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.)
I first read the title as Get Ready for More Palin. Pseudo-Freudian Slip I guess.
Comment by John — September 25, 2008 @ 11:02 pm
Ian, I share your concerns about how this will play out. Yesterday’s drama reminded me of the Republican engineered government shutdown in 1995 where they essentially destroyed the day-to-day functioning of the government for the sake of grand-standing.
My intuition about their stubbornness is that they know they’re in a politically precarious position as all indicators of this crisis point at the heart of the bull’s-eyes on Republican’s foreheads. According to this amazing article:
http://www.nytimes.com/2008/09/27/business/27reax.html
Republicans are trying desperately to conjure up some sort of voodoo that will make a direct bailout unnecessary. It won’t work – a bailout is necessary.
Maybe I’m overconfident but, it’s hard for me to imagine the Republicans creating a favorable narrative for themselves, that will actually fly, when the bailout is actually passed. Sure they can say, ‘well Mr/s Democrat you agreed to a major bailout spending bill that saddled American tax payers with $700B in debt!’ To which Mr/s. Democrat would retort, “Indeed I did… And you were willing to stand idly by while the entire economy burned from a fire that you started!” (cue list of failed dereg legislation that Mr. Republican supported)
It’s hard for me to imagine people buying the Republican’s line there. I know that the National Attention Span is very short but, this has been the headline for the last two weeks and will continue to be for the next two as well. And the underlying assumption behind it all is the Republicans caused this.
That is why I think they are trying to avoid actually bailing out Wall Street. Because they know that there is no successful narrative for them, if it passes. Their cries of, “oh it’s socialism!” is just a ruse.
Quick digression – from the article linked above there is this incredible exchange between Paulson and Pelosi:
Once last quick digression – Did anybody notice this?:
“Government Seizes WaMu and Sells Some Assets ”
http://www.nytimes.com/2008/09/26/business/26wamu.html
To toot my horn a little:
http://www.historyishappeningnow.com/?p=412#comment-299
Comment by aaron — September 26, 2008 @ 1:50 pm
Regarding the extraordinary and dramatic kneeling of Paulson described above in Aaron’s comment, Krugman fans should know that any kneeling by Paulson can be completely disregarded since Paulson cannot be trusted.
That’s if you pay attention to Krugman. I don’t, and I’m blown away to see Paulson — a Republican, a Bush appointee, humiliating himself before the San Fransisco-based Speaker of the House. Did it ever occur to Krugman that blasting Paulson might not be the most helpful line of attack here?
Anyway, setting aside my petty Krugman-bashing, I want to disagree with your analysis of how this whole situation will play out. You write:
“Sure they can say, ‘well Mr/s Democrat you agreed to a major bailout spending bill that saddled American tax payers with $700B in debt!’ To which Mr/s. Democrat would retort, “Indeed I did… And you were willing to stand idly by while the entire economy burned from a fire that you started!” (cue list of failed dereg legislation that Mr. Republican supported)”
There’s no doubt in my mind that Republicans will make that point: Democrats spent $700 billion of YOUR TAX DOLLARS bailing out the fat cats on Wall Street because Dems love taxing and spending, Dems love big government intervention, and Dems love their wall street contributors.
Then, perhaps, Dems will respond by saying it was irresponsible for Republicans to oppose a plan that was necessary to save the economy. Dems will also make the argument that Republicans were partly responsible for this mess because they supported deregulation.
And then Republicans will say this: (1) the $700 bailout was completely unnecessary — it was dreamed up by Bush and his Democratic allies to bailout Wall Street at Main Street’s expense. And (2) all this regulation talk is just a cynical attempt by Democrats to blame Republicans for a mess the Dems created with excessive regulation, equal opportunity lending policies, corruption at Fannie Mae/Freddie Mac, etc.
We know this is a line of pure baloney, but we also know that Republicans have no problem acting irresponsibly and then covering up their irresponsible behavior with lies.
Most Americans don’t support the bailout now. So if Dems pass the bailout without Republican support, I think Republicans will use it to hammer Dems, possibly retaking Congress. I’m not saying that WILL happen, but Americans who still don’t think this bailout is needed aren’t likely to be convinced by anybody, right?
