Is it smart politics to vote against what will be a wildly popular economic bailout package that may approach a trillion dollars? Further, is it really necessary in order to “save” the economy?
Politicians are always torn between doing what they know is right and what they know is politically safe. Many times, there is a happy convergence between the two schools of thought and the politician comes out a winner. For Republicans, this happens whenever tax cuts are up for a vote or votes on issues like welfare reform or military spending.
But what happens when an issue like the bailout package comes before you - a bill that most GOP conservatives worth their salt know deep down in their gut is the wrong approach to getting the economy out of a recession and will push the federal deficit toward the magic number of a trillion dollars?
To liberals like Paul Krugman (and probably some Republicans), the deficit doesn’t matter:
It’s politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold.
Krugman may be half right. Government spending increases during a recession are inevitable and the fall off in revenue due to reduced business activity as well as the increase in the numbers of citizens forced on to the public dole as a result of job loss means a rise in the federal deficit. This much is unavoidable and repeating Herbert Hoover’s mistake in trying to hold the line on spending by increasing taxes is a non-starter. Even Obama knows that much in that he has put his tax increase plans on hold for a couple of years - much to the chagrin of his class warrior base.
But a trillion dollars? And beyond that incomprehensible number is the political fallout that would occur if the GOP were to fight against the stimulus package in the first place.
Such a move might please the Republican base which makes up about 30% of the electorate. But the last I checked it takes more than 50% to be successful in elections. And if the GOP wants to make inroads against the Democrats in the House and Senate, they are going to need considerably more than 50% of the electorate to vote for them in order to climb out of the huge hole they have dug for themselves.
So the smart political move would be to go with the flow and vote for Obama’s giveaway, right? Not so fast, says Nate Silver who lays out the political choices for GOP lawmakers quite nicely:
1) Try to pressure Obama into some kind of compromise, and vote for that compromise;
2) Let the stimulus pass as the Democrats choose to construct it, over your strong objection;
3) Yield to Obama, and vote for the stimulus in the name of national unity.
The third choice probably isn’t very appealing to you. It might be appealing to Newt Gingrich, who is telling you that you don’t have the credibility right now to pick a fight. Better off rebuidling and rebranding the party for the long term. But rebuilding and rebranding means someone other than you is in charge — someone, for example, like Newt Gingirch. So that option is out.
So let’s think through the other couple of choices. First thing first: if the economy improves substantially by the midterm elections, you’re screwed. It won’t matter whether you voted for the stimulus or voted against it, and it won’t matter whether you achieved some kind of compromise or you didn’t. If, by the summer of 2010, GDP growth has miraculously recovered to 4% per year, that’s all the public is going to think about. Obama Save Economy!! Me Vote Democrat!! They aren’t going to care about whether you snuck some sort of capital gains tax cut in there.
But let’s say that the economy still sucks in 2010 — which, frankly, is a pretty good bet. That’s going to work much, much better for you if you’ve voted against the stimulus. Not only can you pin the blame on the donkeys, but you can campaign on tax cutting and fiscal responsibility — the stimulus will “prove”, once and for all, the wisdom of conservative economic principles. And then think about this: the Democrats are going to be trying to spend $800 billion in taxpayer dollars as quickly as they can possibly get away with it. Somewhere along the way, they’re going to wind up funding a Woodstock Museum or a Bridge to Nowhere. Somewhere along the way, an enterprising contractor is going to embezzle a bunch of stimulus money, or cook up some kind of pay-to-play scheme. Maybe if you’re really lucky, this will happen in your Distrct. Better to keep the whole thing at arm’s-length and make sure that Democrats get the blame for that.
The Hobson’s Choice facing Republicans is fighting against a popular president and his very popular giveaway plan in which case if the economy improves by 2010 (more on this later), the GOP is toast or accepting the rationale of the Obama White House and voting in favor of the package in the name of national unity as a result of an “emergency” in which case you will get absolutely no credit from the American people and your base will desert you. The third choice is equally unpalatable; try to inject some sanity in the giveaway by dint of minor amendments, warn of catastrophe, and then vote for it anyway.
In other words, if you stand up for your beliefs and fight the bailout (a certain losing proposition at this point given the Democratic majorities in the House and Senate), your only hope is if the plan doesn’t work and the economy is still in the tank by 2010-12. But if you follow your political instincts and vote in favor of the plan - even if you are able to get Obama to modify some of the parameters - the American people will still see the package as a Democratic triumph. You only consolation by taking door #3 is that the GOP base won’t desert you entirely - probably.
