Campaigns/Elections

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.

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  1. nobody’s serious about killing it

    We’re serious, but we’re out of silver bullets.
    I’m investing in garlic.

  2. The market has closed.

    Dow: 8,579.19 -678.91 (-7.33%)

    Nasdaq: 1,645.12 -95.21 (-5.47%)

    S&P 500: 909.92 -75.02 (-7.62%)

    10y bond 3.75% +0.02 (0.54%)

  3. I sincerely hope that some congresscritters lose their godammed jobs over this shit. Republicans or Democrats, it don’t fuckin’ matter. If you voted for it, your opponent will be on your ass over it. And the voters, who may not be too bright but are very angry, will listen.

    Unfortunately my “representative” in the House is not going to lose if she kills a praying crippled child by stomping her to death with hobnailed boots on national television.

  4. 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.

    David,

    Were you even born yet when Quaaludes were available? The last real ones I saw were in 1981 when I was a college freshman.
    You have made this anachronistic reference before.You could use a newer sedative drug, or a timeless one like seconal.

  5. But Pro Libertate, we passed the bailout! The fiscal crisis has been averted.

    How could this be?!?!?

  6. My daddy tells me stories of how he abused dexedrine and Quaaludes during a one year stay in Grenada. Which reminds me.

    ++++++++++++++++++++++++++++++
    ZOOM WAFFLE!

  7. ProLib,

    I just hope dollars hang in there.I’m all in cash and government bonds.I’m cursing those gold bugs who gave the yellow metal a loony,conspiracy,crank reputation or I’d be in that too.I don’t have nearly enough ammo either.

  8. SIV, ‘ludes are a timeless reference thanks to Karen Ann Quinlan.

  9. Can you ever delete posts? ’cause I don wan mai stupidittee to laz forevah.

    I just hope the market doesn’t capitulate further. But since I know it will. SWIM should invest in a psychotropic vacation.

  10. J sub D

    She was totally dead by the time Weigel was in kindergarten(if not earlier).

  11. Here is an interesting article from Robert Higgs .

    If you voted for it, your opponent will be on your ass over it.

    And what if the opponent voted for it too?

  12. For now, I’ll be happy if we avoid any serious inflation. At least my cash holdings will endure for the short term. Long term, of course, I’d like the market to recover and stay recovered so that I can retire some day.

    Oh, and I’d like to remain employed.

  13. I got ahold of Quaaludes around ’96-’97 here in Phoenix…

    It’s funny, people keep talking about how mad they are at a certain politicians position or vote he/she cast, etc, yet the politicians, whether a ‘new’ or an ‘old’ one keep doing the same shit over and over.

  14. Oops, you all now know my real name…NOOOOOOO!!

    🙂

  15. Could Weigel please explain how the Republicans are responsible for this financial crisis?

  16. J sub D

    She was totally dead by the time Weigel was in kindergarten(if not earlier).

    ‘ludes are part of the American myth, our common heritage. Like thalidomide. You’ll be able to bring up Terri Schiavo in reference to brain death in 30 years without opprobrium.

    Let’s do a quick unscientific survey, shall we?
    Who here was confused, even momentarily, by the Qualludes ref?

  17. And what if the opponent voted for it too?
    We know about the turd vs douchebag race.
    Is there a senate race out there where that is applicable?

  18. I knew a dude who had a “Captain Quaalude” t-shirt. Not bad.

  19. I have the luxury of voting against a congressman (D), Senator (R), and two Presidentinal candidates (D and R) who all voted for that stinking piece of garbage.

    I shall vote R, I, L, respectively, and really feel like I am making a difference.

  20. A Rasmussen poll taken right after the bailout showed voters ready to replace the entire Congress by a 4-1 margin.

    The British Parliament was not this unpopular among the British voters back on the eve of the 2005 UK elections.

    (For a tiny history lesson, Labor lost a huge number of seats in that election, a huge factor in the resignation of Tony Blair.)

  21. Could Weigel please explain how the Republicans are responsible for this financial crisis?

    Not Weigal here but I find it easy. It’s called neglect. The sin of inaction. The GOP controlled both houses and the Presidency the first 6 years of this century. Fannie and Freddie survived, even grew in that time period.

  22. J sub D,

    The penalty for their failure is death. Unfortunately for the other side of the aisle, they are condemned for their sins as well. If only we’d actually take this crisis as a sign that the jokers all need to leave.

  23. McCain had a golden opportunity when Bush came with the bailout plan. If he had positioned himself against it, he would have won this election. Now all is lost for him.