Comment by Ian — September 26, 2008 @ 4:08 pm
Ian: I think your attacks on Krugman are entirely unconvincing–why you pay so much attention to him in particular is unclear to me–and are based not on what Krugman has actually said or proposed.
Krugman said the original version of the Paulson plan sucked–and rightly so, it seems to me. I do not think we need a non-overseen financial dictator in this country for two years. If we do get a responsible stimulus package, as we likely will, Krugman is one of the people we can thank for helping us get the plan right. The details matter. They actually matter. They are not trivial. Paulson’s original proposal was absolutely insane.
Your discussion of how parties may or may not make political hay out of this bailout is entirely speculative. But a bad plan that wouldn’t actually solve our problems and doesn’t hedge taxpayer risk… that would be bad for the taxpayer. So kudos to Krugman and his enablers for moving the conversation in the right direction.
Government isn’t just one big campaign season. The details matter. It’s up to the Democrats to mobilize their strength to justify their revised proposal. They have plenty of opportunity to talk to the American people.
Comment by Lee — September 26, 2008 @ 6:04 pm
To be clear: my previous response is predicated on the idea that there are two issues at stake.
(i) the content of the actual bailout bill. It needs to be good and it needs to work.
(ii) the political conflict that will erupt around the plan.
I assume Krugman has been addressing himself to (i) and not (ii).
Comment by Lee — September 26, 2008 @ 6:15 pm
To Lee: To be clear (I think I was already, but I’ll happily continue this snarky debate as a way to distract myself from the impending apacolypse): I’m criticizing Krugman for attacking Paulson just to score cheap political points, at the expense of speaking truth to the American people about the fundamental legitimacy of Paulson’s desire for a bailout.
Krugman recently wrote this:
“This is telling: if Paulson can’t be honest about what he himself sent to Congress — if he not only made an incredible power grab, but is now engaged in black-is-white claims that he didn’t — there is no reason to trust him on anything related to his bailout plan.”
Look here for the quote: http://krugman.blogs.nytimes.com/2008/09/23/good-ideas-and-lies/
I’m arguing Krugman’s attacks on Paulson are juvenile, given the magnitute of the situation we’re facing. If you disagree, then defend Krugman’s statements — don’t just call my attacks “unconvincing” and then question my motives. The reason I spend so much time attacking Krugman is that I’ve heard him cited on this blog as a blanket defense, as in: this is what Krugman says, and I trust him because he was right before. I’m thinking that if I can take Krugman down a peg or two, then people will be forced to speak for themselves instead of hiding behind him. Krugman isn’t an oracle.
Meanwhile, can you offer any evidence to support your opinion that Krugman can somehow take credit if this bailout bill ends up being better than what Paulson originally proposed? There’s nobody in Washington who supported the no-oversight version of the bill — even John McCain spoke out in favor of oversight (as did Barney Frank, Chris Dodd, Barack Obama, and even George Bush — even Paulson). Do you think McCain was influenced by Krugman’s columns?
To call Paulson’s plan “absolutely insane” is the kind of knee-jerk hyperbole that makes it that much easier for Congressional Republicans to bail on the plan. When Democrats are forced to pass a bailout bill with little or no Republican support, the fine distinctions you’re making between the “absolutely insane” Paulson plan and the “totally necessary” Dodd plan will seem pretty silly to the voter whose primary objection to the bailout is the $700 billion price tag.
To accuse me of seeing this issue as “one big campaign season” is especially confusing to me, since my prime objection to Krugman is precisely that he is exploiting this situation in ways that don’t advance the debate except in cynical political terms.
When Paulson completely conceded the need for oversight, Krugman attacked Paulson for being dishonest instead of applauding his willingness to see reason. It gives the impression that Krugman cares more about embarrassing Paulson than about working out a deal.
If Krugman isn’t interested in the political conflict that will erupt around the plan, then why is he blogging about how “there is no reason to trust him about anything related to this bailout plan”? That’s the sort of knee-jerk hyperbole (to use that phrase again) that only makes sense if you’re interested in scoring political points. Why is it useful to say Paulson is utterly untrustworthy when Paulson is publicly begging for Nancy Pelosi’s support? At least Paulson supports a needed bailout, which is more than can be said for these Congressional Republicans.
