Schumpeter Shrugged

Quick post on the bailout. With the more strident voices on the Right manning the ramparts against it -- in some ways, a dynamic similar to the immigration debate -- public outrage obviously played a pivotal role in Monday's vote. (Most underreported story of the past week: the anti-bailout protests in the streets of lower Manhattan.) I've been posting for months that any sort of resolution to this period depends on the public first believing that the bad actors have been held to account. While the bailout arguably would trickle down and benefit Main Street, you simply cannot expect it to fly through without a hitch while people are reading reports of failed executives getting tens of millions for a few weeks of work. I might have supported the plan as a necessary evil until I saw how toothless it was, especially on executive compensation for participating firms. And of course the provision that includes private foreign banks is patently offensive. The administration can yell all it wants about the need for the plan to be as "clean" as possible. But the bottom line is that "stop the bleeding now, fix the system later" ain't flying.

Part of the public's skepticism is a natural reaction to the now-transparent language of deception and hysteria. When you've trafficked in mushroom clouds and Persian Hitlers for eight years, "imminent financial Armageddon" loses a bit of its edge. Hearing the administration and its media flacks suddenly and in concert (almost as if a memo went out, eh?) warn of a latter-day Great Depression and push this as "it's not a bailout, it's a buy-in" sets off alarm bells for anyone who's been sentient in recent years. Orwell's revenge, maybe. Also, I don't think the plan's Goldilocks-invoking supporters help their cause by trying to convince the public it doesn't understand the financial system well enough to know what's at stake. Somehow they had faith that people were "smart enough to reject the pessimists" on the way up.

As for the Democrats, could they be any more hapless strategically? It's like Charlie Brown getting the football yanked away at the last second over and over. Against great odds, they've managed to make themselves the public face of the bailout -- and by extension and increasingly as time passes, the underlying financial debacle. Yes, they're the majority, so in some ways it's unavoidable. But obviously important short-term implications for November aside, perceptions are forming right now that will last decades. Of course much depends on what happens to the economy and the financial markets from here, especially if a plan doesn't pass and things go south. Still, what will be the public's enduring political memory? Bush's disastrous economic policies, Democrats pushing the largest taxpayer-financed bailout ever, or Republicans "standing up for Main Street" against it?