  24. Does anyone know why Lehman Brothers was allowed to fail but the US gov’t tried to save the rest?

  25. McCain had a golden opportunity when Bush came with the bailout plan. If he had positioned himself against it, he would have won this election. Now all is lost for him.

    If he’d done that, people might have considered him a Maverick? instead of just another old white Republican. He’d have been right as a bonus.

  26. The British Parliament was not this unpopular among the British voters back on the eve of the 2005 UK elections.

    (For a tiny history lesson, Labor lost a huge number of seats in that election, a huge factor in the resignation of Tony Blair.)

    Yet we are about to reward the majority party with a whole bunch of new seats, in this country.

    Repeat after me: You get more of what you reward, and less of what you punish.

    Having rewarded the Dems for voting this abomination through, can we expect (a) more or (b) fewer, abominations from them in the future?

  27. Technomist
    Does anyone know why Lehman Brothers was allowed to fail but the US gov’t tried to save the rest?

    Really poor fellatio skills.

  28. Does anyone know why Lehman Brothers was allowed to fail but the US gov’t tried to save the rest?

    The conventional wisdom is this:

    Summer ’07: ‘They no nothing!’. Credit markets show signs of strain; Fed eases rates, credit relaxes everyone think it’s fixed.

    Mar 08: Bear Stearns is in deep kimchee, credit markets seize again, fed bails out Bear stearns, credit markets relax. Fed tells everyone get your act together, here’s some help. Everyone thinks it’s fixed

    (some voodoo happens here which causes next event, what immediately precipated this I don’t remember, possibly Indymac actually going under and some others on the precipice. Possibly also some unwinding of commodity longs comming off their Jul ’08 record highs. Likely some shift in undercurrents and equilibria in the Jul spike that meant there would be a world wide economic slowdown, not just US)

    First Week Sep 08: FNM/FAE implicit guarantee becomes explicit to prevent seizing up mortgage market, most equity holders are wiped out. Everyone thinks it’s fixed.

    Second week Sep 08: Lehman fails to get a merger,buyer, equity infusion cries uncle. Position had been deteriorating for a while, FNM/FAE didn’t help. Fed/Treas says ‘we told y’all back with Bear to get your act together, tough titties

    Later that week. Lehman going under causes AIG to have a stroke, Fed/Treas need to step back in because AIG will bring everyone down the way they thought Bear would.

    Third Week sep ’08: WaMu throws in the towel, gets strip mined by JP Morgan using the FDIC’s steam shovel.

    Later that week. Paulson puts forth his initial plan to try a systematic recovery rather than the ad hoc stuff he had been doing. So he (or the gov’t) doesn’t have to decide anyome like he did with Bear,Lehman, AIG, and WaMu. They will ‘help’ everyone.

  29. Really, what will be the consequences of being the most unpopular Congress since the South seceded? I’m not sure the Democrats are going to do as well in Congressional elections as they think. And if Obama does win, I suspect we’ll have a GOP Congress again in 2010. Which may be an ideal state of affairs, I suppose. A low, low standard for “ideal”, but what else can we hope for?

  30. There’s a Goldman-Sachs-centric theory of bailouts going around. Lehman didn’t get rescued because it’s a competitor. AIG got rescued because was heavily invested in it. Morgan got bailed out along with Goldman Sachs because hey, they were the only two investment banks left, and you can’t be TOO obvious….

    I don’t know if it’s plausible or not. Right now the Fed is pretty much doing whatever it wants, ad hoc, with no transparency or explanation but “It’s a crisis!” But it’s hard to believe that cronyism isn’t playing a part in this thing, given that both Paulson and Kashkari are Goldman alumni.

  31. thats right create the problem through deregulation and then when you don’t like the cure complain about it imo I’m against this bailout package I think more should be done to help the people of the nation through this rather than the big corporations.

  32. I don’t know if it’s plausible or not. Right now the Fed is pretty much doing whatever it wants, ad hoc, with no transparency or explanation but “It’s a crisis!” But it’s hard to believe that cronyism isn’t playing a part in this thing, given that both Paulson and Kashkari are Goldman alumni.

    While I am also suspicious of the GS connections, the fact is that GS has had to write down impaired assets (because they were a securities firm) and they did a relatively good job in avoiding subprime exposure on their books. That they stand to benefit shouldn’t be surprising; they’re in a much better position to do so than poorly capitalized commercial banks giving their bad assets held-to-maturity valuations.

    I still haven’t seen a mention here of the Treasury’s capital injection plan for banks.

  33. For now, I’ll be happy if we avoid any serious inflation. At least my cash holdings will endure for the short term. Long term, of course, I’d like the market to recover and stay recovered so that I can retire some day.