Nancy Pelosi and I agree: It will be bad if Democrats end up passing a bailout bill without any Republican support. Why? Because Republicans in Congress (liars) will deny that the bailout was necessary. If Krugman wants to be helpful, he should focus on explaining in clear language why a bailout is absolutely necessary to rescue the economy. Dodd, Frank and other Democratic leaders can be trusted to deal with the issues Krugman is raising behind the scenes.
My concern is that we pass a bailout bill before the economy falls to pieces — and to pass a bailout with Republican support so Dems don’t have to spend the next decade defending the bailout (and losing elections along the way). That does not appear to be Krugman’s main concern, and it’s disturbing. That is my point.
Comment by Ian — September 27, 2008 @ 12:59 am
One more point: If you think Krugman has “moved the conversation in the right direction,” you are not understanding the conversation that’s going on right now.
The conversation going on right now is about whether a bailout is necessary to rescue the economy. To the extent that Krugman has moved the debate, it has been by contributing to the idea that we can’t trust Paulson when he tells us we need to act.
Krugman is NOT helping. That’s my opinion.
Comment by Ian — September 27, 2008 @ 1:03 am
I think absolutely insane is a fair characterization of the original Paulson plan. The text called for Congress to give him $700 billion to use in whatever manner he deemed necessary over 2 yrs with no review or oversight.
Moreover, Paulson was asking the taxpayer to trust him that the mortgage-backed assets he would buy would later gain value and that the government would make a profit. I think it’s reasonable to interrogate both the plan and the assumptions.
As one economist said recently “the grown-up thing is to do something to rescue the financial system.” That economist was Paul Krugman, of course. Did Krugman push the debate in the right direction? Only if you think people read and are influenced by the New York Times. I do, but maybe I’m wrong. Then again, I don’t ascribe any great powers to Krugman. I just happen to think he’s right and has been more than reasonable.
Comment by Lee — September 27, 2008 @ 1:58 am
I never heard Paulson say he thought his plan would turn a profit. That’s interesting. Can you cite your source for that?
Regarding the no-oversight aspect of the plan, Paulson has completely conceded the need for oversight. So continuing to beat Paulson up over the particular point is utterly beside the point — and that’s what Krugman was doing.
To say that he has been “more than reasonable” is just crazy to me. Do you agree with Krugman that there is no reason to trust Paulson about anything related to this bailout plan? If you think Krugman has been “more than reasonable,” then I assume you agree that everything Paulson says and does should be utterly disregarded — because that’s the message Krugman’s fans will take away from that blog post I cited above.
Comment by Ian — September 27, 2008 @ 10:30 am
I think you’re probably right to steer me away from attacking Krugman — since this blog should be about more important stuff than what we think of one columnist.
Comment by Ian — September 27, 2008 @ 10:55 am
According to the New York Times, here’s the latest on the bailout plan:
But officials said the core of the proposal, put forward a week ago by Treasury Secretary Henry M. Paulson Jr. remained intact: a plan for the government to purchase up to $700 billion in troubled assets from financial firms as a way to free their balance sheets of bad debts and to help restore a healthy flow of credit through the economy.
Click here for the article: http://www.nytimes.com/2008/09/28/business/28bailout.html?_r=1&hp&oref=slogin
Is this plan “absolutely insane”? If you agree that this plan is “absolutely insane,” then I assume you would strongly urge Congress to vote against the plan.
I am strongly urging Congress to vote FOR the plan.
So is that where you and I disagree? Or are you willing to concede that your “absolutely insane” characterization was a bit premature?
Comment by Ian — September 27, 2008 @ 12:18 pm
P.S. In my comment above, the second paragraph should be in quotes. I forgot.
Comment by Ian — September 27, 2008 @ 12:19 pm
I agree that Krugman is not an oracle and I also know that at times, whether on this blog or elsewhere, I’ve been guilty of invoking a kind of reductio ad Krugman.
