March 11, 2016
In recent weeks the Washington Post has virtually transformed itself into a Bernie Sanders attack platform, filling both its news and opinion pages with critical pieces. For this reason it was not surprising to see its lead editorial today criticizing Senator Sanders for not supporting an auto bailout because it was attached to funding for the Wall Street bailout.
First, it worth once again correcting its misstatements about the Wall Street bailout. The piece tells readers:
“In September 2008, Ms. Clinton and Mr. Sanders were both U.S. senators deciding whether to vote for a $700 billion fund to prop up the rapidly collapsing U.S. financial system. Ms. Clinton voted yes, on the sound view that the likely alternative to this admittedly undeserved rescue of Wall Street would have been global calamity. Mr. Sanders voted no, demanding that Wall Street pay for its own bailout. As it happens, the bailout fund, known as the Troubled Asset Relief Program (TARP), ended up costing far less than the initial headline figure suggested, and even made taxpayers some money; but, as was foreseeable at the time, that hasn’t stopped the country’s political purists, left and right, from second-guessing and making political hay.”
As I and others have pointed out, the “second Great Depression” story pushed by bailout supporters assumes that Washington does nothing even as the unemployment rate soars into the double digits. There is no historical support for anything like this. Even President George W. Bush supported a stimulus package when the unemployment rate was just 4.9 percent. Furthermore, the fact the bailout “made taxpayers some money” really has nothing to do with the time of day. The government lent billions of dollars (trillions of dollars counting the loans from the Fed) to some of the richest people in the country at rates that were far below what they would have been forced to pay in the market. This was an enormous transfer of wealth from the rest of us to Wall Street.
But then we get to the auto bailout itself:
“In short, Mr. Sanders favored an auto bailout — on his pure, unadulterated terms. In the real world — the world of compromise, uncertainty and unavoidable haste (the auto industry was nearing collapse in January 2009) — the available bailout was one that came appended to money for the financial sector. And Mr. Sanders voted no. In that sense, the Clinton campaign is quite right to say that, if everyone had voted as Mr. Sanders did, there would have been no auto rescue, at least not the one we got.”
Actually, the Post’s last line is not true. Suppose the TARP had been voted down. The Post is asserting that Congress and President Obama would have just let GM and Chrysler slide into bankruptcy. While that is possible, it is very difficult to envision. There was overwhelming support in Congress for saving the auto industry. (It was a Democratic Congress at the time.) It is likely that Congress would have voted for the auto bailout as a separate measure if it seemed as though Congress would not pass the second round of funding for the TARP, even with the auto bailout attached.
Of course we can’t know exactly what the counterfactual would look like. Wall Street has enormous power in Washington. It is possible that it would have insisted on holding the auto industry hostage and prevented a free standing auto bailout from ever coming to a vote. But the Washington Post can’t know for certain that Sanders and other supporters of an auto bailout may not have been able to force a free standing vote. In other words, this is yet another effort to trash Senator Sanders that is not based in reality.
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