    Oh, and I’d like to remain employed.

    Please, please don’t send this list to me.

    Just because I can visit every house in the world in a 24 hour period without my reindeer incinerating doesn’t mean I can work miracles.

  34. My Congressman voted for the bailout, even after admitting in an AP article that calls to his office were 8-to-1 against it. Both of my Senators voted for the bailout, even though one admitted that emails to her office were 1000-to-1 against it.

    I would like to say they’ve lost my vote, but truth be told, I wouldn’t have voted for either one in any circumstance anyway.

  35. Both of my Senators voted for the bailout, even though one admitted that emails to her office were 1000-to-1 against it.

    It is possible that those opposed to the bailout were more vocal about it.

    I’m not sure the Democrats are going to do as well in Congressional elections as they think.

    They can not do better than Britain’s Labor Party did in the 2005 UK elections.

    Blair and his Labor Party were more popular.

  36. If I recall correctly, McCain went from a tossup in the polls nationally, to about 6 points down, right after coming out (of the socialist closet) for the bailout.

    I don’t think its’ a coincidence. People inclined to vote for Obama expected him to act like a socialist, so he didn’t get hurt that much by his support.

    McCain’s former supporters, however, thought that a Republican would be better than that. Big reality check. Big drop in the polls.

  37. Wheeee! Free money!

    How could anyone be against that?

  38. RINO Saxby Chambliss is fucking toast in GA. I’ll wager the LP Candidate for Senator outdraws Barr considerably, partly as a result of conservatives rebelling over the bailout.I’m not looking forward to DemocRAT Senator Jim Martin for 6 years but I’m voting straight LP.

  39. thats right create the problem through deregulation

    1. Deregulation??? YOU FAIL.

    2. Regardless, *I* didn’t create the “problem”, so stuff it.

  40. 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!”

    …trying…to resist….getting….violent…

  41. “”””Really, what will be the consequences of being the most unpopular Congress since the South seceded?”””

    Winning your party’s nomination for President.

  42. Davis Weigel is a slimy little weasel. I’m sure he feels right at home in D.C.

  43. The problem is the uncertainy about whether economy is going to tank and how badly.

    If it’s badly, then the bailout will appear to have been a waste. A few people will hang on saying it would have been worse. Most will say it’s pointless.

    If it’s a mild recession, people will point at the bailout as having been necessary.

    Things are still up in the air and everyone’s covering their ass so they can claim to be for for and against it.

    What pisses me off right now is that the government’s capricious plan changing is probably doing more damage than anything else. If you don’t know from one day to the next if the banks are going to be nationalized or there’s going to be an interest rate cut or what, then the safest thing to do is to sell and wait until the government figures out which way is up.

    I also read it as a rebellion against the massive government intervention. Capital is scared shitless and is fleeing due to fear the nationalizations will wipe out their investments.

    I predict that the stock market will continue to tank as long as the government keeps making more extreme interventions and changing it’s mind about what to do.

    That is, I suppose, good news for bailout opponents. But I’m not in any particular mood to celebrate. Suffice to say the bailout has NOT saved anyone’s 401(k).

    In effect, libertarians should be pointing out that the government is making this worse. It’s effectively famming the flames of panick.

    Actually one left-liberal I know suggested that Bush is deliberately trying to create a state of emergency so he can cancel the election. I’m almost tempted to believe it.

  44. Here’s what I’m wondering. Why the f*** isn’t Bob Barr using every penny of his money to exploit this situation to the maximum? He should be running ads all over the internet and TV saying “Hate the bailout? Vote Barr in 2008.” He needs to get ads anywhere but the typical libertarian places that will be likely voting for him anyway. I’m standing on the edge as to whether his solid opposition to the bailout is enough to make me overlook his horrid immigration policy and cast a vote for him.

  45. And by the way, how the f*** are Democrats getting away with arguing that Republicans and deregulation is the cause of this problem? Why aren’t Republicans growing balls and fighting back against these flimsy and pathetic charges that are starting to look like conventional wisdom? As if the president has more power over the economy than Congress, which has been run by Democrats the past two years! Obama’s been talking about all the jobs lost since January, but I haven’t seen any noteworthy deregulation since January to cause such a loss. Because libertarians and conservatives aren’t fighting back hard enough, we’re letting the Dems get away with arguing that Keynesianism is the only solution to fix the economy. Trust me, the Republicans have plenty of blame for digging us so far into debt, but this pure, steaming bullcrap from the Democrats is just too much for me to handle.

  46. It’s time for a Revolution.

    Hang all the bastards at the FED.

    Repeal the 17th and 23rd amendments or hold an Article 5 Constitutional Convention to fix it.