And to (attempt) to be fair to Paulson, it’s my understanding that they have essentially enacted his plan but with proper over-sight and limiting pay for Wall Street Execs:
http://www.nytimes.com/2008/09/29/business/29bailout.html?pagewanted=all
With that said, it is precisely “the magnitude of the situation we’re facing”, that makes Krugman’s criticism of Paulson appropriate and necessary, not “juvenile”. In an effort to get away from invocations of him, I’d like to offer another well-known lawyer, writer, actor and economist, who also happens to be a Republican, who was similarly appalled by the ‘Paulson clause’ granting total authority over the bail-out’s execution:
http://www.nytimes.com/2008/09/28/business/28every.html
From the article:
[emphasis mine]
So, I stand by my choice to include my voice in the national chorus of criticism of Paulson for deigning to include that heinous clause. Furthermore, at least in my book, Paulson doesn’t get points for ‘conceding the oversight question’. To me, he utterly disqualifies himself from the process entirely, for having dared such a faux-legit and egregious power grab.
Comment by aaron — September 28, 2008 @ 2:27 pm
We may disagree over Krugman’s approach to this whole issue, but I agree that the plan on the table now is far, far superior to the plan Paulson put forward. I guess I’ve wanted to believe that Paulson wasn’t motivated by a cynical hunger for power but rather by a sense of responsibility to avoid catastrophe. But I may be naive on this score.
Comment by Ian — September 28, 2008 @ 3:35 pm
I was all set to stop complaining about Krugman, and then he writes this in a column published today (Sunday):
“About Mr. Obama: it’s a shame that he didn’t show more leadership in the debate over the bailout bill, choosing instead to leave the issue in the hands of Congressional Democrats, especially Chris Dodd and Barney Frank. But both Mr. Obama and the Congressional Democrats are surrounded by very knowledgeable, clear-headed advisers, with experienced crisis managers like Paul Volcker and Robert Rubin always close at hand.”
This is the second time I’ve heard Krugman criticize Obama’s handling of the economic crisis. I would very much like to know what Krugman is talking about. Why, exactly, would it have been helpful for Obama to inject presidential politics into this issue by taking a strong position on the campaign trail while his Democratic colleagues in Washington were working hard to garner support from Republicans in the House and Senate? Does Krugman honestly believe Obama could have made an important difference?
I suspect not. If Krugman had a substantive point to make, I suspect he’d explain himself more fully — if only for the sake of clarity. I suspect one of two things: Either Krugman is criticizing Obama for no other reason than to make his criticisms of McCain seem more credible (just like Freidman), or Krugman is simply trying to take Obama down a few notches because he has a personal grudge against Obama for some reason.
Would anyone like to take issue with my analysis by speculating as to what Krugman meant when he wrote it was a “shame” that Obama didn’t “show more leadership”?
For my part, I think Obama was absolutely right to let Frank and Dodd take the lead on this issue.
Comment by Ian — September 29, 2008 @ 2:04 am
Yeah, this was a nebulous comment on his part that seems somehow more rhetorical than substantive.
I agree that Obama has played this with poise and level-headed-ness. And I think that by staying at arms length, it’s helped minimize the amount of presidential politics injected into the debate. An injection which we saw could be pretty destructive!
Comment by aaron — September 29, 2008 @ 12:29 pm
Krugman is pretty obviously not a big fan of Obama. He has consistently criticized Obama for being too “non-partisan” and too “centrist.” Edwards was his preferred candidate, and–if not Edwards–then Clinton. You might argue that Krugman–despite his reflexive, arguably irrational dislike for Obama–should never allow criticisms to escape his lips until Obama is firmly in the white house–there is a plausible case to be made that a national columnist with a prefered candidate needs to think in such strategic terms–but I don’t think there’s too much going on here.
When Krugman says “it’s a shame” what he means, I think, is something like “it would have been nice if the alternative to the Paulson plan was called the Obama plan” or some such thing. But I don’t think it means “Obama should feel great shame for doing something terribly wrong.” In the context of the article, whatever personal dislike he may have toward Obama, it’s pretty obvious what Krugman is arguing: Obama is the responsible choice for President; McCain a terrible and awful choice.
Comment by Lee — September 29, 2008 @ 1:40 pm