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.
If I understood your earlier post’s criticism of Krugman’s column “Krugman doesn’t make sense”:
http://www.historyishappeningnow.com/?p=406
(his inconsistencies or poor logic aside) it was that any dawdling on the part of Congress that allowed more damage to the economy (e.g. further tightening of credit, losses of jobs, etc.) is unacceptable. And even if Paulson’s plan is lousy, it’s better than nothing.
But I don’t think that things are so urgent that there is not enough time for some vigorous debate. Sure things are dire, but, I don’t think there are any other imminent collapses coming in the next week or two.
I’m inclined that we ought to use that little extra time to choose the best bailout and, my preference, use Chris Dodd’s plan.
Comment by aaron — September 23, 2008 @ 7:05 pm
They won’t fail to pass a bailout because it’s not really an option. Sure, Washington Mutual and maybe a couple of others might go under before they do pass the bailout but, eventually, the dust will settle, something will get passed, and we can get on to worrying about the coming recession.
Also, based on the fact that everyone hates the Paulson plan (because it is in fact a piece of poo), I see it as very unlikely that his plan will ultimately pass. This is a good thing. His will be termed ‘lacking and insufficient’ (which it is) and we can get onto a better plan, such as Chris Dodd’s.
I know that there is going to be a fair amount more of political wrangling before anything gets passed but, in the end, each side is just going to come away with their own spin and talking points.
I actually think that the Democrats are well positioned and in the drivers seat here. As long as they don’t persistently block every attempt at a bailout and become seen as the party that’s trying to ruin the economy, I think this will ultimately work to their political advantage.
What if the bailout fails? I’d start buying gold bars and stowing them under your bed…
In all seriousness, we’ll pass have to pass another that addresses where ever the first fell short. For a fascinating ‘what if’ there’s this James Fallows article written about the bursting of the housing bubble back in June of 2005:
http://www.theatlantic.com/doc/200507/fallows
Comment by aaron — September 24, 2008 @ 1:58 am
For the sake of being contrarian, Washington Mutual, alone, will exceed the FDIC reserves so if you wait you have that sunk cost. Now if you can get GS to buy it, that solves that problem for both.
Still better to do it right than quick but bare that in mind.
Comment by John — September 24, 2008 @ 9:46 am
I hope Aaron is right that Congress has some breathing room to think a little before acting — and I agree with John that it’s better to do this right than quick.
I just hope liberals don’t become so intoxicated by the political meaning of this scenario — a complete failure of the Bush Administration’s economic policies and the Reagan revolution more generally, the financial catastrophe as a glaring symbol of the hypocricy of free marketeers, a situation where, as Jonathan Alter put it on Countdown, “we are all Socialists now” — that they lose track of the issue at hand, which is to bailout the economy.
Arianna Huffington ends her recent blog (linked above) this way:
“The last few weeks have demolished that notion. In the battle over the proper role of government, the forces of the Right, the high priests of the church of the Free Market — including Bush, Paulson, and the Masters of Wall Street — have suffered a monumental defeat. So why are we allowing them to dictate the terms of their surrender?”
This is not a time for liberals to be proudly announcing how they will use the current crisis to stomp all over their political adversaries. This crisis may be bad for Republicans, but it is no time for Dems to be talking about the opposition’s “surrender,” as though we have somehow emerged victorious from the rubble. There is no upside to this, and we shouldn’t be playing games when the stakes are this high. This crisis will still be available for political exploitation after it has been resolved.
When Krugman says the plan “doesn’t make sense,” he makes it harder for Dems to vote for the plan. Which would normally be a good tactic, except REPUBLICANS DON’T WANT TO VOTE FOR THIS EITHER. (excuse the melodramatic CAPS; I don’t know how to write comments in italics.) Most Republicans are only thinking about supporting this massive government intervention at taxpayers’ expense because they believe it is necessary to avoid catastrophe — but if Democrats are willing to make political hay out of opposing the plan, why shouldn’t Republicans do the same thing? And if everybody balks, then what do we do?
I acknowledge that most critics of the Paulson plan support some kind of bailout plan — they just would rather see the Dodd plan or some other better alternative. My only point is that we have to be responsible with our rhetoric, or else we may accidentally throw the baby out with the bathwater. It’s easy to trash people like Paulson and Bernanke, but where would we be now without them begging and pleading with Congress to pass some kind of bailout?
Comment by Ian — September 24, 2008 @ 4:38 pm
I think the way to be responsible with our rhetoric is to say what we really think. And to advocate for the plan we really support and to say openly why we support that plan. The fact is, Democrats have the leverage to pass the plan they think would be best for the economy. They’re not in a position where they have to compromise–especially if compromise means giving away Congress’s oversight role or putting taxpayer at risk money without some return. These are lines Democrats shouldn’t cross, first because doing so would be bad for the taxpayer, second because they have the strength to get what they believe in implemented.
Comment by Lee — September 24, 2008 @ 5:27 pm
Regarding “what we really think,” I really think the government needs to pass a bailout plan, and fast. I really think that this plan is a hard pill to swallow for every single Senator and every single Representative — because if the plan passes, Americans will see the downside (i.e., a huge surge in the debt) while the upside (no economic catastrophe) remains invisible.
So the more the plan gets attacked, the greater the likelihood that Congress won’t be able to summon the political will to act. People on both sides of the aisle are characterizing this plan as a plan to bailout fat cat executives with no regard for the little guy — and this misperception of the bailout plan could easily destroy it.
You say Democrats have the leverage to pass the plan they think is best. I absolutely hope you’re right. I agree that oversight is important. But when it comes to “putting taxpayer money at risk without some return,” I think we need to accept that THAT’S THE POINT! The point is that taxpayers are going to have to take a hit because of “anything goes” financial markets where a great deal of the nation’s wealth was put at risk. Anybody who thinks the point of this bailout is to earn a profit for the taxpayer is misunderstanding the situation.
Democrats can use this crisis to win elections and do what’s best for this country — I just think they should exploit the crisis after it’s over, rather than exploiting it while it’s still going on.
Comment by Ian — September 24, 2008 @ 5:51 pm
The problem is if they don’t ‘exploit’ it (which is to say, utilize the momentum of the moment) we’re not going to come out as well as we otherwise should. This isn’t a binary thing – pass it, or don’t. It’s a question of quality – what kind of bailout do we want?
I’ve argued that there is no likelihood that Congress will fail to act (or it’s an infinitesimal probability). There is no alternative but to go through with this bailout.
Furthermore, it’s not like New Orleans on September 2nd, 2005, get out or you’re trapped – there is time for deliberation and time enough to get a good plan.
Also, while I share your concern about getting this bailout passed before the crisis deepens, I think that the differences between Paulson’s and other plans are sufficiently large and substantive that it’s appropriate and right for Democrats to push for a different plan.
Paulson has been kind enough to submit a plan, which was perhaps good to get the ball rolling (maybe? although any of us could have proposed a plan too, to that end), but his plan sucks. He is the consummate fox in charge of the hen house. You pointed out that we should be thankful for Paulson and Bernanke’s presence – I’m very thankful for Bernanke’s presence as I believe he is a man of principal and I know he is the foremost expert on this matter.
But Paulson? We could replace him with a goat and get better results:
http://krugman.blogs.nytimes.com/2008/09/23/good-ideas-and-lies/
Comment by aaron — September 25, 2008 @ 1:33 pm