With the bailout compromise bill going down in flames in the House, I just want to highlight two very sensible paragraphs written by Jim Manzi over at The American Scene just before the vote happened:
It seems to me that biggest cost of this proposal is not the direct expenditure. The government would commit to up to $700BB to buy and then re-sell some assets. How much they would recoup is unclear, but history suggests that it is far from impossible that this would be close to break-even. How is it possible that the Treasury could avoid paying more than they are worth if the bail-out is to help the banks at all? Because the fact of the Treasury being available to buy them changes their market value.
Before we get too excited about this seeming magic, however, we should remember – as I went into in greater detail a prior post – that the ideological costs of this are likely to be extremely heavy over time. This is a terrible precedent on many levels. Further, we can’t be sure that there really would be a cataclysm without the bail-out, nor can we be sure that this will be enough to avoid one if it’s coming. We are making a bet to lower the odds of a bad outcome. It’s just that the severity of a Great Depression is sufficiently bad that it is a worthwhile bet to make. But we will pay dearly for it for many years. In this way, the bail-out should be seen as one move in the course of a long and unpredictable campaign.
Emphasis mine. He concludes, “But now it’s time to swallow hard and vote for the bill.”
Very interesting to see how the aftermath of this afternoon will play out. It sure looks like the House GOP acted just as I feared they would.
UPDATE: Megan McArdle:
I am grimly reminded of H.L. Mencken’s famous observation that Democracy is the theory that the common people know what they want, and deserve to get it good and hard.