

Mr. Reid, at a news conference, said Democrats were waiting for Republicans to signal that they had enough votes to support the bailout. “We have all heard what went on over in the House today,” Mr. Reid said. “It was a scene of disarray. So we need the Republicans to start producing some votes for us.”

Or this from the New York Times’ DealBook blog:

Even before the proposal was formally presented over the weekend, Senator Jim Bunning, Republican of Kentucky, had declared that “the free market for all intents and purposes is deal in America.”

He echoed those thoughts in Tuesday’s hearing, declaring that Mr. Paulson’s plan was “financial socialism” and “un-American.”

Or this from a related Politico story:

“I don’t think a single call to my office on this proposal has been positive,” Sen. Sherrod Brown (D-Ohio) told Paulson at the Banking committee hearing. Even Democratic Sen. Chuck Schumer, a New Yorker with close ties to Wall Street, urged Paulson to consider scaling back the $700 billion request or accepting an arrangement where the money could become available in tranches after the plan has had time to prove itself.

If Democrats spend the latter half of this week fighting Republicans in Congress to pass a plan originally put forward by the Bush Administration — it’ll be bad, in my view. Very bad.

UPDATE: According to The Washington Post, It seems like nobody on the left or the right likes Treasury Secretary Hank Paulson’s $700 billion economic bailout plan — except for Paulson and Fed Chairman Ben Bernanke (and Dick Cheney).

Anybody want to speculate about what will happen if the plan fails?  

************

It seems we on the left are nearly unanimous in our opposition to the Paulson bailout plan.

Arianna Huffington calls it “a pricey debacle,” says the plan will “do nothing for American families,” warns Congress against being “bull-rushed into disasterous public policy,” and asks “How dumb, or frightened, do they think we are?”

Matthew Yglesias calls it “a terrible policy.”

And Paul Krugman says the plan “doesn’t make sense.”

Even some Republicans are getting involved, as Robert Kutner writes:

The ranking Republican on the Senate Banking Committee, Richard Shelby, appearing with Frank (on CBS’s Face the Nation), sounded if anything even more radical than Frank, accusing Paulson of “lurching from crisis to crisis” and helping Wall Street, but doing nothing for the homeowner. Shelby, whose support is crucial to the plan, later issued a written statement that he “remains at this point unconvinced” of the proposal’s merits.

Kuttner himself writes:

No self-respecting legislator should vote for this lopsided plan in its present form, and a bracing debate should shed light on what the two parties really stand for.

So what happens when the plan remains unchanged and goes to a vote? Do we agree with Kuttner? Should we urge our elected leaders to vote it down? Should we expect Obama to vote against it, in that case?

And why are we all — Krugman, Huffington, Yglesias and Kuttner, that is – talking about the Paulson plan, anyway? Isn’t Congress run by Democrats?

For an indication of what’s at stake, please read this relevant article in the New York Times.

New York Times columnist Paul Krugman has a lot of fans on the left who seem to regard his views as gospel when it comes to economic issues – such as the $700 billion bailout of the financial industry put forward by Treasury Secretary Hank Paulson.

Opposition to this plan from Krugman and others has provided political cover for politicians in Washington, allowing them to voice their own objections. We can only hope that this push-back from the plan’s critics will compel Congress and the White House to improve the plan before it passes.

But if opposition to the plan causes it to die, and the result is catastrophe for the American economy, I’ll be angry at Krugman for feeding the fires of self-serving political posturing and obstructionism. My anger is based, in part, on some rather stupid and manipulative aspects of his recent column on this issue.

Let’s examine how this column, from Sept. 21, 2008, begins:

Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.

There’s justice in the gibes.

Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.

The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis?

Well, it might — might — break the vicious circle of deleveraging, step 4 in my capsule description. Even that isn’t clear: the prices of many assets, not just those the Treasury proposes to buy, are under pressure. And even if the vicious circle is limited, the financial system will still be crippled by inadequate capital.

Or rather, it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan?

It may be that the federal government will hugely overpay for the assets it buys. That’s why it’s called a bailout. The low market value of these assets is the problem, isn’t it? — So obviously a bailout would require paying more for these assets than market value. It may also be that Paulson’s plan will provide the stockholders and executives of financial firms with giant windfalls at taxpayer expense. But that has no bearing whatsoever on the central point Krugman claims he’s making — that the plan doesn’t make sense. If the purpose of this plan were to punish those responsible for the current crisis, then I agree that it would not make sense to buy their bad debt. But if the purpose of this plan is to stabilize the financial industry for the sake of the overall economy — and in fact, it is — then the plan is probably going to benefit financial firms. It wouldn’t make sense to expect anything different.

Krugman uses words such as “logic” and “sense” to give the impression that his arguments are grounded in his understanding of the economy. I have no doubt that Krugman understands the economy better than I do — but the arguments he uses are moral arguments, not economic ones. When he refers to “a giant windfall at taxpayer expense,” he’s trying to draw attention to injustice, pure and simple.

