TPM Café (Talking Points Memo), October 2, 2008
Today's the big vote. The nation's political leadership has carried out a full court press for this bailout. They have frequently ignored the facts and commonsense (since when do we make policy based on stock market swings?) and repeatedly tossed out the specter of the Great Depression to push their case.
It's clear that the overwhelming majority of the public thinks that this Wall Street bailout stinks, but Wall Street has immense political power and it is likely that it will get its way.
If it is not possible to stop the bailout, how about a fallback position? Perhaps we can force our political leaders to take responsibility for their actions. Remember, we are only in this economic mess because the people who designed this bailout (Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke, and President Bush) failed to stem the growth of the housing bubble. Rather than take responsibility for this disaster, they are demanding $700 billion bailout to patch up their mistakes.
How about a commitment to take responsibility this time?
In other societies, and at other times in our society, the leaders that brought on such a disaster would feel the need to resign their positions. That apparently is not about to happen just now.
However, since we have heard so much sanctimony about the importance of this bill to the nation's economic future, perhaps we can force our political leaders to put their power where their mouth is.
As a very large number of economists have argued, this bailout is fundamentally flawed in its design. It should be focused on directly injecting capital into the banking system, not overpaying for bad assets. This design flaw makes the bailout far less effective. Furthermore, this bill does almost nothing to offset the contractionary effect from the collapse of an $8 trillion housing bubble. For these reasons, it is not just morally repugnant to give taxpayer dollars to incompetent Wall Street bankers, it is also bad economic policy.
So here's the deal. One simple measure of the success of the bailout is whether it fixes the mess. Will it be sufficient to restore the banking system or will we need still more money six months or a year down the road? Suppose it does?
Will our political leaders, who promised us that this bailout is the essential medicine for the economy, just get up and tell us that they need still more money? If our political leaders believe what they are telling the public, then they should be prepared to take responsibility for the success or failure of their policy. Are there any commitments to resign leadership positions in the event this great policy fails?
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer. He also has a blog on the American Prospect, "Beat the Press," where he discusses the media's coverage of economic issues.