More to the point, can an honorable politician of any ideology or party deny the president what he deems necessary to help people in what his advisors and many experts are telling him is an extremely serious economic crisis? And what does it say about the GOP as a party whose only real hope for gains in 2010 is if the president’s plan doesn’t work and millions suffer the consequences?
Or will they? We are in a serious recession, the depth of which is unknowable at the moment. A Republican Administration has already pumped trillions into the financial sector (without much effect on credit markets and all to the detriment of a free market economy). Few are asking would we have been better off - or just as badly off - if Bush and his gorgon Paulson (and bailout enabler Fed Chair Bernanke) had simply tweaked the system rather than drowning it in money. If the Bushies had allowed several larger Wall Street banks to go under or facilitated some mergers while letting others go down the drain, how much worse off would we be?
Stock market lower? Perhaps. Credit tighter? Hard to see how that would be possible. More job losses? Again, we’re bleeding half a million jobs a month so it would be difficult to imagine that pace getting much worse.
Then there’s all that worthless paper - mortgage backed securities, credit derivatives, and loans that have been foreclosed. There are trillions of dollars of this worthless toilet paper sitting in banks around the world - had been sitting there for months as the housing bubble burst and began to drag the economy toward recession. What changed that caused this bailout mania?
Panic took hold. The Panic of 2008 will be remembered for the scramble to inject “liquidity” into the financial sector so that the business of American business could continue. Gigantic corporations asked the government to sheild them from the results of their poor business decisions and the ebb and flow of the free market by claiming to be “too big to fail” and the government obliged them by throwing trillions of dollars in their direction. No one knows where this money went. No one knows how it was spent. We are told that by saving these companies, we avoided a “meltdown.” If it not be heresy, might I inquire as to just what proponents of these bailouts think we are experiencing now if not a “meltdown?”
In effect, we just spent $7 trillion or so (most of that printed up by the Fed and pumped into the “system” in ways that are so arcane, not even the deacons of high finance can explain it adequately) just to avoid what we are, in fact, going through right now. We don’t know how much worse it would have been without this massive bailout. Such prognostication is impossible. Indeed, even asking the question “How much bang did we get for those $7 trillion bucks?” will bring down criticism for even daring to think that perhaps - just perhaps - much of this massive giveaway was - dare I say it - unnecessary?
But with the GOP’s credibility at close to absolute zero, no one in the Republican party seems willing to make the case that before we pump another trillion dollars into the economy in free money, it might be a good idea to pause and reflect on exactly what we are doing. Forget the deficit for the moment. How is this bailout mania - the result of a feeding frenzy due to the smell of unearned cash available to those who whine the loudest and have the best lobbyists - affecting the ability of the free market to function?
For all the ignorant words written in opposition to the free market in recent months, no one has yet figured out a better way to deliver goods and services to the consumer so cheaply and efficiently, create wealth and jobs, innovate in cutting edge industries like energy, pharma, and bio-tech, while proving itself over time as the most spectacular engine for liberty and the fairest system in the history of industrialized civilization for distributing the economy’s bounty.
No, it is not perfect. Far from it. But this hybrid beast that is emerging as a result of such massive government intervention in the economy is an unknown animal. And if this is to be the end of the “American System” don’t you think we should like, you know, have a debate about it or something? Right now, the new Obama Administration is riding the crest of a wave of panic that gripped this country in late summer and early autumn. And the idea of making nation-changing decisions because Wall Street has been spooked or people are anxious about the future without the benefit of a full fledged debate is even scarier than anything the economy could ever elicit from me.
And now, at the exact moment that this country needs a strong, united Republican party who could come up with free market alternatives to this giveaway society being created by the Democrats and stand up for what they know is right, the GOP is busted, broken, toothless, and out of ideas.
It is not simply going to be good enough to scream “NO” into this hurricane wind of “hope and change.” The GOP must vigorously make the case that the need for this bailout has not been thoroughly examined or thought through adequately. They have a responsibility to try and apply the brakes to this juggernaut that has swept the country over the last few months as politicians have responded to panic by panicking themselves. Most importantly, they must do what minority parties are supposed to do; offer sound, reasonable, achievable ideas to counter what is coming from the majority.
This will not happen to the leaderless, dispirited crew of Republicans on Capitol Hill. In this respect, it won’t matter politically whether they vote for the bailout or not. They have already proven themselves to be emasculated by the voter and their own timidity and cowardice when it comes to standing up for their core principles.