Here’s another example of Krugman disguising a moral argument with economic-sounding language:

The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

When Krugman says the government “should get what people who provide capital are entitled to,” the “should” represents a moral imperative rather than an economic imperative. His concern isn’t that the plan won’t work, but only, once again, that it is unjust. He’s worried that “the gains” will “go to the people who made the mess in the first place.”

It terrifies me that the federal government might be prevented from doing what is necessary to protect millions of American jobs because of moral concerns about rewarding corporate executives. Again: there will be plenty of time to punish the people responsible for creating this mess, but we need to get out of the mess first. That’s according to Democrats I respect, including Senator Christopher Dodd and Congressman Barney Frank.

But Krugman is fueling the idea that we should be afraid of what would happen if the plan passes. Here’s how he ends his column:

But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.

Again, Krugman is saying this bailout plan won’t address the real problem — another lie, as is clear if you read the rest of the column. The problem is that financial firms hold too much bad paper, which has the potential to cause a severe tightening of credit. So how does the bailout plan, which would enable the government to buy this debt, not address the real problem? Krugman’s argument doesn’t make any sense. Perhaps Krugman is saying the bailout plan should address the crisis’ root causes — but that can be done over the course of the next several years, after a newly-elected slate of politicians have had time to study the situation more closely.

Here’s a question for Krugman fans. When Krugman writes that if the current proposal is passed, we’ll “all be very sorry in the not-too-distant future,” does anybody have the faintest clue what he is talking about? Is Krugman merely saying the injustice of rewarding corporate executives for their misbehavior will offend our moral sensibilities? Is he actually arguing that passing this plan would have a negative economic impact?

This economic catastrophe came about because of stupid Republican ideology. Smart Democratic ideology — in other words, a “big government” intervention — can rescue the country from the mess the stupid Republicans have wrought. Over time, this whole sorry affair will provide plenty of powerful talking points that will empower Democrats to improve the rules and regulations by which our economy is run. And for those who hate “the trash,” there will be plenty of time for appropriate retribution.

But first, we have to save the economy. So please take off your self-righteous hat and put on your economist hat, Mr. Krugman — and stop treating me in ways that suggest you think I care more about hating Bush and hating executives than I care about this country’s prosperity.

After reading Lee’s recent post voicing skepticism about the Fed’s roughly $700 billion bailout plan, I saw this Politico article about similar skepticism popping up elsewhere.

I’m not sure what I think, but I’m concerned that if the government doesn’t step in, the consequences for middle class Americans could be devastating for many years. The “fundamentals” of America may be strong — if, like John McCain, you use the word “fundamentals” to mean “the American worker” — but the American worker may end up on the street if the American financial systen collapses and credit evaporates, causing severe strain for businesses already struggling with high gas prices, rising health care costs, etc.

It’s scary and distasteful to think that taxpayers would suddenly take on nearly $1 trillion in bad debt — but Americans have already spent roughly $1 trillion on an unnecessary war in Iraq. The question is, isn’t it scarier and more distasteful to imagine the unemployment rate reaching 10 or 15 percent, to think of 401K accounts failing, etc?

This is a mess. So much for “the era of big government is over,” as President Bill Clinton once said.

As George Stephanopoulos said today on “This Week, “the era of big government is back.”

The NYT has posted the leaked text of the government’s proposed bailout plan.  This plan, in effect, gives near dictatorial economic powers to the Secretary of Treasury, giving him upwards of $700 billion of taxpayer money — our “hard earned” money, which fair weather libertarians (aka Reagan conservatives) would regard, if it were being used to help poor people, as having been “stolen” by big government — to dispense more or less as he pleases.

Secretary Paulson “is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States” and to enter “into contracts, including contracts for services… without regard to any other provision of law regarding public contracts.”

Secretary Paulson’s decisions “pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”  In other words, Congress is again pooping on the rule of law. The Secretary will have these powers for “two years from the date of enactment of this Act.”  Apparently, in order to save us from our financial crisis, no one can question or review the decisions of our new economic Great Leader.

Beyond the rule of law issues, Paul Krugman has this to say about the proposed bailout plan:

The Treasury plan… looks like an attempt to restore confidence in the financial system — that is, convince creditors of troubled institutions that everything’s OK — simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem — which seems doubtful — or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.

And there’s no quid pro quo here — nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

Based on the little we know, and on Krugman’s assessment, I think we have some good reasons to believe that this bailout plan, especially as compared to similar past plans (say, the S&L bailout or Sweden’s financial crisis), may be bad for the economy and for the American taxpayer.  At the very least, there should be a detailed public debate about what course we want to take, what sort of bailout plan we want, and what taxpayers can expect to get for their bucks, not to mention public oversight.

As this financial crisis expands, I more and more have a sinking feeling in my stomach about where this is headed.  Will this financial debacle begin to affect the regular economy?  Will interest rates on credit cards go through the roof, effectively cutting off the credit lines upon which Americans depend for their high standards of living?  Will borrowing, to buy a car or to purchase capital, simply become impossible, for individuals and small businesses?  Is this economic crisis simply a liquidity crisis, basically a crisis in confidence in the markets, or are there more fundamental problems yet to be revealed?  I am beginning to wonder whether I should have majored in something more useful in college, like farming or cobbling.