Capital Markets

Abandon All Hope

Everybody's running against the bailout, but nobody's serious about killing it.

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Theresa Finch was pissed off. Somebody had to be. It couldn't have been quieter in the bleachers of Tuesday's Obama-McCain town hall debate if the events drinks were laced with Quaaludes. Audience member Finch was quiet, too, until she got up to deliver her question.

"How," Finch said, "can we trust either of you with our money when both parties got—got us into this global economic crisis?"

Anyone could have predicted the candidates' answers: It was the other party's fault! (As McCain might say, it was "that one's" fault.) "When George Bush came into office," Obama said, "we had surpluses. And now we have half-a-trillion-dollar deficit annually."

"Do you know," said McCain, "that he voted for every increase in spending that I saw come across the floor of the United States Senate while we were working to eliminate these pork barrel earmarks?"

Tone-deaf debate answers are nothing new. The blowsy responses of McCain and Obama, though, revealed the traps that voters and the candidates have both fallen into. Voters are furious about having their money shoveled onto Wall Street. That was supposed to restore faith in the mortgage industry? Huh? What?

(Story continues below video.)

Click above to watch a 63-second condensation of Tuesday's 90-minute presidential debate between John McCain and Barack Obama.

On his post-bailout vote show, Lou Dobbs, the jowly arbiter of middle-American anger, called it "stunning setback for voters who believed the House would stand up for the American people and refuse to be bought out by the Bush administration, political elites, and Wall Street." True, he always talks like that. But this time he was actually expressing what voters thought. A Tuesday CNN poll pegged the proportion of Americans who thought the bailout was "for Wall Street" at 53 percent. Only 40 percent thought it was passed to "help ordinary taxpayers."

Obama and McCain are stuck in another trap. They voted for the bailout. They can't run against it. They went all in, literally, and now they're stuck selling its merits while frowning and promising that it was the only choice they had.

When you dip a little lower, under the presidential stratosphere, anyone who can be against the bailout is against it. In both parties. In Oregon, where Democrat Jeff Merkley is running stronger than people expected against Republican incumbent Sen. Gordon Smith, the bailout is the villain of a heavy-rotation TV ad. "In this economy, who's really on your side? Gordon Smith and Washington—a decade of no accountability. A trillion dollar check for Wall Street."

You couldn't find a politician more at odds with Jeff Merkley than Wisconsin's John Gard, a Republican trying to take a GOP-leaning swing seat from Democrat Rep. Steve Kagen. Yet his message on the bailout is basically identical. "Now they want to give a huge bailout to Wall Street billionaires," Gard says to the camera in a new ad. "You play by the rules and fall further behind while they break the rules, and Congress hands them your money."

There's no wiggle room here: None of the congressfolk who supported the bailout—and most did—are benefiting from it. Their tone is set by Georgia Rep. Jim Marshall, a perpetually endangered Democrat who is deflecting Republican attacks with an apology that is Jimmy Swaggartian in scope. "I don't like this rescue plan any better than you do," he tells voters, sour-faced, in a new ad. "And I'm not interested in bailing out the irresponsible people who dragged us into this credit mess." Subtext: "But I did it anyway. Let me keep my job!"

You'd expect some sort of libertarian backlash to be brewing—if you define libertarianism down to mean "not wanting to nationalize mortgages." There's not much evidence of it, although some bailout enemies are trying. In Massachusetts, libertarians are working to pass Question 1, a rerun of the 2002 ballot measure that would have repealed the income tax. Six years ago groups such as the Committee for Small Government and Citizens for Limited Taxation powered it to 45 percent of the vote. This year, according to the CSG's Carla Howell, the support on the ground is a little more noticeable, and the opposition of Massachusetts' political establishment is a lot more pronounced.

This weekend one of the protestors at a pro-Q1 rally showed reporters a sign he was proud of: "Bail Out Massachusetts Taxpayers!" Just like those Democratic and Republican challengers, here was an anti-tax activist channeling the anger of the hoi polloi against the government.

"The congressmen voting for the bailout," says Carla Howell, "have one financial qualification: They're on a first-name basis with the institutions that stuff their coffers. Beyond that they're unqualified to meddle with markets. People see the reaction to Katrina, the foul-out of the Big Dig, and this bailout, and that shakes their faith in government doing anything right."

Well, not quite. Faith in government was low before the bailout. Faith in Congress was lower. A Rasmussen poll taken right after the bailout showed voters ready to replace the entire Congress by a 4-1 margin. Faith in government has been low at least since Watergate. None of that matters, because both parties passed the bailout, and both candidates are defending it. On Tuesday night, John McCain even suggested expanding the role of the Treasury beyond the provisions of the bailout legislation, to purchase mortgages directly from homeowners.

Was the onus on John McCain to articulate a stance against the bailout? Should he have cracked open his Henry Hazlitt and explained why some industry failures are necessary for economic growth? Maybe he could have, but really, so could have anyone on the right. So could have Obama. But neither of them did, and a sort of gentleman's agreement developed: Anyone could complain about the bailout from a kneejerk populist stance, but no one could derail it. All you need to know about the craven political thinking at work came from the desk of Newt Gingrich, would-be idea man of the right, who first opposed any bailout, then publicly supported a bailout "reluctantly and sadly" about an hour before the House initially rejected the plan, and then pronounced McCain dead in the water for supporting the bailout at all.

The voter's place in all of this? McCain located it in a Wednesday campaign trail gaffe.

"Across this country," McCain said, "this is the agenda I have set before my fellow prisoners."

David Weigel is an associate editor of reason.