I just got perhaps the most brain-dead e-mail I've ever received, from the super-left Working Families Party here in New York.
Everything I've hated about the Cheney/DeLay Republicans is in evidence here: the blind partisanship, mindless scapegoating, one-size-fits-all policy "solutions," the staggering hypocrisy, the near-total misunderstanding of how the world actually works. Grab your nose plugs and knee-high rubber boots; here we go.
Dear WFP Supporter,
The House vote against the bailout bill is shocking and fascinating at the same time. It appears to be a combination of an unusual right-left alliance. House Republicans are angry that the bailout isn't based on "free-enterprise" principles, or so they reflexively say. More likely they are furious at President Bush for having led them into the minority-party wilderness, and they are acting out. They are not an impressive bunch.
Much more interesting are the Democrats. 95 voted no (adding to the Rs 133 No votes). It's not entirely clear, but it seems like the Democrats who voted "no" mostly did so out of a sense that the bailout was still too generous to Wall Street hot-shots who caused the problem in the first place.
In other words... Republicans who voted against the bailout measure did so because they're ill-behaved children, and their statements about doing so on grounds of principle are obviously dishonest. But Democrats who opposed the measure are (we think) not only principled, but actually heroic.
(The truth, as Nate Silver details, is that the common factor of bailout opponents across party lines was that many were in close races for re-election. This thing is terribly unpopular in the country, and a vote to "bail out the Wall Street fat cats" easily could have been worth 4-5 points in a close race.)
Anyway, back to the dumbassery:
Now it's back to the House Democratic Leadership. They will "fix" the bill and get it done. The drop on Wall Street will demand it. The question is -- who will they conciliate to get the votes they need? If Pelosi has nerve, she will do what it takes to get Democratic votes, which will mean a proposal focused less on home lenders and more on homeowners. The problem is -- she does not want a bill that relies only on Democratic votes, because the bailout is not popular with voters and she doesn't want to take the blame if it goes sour (as it certainly could).
It's a truism of American politics that when government undertakes something momentous and/or unpopular, it must do so on a bipartisan basis--both because the two parties must share the political risk, and because it's the only way to guarantee some measure of sustained commitment to the policy. Think back three years to the Bush effort to partially privatize Social Security. The Republicans had the votes to pass their plan in the House; as they had done on so many other measures, they could have rammed it through there and forced the Democrats to deny cloture in the Senate, gambling that they could win on the politics. But they didn't, because the measure was unpopular. The Clinton health care reform effort of 1993-94 is probably an even better example; the political risks of "government-run health care" were perceived as too high for the Democrats to run alone. (They might have miscalculated there, given what happened that November.)
In the current decade, for that matter, the DeLay/Frist Congresses pushed through legislation on party-line votes again and again; this is in no small part why the public currently perceives the Republicans as "owning" this disaster. But apparently for the True Believers on the left, just as their counterparts on the right, this is all part of Doing the Right Thing.
It gets even crazier when the WFP offers its ideas for a revised measure:
What to do? We are no experts, but, it turns out, the experts aren't really experts. Our principles lead us to the view that the Democrats should make it a fairer, more progressive response to Wall Street's crisis. They need to trust that people will reward them for standing up for working and middle-class people instead of kow-towing to the wealthy.
How might the revised bill look that is different than the original?
* The costs must NOT be borne by working families. If we need to bail out Wall Street, we need to make sure that Wall Street pays for it, by imposing a steep surcharge on incomes over a million dollars a year and a small tax on all financial transactions (as New York did until 1981).
* The final plan MUST re-regulate Wall Street. Any bailout needs to reverse the deregulation of Wall Street that led to this crisis, including breaking up banks that are "too big to fail."
...
* It must be a bailout for homeowners, not for home lenders. We need to compel any institution that gets taxpayer assistance to renegotiate loan terms. Where foreclosure is unavoidable, families should be guaranteed the right to remain in their homes as renters. And the bill needs to include direct assistance to families in financial trouble, including expanded Unemployment Insurance and Home Heating Oil assistance.
More broadly, the bailout can't stand in the way of the broader economic stimulus package that is desperately needed.
I really don't even know where to start with all this. The mindless notion that $1 million in 1981 is anything like $1 million in 2008? The apparent historical coincidence that the revival of New York City in particular began around the time that this "surcharge" was repealed? The idea that anyone who makes over $1 million a year is "Wall Street," in that they should be made to pay for the crimes? It's too easy to label these people Bolsheviks, and I'm really trying to resist... but this is basically the post-modern expropriation of the kulaks. (If the WFP calls for the toiling masses to burn down the McMansions, we'll know for sure.)
