Arnold G. York
Chicken Little in the Sky is Not Falling
On Monday, the House voted to turn down the $700 billion rescue package, or bailout if you prefer, and one would have thought the civilized world had come to an end. Newspapers all over the world were predicting doom and gloom, and possibly Armageddon. The stock market dropped precipitously, 778 points, a one-day record.
I may be a little premature, but I have a bit of early revisionist history. First, it isn’t as bad as it seems, and this gigantic sense of urgency is all a bit manufactured.
Having said that, I acknowledge there are definitely problems in our economy, in fact, in the world economy, and ultimately there is going to have to be some sort of a workout package to get things moving again. Uncertainty is the enemy of economic activity and few are going to go out and buy a house or a new car, or invest in a new factory when they’re not sure if their world is going to be around tomorrow. Individually, we’re all doing what’s sensible, which is sitting on our money and waiting to see what happens. However, when we all do that collectively, it becomes a recession. So we are definitely going to have to do something to get it all moving again. But before we jump in with draconian measures, which we’re going to have to live with for years, we should stop, take a deep breath, and try to figure out what happened and what we can do to fix it. In this case, the economics and the politics are deeply intermeshed so we’re going to have to look at both before plunging ahead.
Let’s begin with the politics. The bailout bill failed because two-thirds of the Republicans in the House of Representatives voted against a bill created by a Republican secretary of the Treasury, pushed heavily by their Republican president and endorsed by their Republican Party leadership in both the House and the Senate.
How could that happen?
I think there are several reasons.
The fact that the representatives are all up for reelection in November and that the country doesn’t seem ecstatic about the bailout was a factor. In fact, e-mails have been pouring in from many in the country who apparently see this bailout not as the savior of the free market but more like a “No Banker Left Behind” program (not my phrase but a good one) to bail out a bunch of guys in Gucci loafers who have been sucking the system dry.
But I believe there is something more basic involved. It’s apparent that the Republicans don’t trust the president and their own leadership, and I would say with good reason. For six of the eight years that Bush has been president a compliant Republican Congress has rolled over for him and has given him what he wanted, whether it was the war in Iraq, Homeland Security, or tax rebates or economic deregulation. I’m sure many of them are having second thoughts. People don’t run for Congress to be a toady for their president and many are unhappy with themselves for going along with many things with which they didn’t agree for the sake of party. And now, finding the country in the shape it’s in, many are in the mood to revolt politically.
The solution is somewhat more questionable. The financial crisis is real. The fact that the president, the treasury, the House and Senate leadership of both parties and both presidential candidates agree there is a financial crises means that one really does exist, even though many in the American public don’t buy it.
But to fix it and pass a bailout we’re going to need a bipartisan effort or it’s not going to happen. It’s hard to tell if this current bailout bill is the right answer. Clearly, it’s an expensive answer, so I believe before we just plunge into it Congress should look it over very carefully and change it if necessary. The liberal Democrats want to see more aid for the homeowners losing their homes and some additional controls so this just doesn’t repeat itself. The conservative Republicans want to see some fiscal discipline, which has been sorely lacking, and a restoration of a free market. I think they’re both right, and if it takes another week or two to try and reconcile these objectives, so be it.
Some of these objectives work against each other. However, there is simply no reason why the Congress can’t take the time to try to resolve some of these things in the bailout bill so we can all have some level of confidence that it has a reasonable chance of working.
In January there will be a new president and whatever the bailout solution is, and whatever powers are given and money put at risk, they are going to be administered by a new secretary of the treasury and a new president, so there is no simple one-party solution to this one.
For those of you interested in how this plays out in the presidential race, I have a goody for you. On Oct. 13, there is going to be a debate at Pepperdine University, in the Smothers Theatre between two bright, articulate professors. Bob Kaufman from the Pepperdine School of Public Policy is a strong supporter of Sen. John McCain and will be arguing the his position. Supporting and arguing for Sen. Barack Obama is Professor Doug Kmiec of the Pepperdine School of Law. The debate is free and open to the public. It’s a debate not to be missed. See the ad in this week’s The Malibu Times for the details.