jimsleeper.com » Why the Second Bail-out Bill Should Fail

Why the Second Bail-out Bill Should Fail

Talking Points Memo Cafe

September 30, 2008, 11:02PM

By Jim Sleeper

Some supporters of the bailout package that failed on Monday still think that it sank only because a tidal wave of short-sighted, right-wing populist rage topped the levee and swamped the House. Their Exhibit A is Thaddeus McCotter (R-Mich.), who warned, “In the Bolshevik Revolution, the slogan was ‘Peace, land, and bread.’ Today, you are being asked to choose between bread and freedom. I suggest the people on Main Street have said they prefer their freedom, and I am with them.”

Such demagoguery is containable, bailout proponents say: A slightly-more “populist” package will pass the House soon, perhaps with a push from the Senate. And if the economy still worsens, the same angry citizens who scared those representatives who weren’t “with them” as fully as Rep. McCotter into voting Nay will turn against them soon enough for having opposed the bailout.

A small problem: A lot of House “Bolsheviks” and liberals opposed it, too.

“Why aren’t we reducing debt for Main Street instead of Wall Street?” demanded Ohio’s Dennis Kucinich. “Is this the United States Congress or is it the board of directors of Goldman Sachs?”

There was even a “Bolshevik” in the majority of McCotter’s Michigan delegation that opposed the plan, 9 to 6: Detroit’s John Conyers asked, “If injecting credit into our financial industry is the solution to the current supposed credit squeeze, why hasn’t this body been given… other proposals, like giving tax payers a no-risk equity stake in the bailout recipients or supporting the direct injection of capital into the financial industry, as we did during the Savings and Loan crisis of the 1980s? The likely reason is because Wall Street would have to give up a piece of its wealth…”

Other left-leaners opposed the deal as strongly as conservatives did, including Marcy Kaptur, a comrade of Kucinich in the Ohio delegation, which voted against it 10 to 7. So did dozens of center-liberal Democrats, many from seats safe enough to have survived populist wrath had they backed the bill.

What explains this un-harmonic convergence of left and right? Conservative Republicans will groan to learn that it evokes a world-weary French apercu, Les extremes se touchent: In politics, the opposite extremes sometimes touch, sharing a course of action for reasons antipathetic to each other.

In interwar Europe (to speak of real extremes).apocalyptic Marxists were as eager as fascists to see bourgeois democracy fail, imagining that that would unleash a proletarian revolution. But antipathy to Wall Street isn’t as fantastical or nihilist as that, and it’s nowhere near as irrational and uncontrollable as a tidal wave.

True, we are all wired into the current system, and if layoffs were announced and credit cards frozen we’d be frightened – for about a day, TPM’s own Dean Baker contends, until the Fed took over major banks, as it almost did in the 1980s, bouncing their executives and shareholders and letting the system of payments operate as before.

Serious restructuring would ensue: We could fix credit without giving so much to Wall Street and entrusting so much power to Henry Paulson and other big architects and apologists of what went wrong.

That’s reason enough to discredit a second bailout bill. This is politics, after all, not a storm watch, and better leadership could turn the populist surge into something deeper and wiser. It could craft a stimulus package to boost borrowers’ loan paybacks and credit ratings and, with that, lending and economic growth that are real this time, not imaginary.

Take a second look at what Kucinich and Conyers are saying. Are they really seeking less freedom than the sloganeering McCotter? The extremes are touching here because the statist, corporatist bailout now on the table is itself scary in basic republican terms. Rep. McCotter may see the hand of Lenin, and some on the left the hand of Mussolini, but another, deeper warning comes from the center of the republic itself:

“When the people give way, their deceivers, betrayers, and destroyers press upon them so fast, that there is no resisting afterwards,” wrote John Adams in 1787. “…. The people grow less steady, spirited, and virtuous, the seekers more numerous and more corrupt, and every day increases the circles of their dependants and expectants, until virtue, integrity, public spirit, simplicity, and frugality become the objects of ridicule and scorn, and vanity, luxury, foppery, selfishness, meanness, and downright venality swallow up the whole society.”

A tweaked bailout package won’t change that, especially if it comes from the United States Senate, which is three times further from populism and three times closer to Wall Street. Even Thaddeus McCotter isn’t wrong to say that those who would save the current system really will lose the American people.