As for "a bailout for homeowners, not for home lenders," this amounts to rewarding irresponsible behavior for some while punishing it for others. Again, maybe I'm showing my bourgeois homeowner undies here... but my wife and I didn't take a crazy mortgage to buy a place we couldn't afford. I'm not feeling particularly inclined to see my tax dollars rescue those who did from the consequences of their unwise decisions. The ameliorative measures are one thing; there's ample economic justification to take action that lead to fewer people losing their homes. And where there was exploitation--as there surely was--some reconsideration of loan terms is probably appropriate. But let's not "bail out" anybody, much less justify selective aid based on a super-simplistic notion of class.
That leaves regulation and stimulus. As a goo-goo type above all else, I couldn't agree more with the point about "re-regulation." But I have this nagging feeling that wedging a complicated set of rules that should strike a balance between encouraging growth and fostering irresponsible behavior into a measure where time is a factor--in the supercharged atmosphere of a presidential campaign, no less--might not work out so well. The same goes for the stimulus idea--which, in this presentation, just happens to include all the things the WFP always calls for. I happen to think they're good ideas. But let them win on their own merits, rather than using the DeLay tactic of jamming them through as an add-on to something else.
It's profoundly depressing how much these guys resemble their putative adversaries when it comes to tactics and style.
I don't claim to be an expert either, but maybe what they should do is allocate a small (in this context, anyway) chunk of the total money now, to send a message to the markets--which, if I understand the psychology of it at all, are waiting for some sign that action is forthcoming. To preserve leverage, Congress could make disbursement of the balance of it provisional upon passing the regulatory regime and, if a majority wants it, a stimulus package. This time frame also would ease the pressure by virtue of pushing the policy moment beyond the election. Call me crazy, but I suspect it's easier to take a "tough" vote in February of an odd-numbered year than September of an even.
8 comments:
Wow. A lot to chew on in this one. I've been thinking about a succinct comment for the last day or so and haven't come up with one.
I will say that I've always been a goo-goo, but I'm gradually becoming less of one. Some parliamentary tactics are bad and yet their badness is more than outweighed by the good achieved, I think - particularly when declining to use those tactics doesn't actually do anything other than effect a unilateral surrender. Obviously, some things are so undemocratic and unfair that any decent party will eschew them no matter what outcomes are at stake, but... I'm not sure that stuffing partially related things into one big bill falls in that category. It's not like the Dems are combining abortion-on-demand or something similarly inflammatory with the bailout and then saying take it or leave it. It's mostly things related to economics (the mental health stuff aside - but that just seems to be a procedural maneuver, not a partisan gambit). This is how things typically get done, and if the Dems decline to do it, the GOP isn't going to respond in kind.
As for the homeowner bailout, huh. It's complicated. I hear you - I took out a 30-year fixed-rate on a smaller house than I wanted and not in the neighborhood I really wanted. But the stuff that's been talked about on the left sounds pretty good to me - letting bankruptcy judges reset mortgage rates? I mean, by definition those folks have already filed for bankruptcy, meaning their credit is shot for seven years, and they're not getting anything for free - they're just getting an unpayable mortgage that they're tempted to walk away from converted into a mortgage they might reasonably pay and that will incentivize them to stay in the house, make payments, keep the place up, and not leave an abandoned property on the block, while giving the holders of the relevant mortgage-backed security some modest value to back up their holding, rather than no value from a totally worthless loan. That sounds better for lenders, better for borrowers, better for the economy, better for neighbors who would otherwise see their own property values drop.
It's hard to be certain, but it sounds like those are more or less the substantive positions that WFP is calling for; it also sounds like you don't have that much problem with those positions (correct me if I'm wrong). I get the feeling that what most set you off was the merely the tone of the opening line of that paragraph of the WFP email, calling for a "bailout for homeowners." Which, in isolation, could amount to a mindless call for assistance to the unwise and reckless with no penalties or consequences. If you read the rest of that paragraph charitably, though, it doesn't sound like that's really what they're saying (although they're not specific enough to be certain).
As for the tax on financial transactions, I'm well out of my area of expertise but that sounds to me like the 'Tobin tax' advocated by Nobel prize winner and mainsteam-economist-in-good-standing James Tobin for years. I am unsuited to debate the merits, but my impression was that perfectly reasonable, non-radical economist types have long felt that it would help ameliorate big busts from bursting bubbles.
