Ignored will be the fundamental moral and practical reasons why any bailout is wrong, but because no one seems to pay attention to principles anymore, the pragmatic view will be, "Oh, $350B isn't that much. What a great compromise!"
One of the more interesting side issues in this whole affair has been the overwhelmingly negative public response to the proposed bailout, and not only that, but that the politicians responded to it. I was preparing a post today where I was planning on arguing that Congress would pass the bill regardless of public opinion, and that this would put a spotlight on the blatant power-grabbing nature of it; this as opposed to some supposedly noble attempt at "fixing" the economy because they know better than us.
Because the House surprisingly failed to pass the Emergency Economic Stabilization Act of 2008, and because three quarters of the American people opposed it, does this mean they were all motivated by the right reasons? I don't think so. The most common refrain from the "No Bailout" side has been that people don't want to reward the greedy Wall Street tycoons; not that government intervention is bad per se, just that this particular intervention is bad. Very few have identified the insidious nature of nationalizing significant chunks of the economy, or the terrible violation of individual and property rights that a trillion dollar redistribution scheme would represent.
Driven by fear for their jobs, the politicians listened to the angry word on the street, and acted in accordance. From the Wall Street Journal:
For rank and file lawmakers, the vote forced upon them produced anger and soul-searching about the economic and political costs of the bailout, and a difficult choice: whether to safely vote no on an issue unpopular with voters or swing behind a measure the nation's top economic leaders insist is needed to avoid a recession.Decisions made on the plan could be not only career defining, but career ending. The pols are scared out of their minds, afraid of losing their jobs in 5 weeks, but the only thing they have to fall back on is "which pressure group has the most pull?"
And across the Capitol, there was an overwhelming sense that decisions made on the plan would be career defining. "There is no extra courage to go around," said Rep. Jim Cooper (D., Tenn.).
Many lawmakers said they weren't willing to go out on a limb. Rep. Lynn Woolsey (D., Calif.) said there still were "major questions unanswered" about the need for bailout. She said Wall Street isn't beinb asked to pony up enough to fund the rescue, and voiced doubts about whether the Bush administration—which engineered a series of earlier market interventions, including the takeover of Fannie Mae and Freddie Mac – should be trusted this go-around. [emphasis added]
And take note of one part of the quote from Rep. Lynn Woolsey (D., Calif.), when she said, "Wall Street isn't being asked to pony up enough to fund the rescue." How is this even a meaningful group of words? Wall Street should "pony up" money to "fund the rescue?" Implied in this tortured reasoning is that it is the government's proper role to identify that a rescue of otherwise private institutions is both necessary and proper, and that the problem is that Wall Street isn't being forced to kick in more dough. This anti-individual rights, concrete-bound, pragmatic, and "screw the rich bastards because they're an easy target in the similarly concrete-bound minds of the public" mentality is a perfect encapsulation of our current political climate.
Thus, because the bill was narrowly defeated based on nothing but fear -- and assuming that a repeat vote will fail narrowly for the same reason -- I predict that Barney Frank, Nancy Pelosi, and a grovelling Hank Paulson will get together and craft a bill that is half the size of this one, the American people will sigh in relief that "fiscally responsible" heads have prevailed, and we'll have a slimmer, trimmer nationaliza... er... bailou... er... Emergency Economic Stabilization Act by the beginning of next week.