Some have suggested the failure of the bailout shows a lack of leadership and courage among Congressional Republicans. It’s a peculiar form of courage that embraces an unpopular desperate measure after apocalyptic prognostications by the Svengali-like duo of Treasury Secretary Paulson and Fed Chariman Bernanke. I think it’s, in fact, this is one of the GOP’s finest hours.
Lots of legislators in general and DC legislators in particular think that life is all about getting along with the other side as an end in itself. Doing something–anything–in the face of problems. This is the ideology of the execrable and boring David Broder and also, sadly, John McCain.
I start with a strong laissez faire view of economics, particularly crises. Almost always, the best thing to do is nothing. I don’t buy the mass psychosis view. It’s just a question of prices dropping. Markets always clear. Changing the rules in midstream is a bad idea. Changing the rules to inflate during an inflationary bubble is a bad idea. Picking one sector of the economy over another is a bad idea. Helping the wealthiest Americans and American institutions with taxpayer money during their self-induced crash is a bad idea. Individuals fail. Companies fail. Banks should fail too.
We need a painful contraction, particularly of the housing sector. There is no way around it. There is no reason to fight it whether with this bailout or extended unemployment benefits or anything else that will drag it out. Banks can and already have begun “workouts.” This is sensible for good credit risks sitting in overpriced homes. Let prices drop. Let businesses fail. Let hard assets auctioned in bankruptcy absorb this $700B of investor money about to be spent on the bailout rather than letting it get sucked into the rotten, overly leveraged, and opaque institutions and instruments that got us here.
Our leaders–Bush, Pelosi, McCain, Reid, Obama–have been surprised at the grass roots skepticism of this bill. There’s no trust and rightly so. It’s great to see the “leadership” get walloped. This has nothing to do with leadership. A free people doesn’t need much leadership. Ideally, we are leaderless, going in our own individual directions economically and in general. And a free people does not accept facially ridiculous transfers of their wealth to the super-wealthy because of scare tactics by one of their erstwhile comrades in the form of Treasury Secretary Paulson.
I’m sure the thought of 25 or 35% of Wall Street’s personnel unemployed is much more viscerally painful to Paulson than all the structurally employed textile workers from North Carolina or auto workers in Michigan whom the Wall Street crowd so regularly consigns to uncertainry and even penury. But why should Republicans, who acknowledge that life is often painful and that this pain is frequently unavoidable, have a different set of rules for the mega-rich.
It’s good that the official GOP leadership is being burned on this by the grass roots and less senior Republicans, just as they were burned on immigration reform and burned on Hariett Miers. We have no shortage of “leadership.” What we need is good sense and commitment to principle. Shooting down this taxpayer giveaway was a flicker of those old time limited government and fiscal responsibility principles in action.