We need answers
Damir’s right to bust my chops a bit — I’m sure Hank Paulson has heard the moral hazard argument once or twice in his career — but it seems to me the burden of proof is still on the proponents of Paulson’s bailout to justify it, not the skeptics to prove why it’s reckless or worse than the alternatives. Five questions occur:
1) What will this bailout plan really do, in the short-term and long-term?
2) How much will it really cost, short-term and long-term?
3) Is there a cheaper or simpler way of accomplishing the same results?
4) What unintended consequences might we anticipate arising from this plan?
and finally
5) How will it prevent the next crisis rather than the last one?
The Wall Street Journal has two must-read perspectives on alternatives to the Paulson plan, here and here.
On the basis of the last eight years, I think it’s fair to say that George W. Bush exaggerates the severity of the threats the United States faces, and that this is cause for concern in matters of domestic as well as foreign policy. In pursuing an unremitting expansion of executive power — first under a pliant Republican Congress, now under a spineless Democratic one — President Bush has justified many pernicious acts on the basis of the claim that we are living in extraordinary circumstances.
When the administration wanted to eavesdrop on untold numbers of Americans’ communications without the approval of the Foreign Intelligence Surveillance Court? Extraordinary circumstances. When it wanted to lock people up in Guantanamo without counsel or trial? Extraordinary circumstances. Putting a million people with no proven connections to terrorists on the No-Fly List? Waterboarding terror suspects? Invading Iraq? Abusing prisoners at Abu Ghraib?
When the administration wanted to give the Secretary of the Treasury more than half a trillion dollars to spend as he chooses to fix the economy overnight, and a cowering Congress didn’t ask the right questions for fear of what might happen with an election two months away ? . . .
When in George W. Bush’s presidency haven’t we been facing extraordinary circumstances that called for quick executive fixes? And yet the Constitution still exists, whether or not our legislators have the courage to act like it. History is rife with examples of what happens when rule of law gives way to rule by executive decree, and we don’t want to go down that road.
No, I don’t think we’re witnessing a second Nazi seizure of power, and Paulson’s plan should be judged on its merits, not its association with the Bush administration. The right action is the right action, regardless of who proposes it. But a little skepticism here is indicative of health, sanity and sobriety, not the mark of an ideologue who puts all his faith in the free market. In fact, skepticism is the proper response of a person who recognizes that he’s passed his own intellectual limits, run out of appropriate analogies, and can’t wholly predict what’s to come.
So if we pass a bailout plan, let it be well considered, and enacted for the right reasons, not for fear of political fallout.