One last thing: I'm not sure they really intended to suggest that there should be a surcharge on all incomes over $1 million. Maybe they did. But in context, it seems plausible that this was intended as a comment about Wall Street executive compensation - all of the surrounding discussion is Wall St.-specific - and that they just worded it poorly.
[[Sort of like when Palin tells Couric that she reads "all" newspapers and several bloggers I respect (Mark Kleiman, Matthew Yglesias) jump down her throat as if she meant that literally. She just misspoke; she was just trying to say something about the news sources made available to her as governor.]]
Agreed, of course, that $1 mil today isn't nearly what it was in 1981 and that precisely the same 'steep surcharge' that was in place back then probably doesn't make sense today. I'm not saying the WFP thought this one through all the way or that it's a great idea; just that it seems plausible that their intent was substantially less Bolshie than you imply. (Again, I could be wrong about this.)
I think what bothered me on a meta-level was the easy blaming, the certitude, and what felt like an almost willful failure to understand how the economy works. Tom Friedman's piece in Wednesday's NYT captured my sense of this fairly well: you can't "let Wall Street drown" and stay dry yourself. And while there needs to be re-regulation and sufficient punitive measures to guard against another round of reckless behavior in the near future, the "steep surcharge"--which I gather, from conversations I've had with people who know since I posted this, is just the hobby horse of the WFP executive director--goes well beyond cutting off a nose to spite a face. More like decapitation and then melting the severed head in a barrel of acid.
I will say that the balance of the changes to the bill that the Senate passed last night struck me as sufficiently negative on the merits that I have a little more sympathy for the point you made in the first comment than I might have a day ago...
I find, as I pass into my mid-30's, that I am taking a far more open-minded, "listen to what both sides are saying" approach to political issues these days. I remain open to a compelling rationale for providing some sort of government-sponsored solution to the current issues in the financial sector. But so far, I haven't heard one. On a personal and national level, much of America has a really bad habit with spending more than we have coming in. On the personal level, that means more frills, fun and toys; on the national level, it contributes to economic growth and jobs. Less of any of that is painful, and we don't like it. But at some point, the piper has to be paid. And the bills floating through Congress, in response to the pleas of the Fed Chair and the Treasury Secretary, are simply about wanting the Government to step in and fix the mess that investment managers and would-be mortgage owners have made - at taxpayer expense.
Widely available credit, such as we have today, is historically a fairly recent thing. We have had economies, and growth, without it. I don't think extension of credit is a bad thing, but at its heart it is supposed to be about a judgment call, with some risk, about the likely ability of the borrower to pay. As a nation, we've lost sight of that. Relatively few people I know have any real commitment or plan for getting out of debt in the foreseeable future. Debt is a lifestyle.
I believe that the lenders of this country can and should find a way to assess the creditworthiness of would-be borrowers, assign an interest rate based on the overall risk, and offer loans accordingly. They have little incentive to do so, however, if their major alternative is to wait a couple of weeks for an apparently panic-stricken White House and Congress to provide bailout money. In this environment, our Government is helping to create and perpetuate the very outcome it fears.
What disappoints me about both presidential candidates is how little I perceive them talking about the things that will help make our economy strong. An individual who has a habit of spending more than he earns, and is in serious debt as well, needs a plan that covers spending reductions, debt repayment, wise planning for emergencies, and a strategy for increasing income. I see no reason why a nation or government is any different - other than that it has more discretion to play games to keep the day of reckoning from coming.
McCain and his supporters have very little planned in the way of getting out of deficit spending. I'm willing to buy that McCain dislikes pork more than the average person in Congress, but it's not clear he has any leverage with Congress on that issue, either now or as a potential future president. McCain also seems to have little driving interest in ending the war in Iraq, which is quite expensive. Obama, for his part, refuses to deal with the fact that many of his constituents have jobs that can be done far more cheaply by other countries, since we're in a global economy that isn't going away, any more than the Internet or cell phones. Investing in renewable energy technology and infrastructure overhauls are good ideas (good, expensive ideas), but don't go far enough. Both candidates are, apparently, willing to throw out "pay as you go" to support the current bailout bill. And neither candidate appears to be calling America, or Congress, to submit themselves to several years of painful financial discipline in order to get out of the hole. Our electoral cycle, our media, and the lobbyists don't seem to reward, or give much credence to, that sort of long-term perspective.
Eric
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