Of Politics and Economics
Pethokoukis has some important insights:
Newt Gingrich said voting for the bailout will break against candidates in 2010 and beyond when voters see how destructive it is to the economy. And that’s the thing. While the bailout, if Paulson and Bernanke are to be believed, may prevent a financial meltdown, it will not by itself return America to prosperity. The labor market is clearly weakening, and is the last thing to turn around once an economy does regain momentum. So there’s a good chance that a perturbed public, currently down on the bailout, will view it as an expensive flop by the time the midterm elections roll around. They will hold its supporters accountable.
That’s the rub, isn’t it?
It seems more than likely that Pethokoukis is correct: there will not be a miraculous recovery. Even if the plan is effective and averts outright disaster, it certainly won’t bring back the prosperity we’ve come to believe is our right. We’re in for several years of slack growth and higher-than-comfortable unemployment as the fetid gas leaks out of the distended sphincter of our bloated bubble economy. We’re used to spending beyond our means, but it’s become time to come to terms with the less glamorous lifestyles we can actually afford.
Politics doesn’t recognize such realities, however. If the bailout bill passes, it will quickly become the root cause of all of our future economic underperformance, a handy cudgel with which to bludgeon political opponents. It’s obvious why neither Obama nor McCain was willing to support the bailout last night in anything but the most circumspect terms.
Is it an unreasonable question to ask whether the bailout will help out at all? Not in the slightest. But there’s a line to be drawn between healthy skepticism and crass political maneuvering undergirded by slavish adherence to a free-market ideology which deems any government intervention to be anathema*. Here’s a disgustingly irresponsible example of the latter, as reported in Politico the other day:
According to one GOP lawmaker, some House Republicans are saying privately that they’d rather “let the markets crash” than sign on to a massive bailout.
This is Washington business as usual—unsurprising opportunistic angling for future gain. It’s depressing, however, that the gravity of the moment is not compelling our leaders to look beyond their political futures at what’s good for the country.
* This is not to say that I approve of the extra provisions the Democratic leadership is proposing—far from it! It’s just that the House GOP shouldn’t be trying to second-guess a Republican-appointed Treasury and Fed—who just happen to have concocted a fairly decent plan—for future tactical gain based on ideological truisms.