  47. They can not do better than Britain’s Labor Party did in the 2005 UK elections.

    Blair and his Labor Party were more popular.

    No, they were not. Democrats are back to a double-digit advantage in the generic Congressional ballot polls. You’re confusing Parliamentary Democracy with our system. In Britain, low popularity for Parliament is the same thing as low popularity for the governing party. In the US, it is not, mainly because the minority party has a lot more power in Congress than in Parliament. Much of Congress’s low popularity stems from frustration that the Democratic agenda from the 06 elections (the war, mainly) was blocked by the Republicans.

    If I recall correctly, McCain went from a tossup in the polls nationally, to about 6 points down, right after coming out (of the socialist closet) for the bailout. You do not remember correctly. Obama had regained a lead the week before the bailout talks even began, and the trend line after the bailout looks little different from that before the bailout.

  48. And by the way, how the f*** are Democrats getting away with arguing that Republicans and deregulation is the cause of this problem?

    Because there’s just too much evidence supporting the charge; because it makes intuitive sense; and because the Republcans controlled all three branches of government (executive, legislative, and the Federal Reserve) for the five years during which the problem developed.

  49. A lot of people have been making comparisons to the Great Depression as an analog of what is going on now. But I do believe there is a better historical precedent for current events, and that would be Japan in the late eighties.

    They had the exact same problem: An unbelievable asset bubble anchored in outrageous real estate prices. When Mr. Bubble popped over there, tumult followed.

    The second parallel is the “solution.” The Japanese are infamous (along with the rest of Asia, frankly) for their patriarchal business systems. The response to the bubble-pop was to prop up their banks with scads of red-ink via pumping cash – freshly printed paper cash – into the ailing bank system, especially to the big banks that were politically connected to the LDP that runs Japan.

    The end result was not a huge contraction of the Japanese economy, but a malaise that country has been unable to shake off since. The Nikkei has never been as high as it was in 1989, the Japanese economy grew at anemic rates for more than a decade straight, and public debt there is now nearly twice the country’s GDP. The only thing that perhaps kept Japan from free-fall was their excellent balance of payments with the rest of the world, and the emergence of China – which for Japan has been a trade-surplus bonanza vs. the red-ink Wal Mart experience with China the USA “enjoys.”

    If there is a historical parallel to this “crisis” I would bet it’s Japan’s asset bubble and the paper-pumping response of the 80’s, not the disasters of ditching a gold standard (which Britain did, setting the Great Derpession in motion) financial system that hasn’t existed for decades.

  50. Clinton and the Dems pushed the CRA in 1995. The root cause of the bubble.

  51. I’m looking forward to when I go to Vegas next time. I can “invest” $100 in the slots. And if I lose, I can ask my two senators, and house rep. along with Bush, McCain and Obama to refund my lousy choice of investments.

    Investments are a gamble. It’s a risk. A choice you make. Why should I cover anyone’s ass when they gamble?

  52. In effect, libertarians should be pointing out that the government is making this worse. It’s effectively famming the flames of panick.

    All I hear from friends and co-workers is that there is NO choice out there left for voters. There’s Dems and Reps. But there’s always another choice.

    I’m sick and tired of Bush talking about this “crisis”! The credit bubble has finally burst. Yipee! If they just let it alone, the free market would come back to center and we wouldn’t be building our economy on shifting sands.

  53. Joe, what’s the evidence of Bush’s “deregulation”? He spent record tax money on that aspect of obese government just like Bush spent record quantities of money on other aspects. You can argue Republican corruption and I’d totally agree with you (but I’d pull in some Democrats, which would probably piss you off even though they’re at least as corrupt as the Republicans, considering their destructive “CRA”!)

    Anyway, I’ve been dying to ask a Democrat this, so “where’s the deregulation?”

  54. Reason (and myself) owe Ron Paul an apology.
    It was NOT reason that warned us about these events. It was Ron Paul.

  55. “””Clinton and the Dems pushed the CRA in 1995. The root cause of the bubble.””””

    Say you buy a bike with a loose wheel, and after 10 years the wheel falls off and causes an accident. Is the accident the bike makers fault or the person who didn’t keep the bike running in top shape for 10 years? Or are they both to blame? Sure it’s wrong for you to get a new bike with a problem, the maker shares in the blame. But you would have prevented the accident if you paid attention to the condition of the bike.

    One would have to be pretty partisan to place full blame on democrats or republicans. There is much fault to go around. The biggest fault goes to the two people that shook hands when the mortgage was signed.

  56. Calling the corporate welfare, protectionism, subsidies and selective quashing of competition through favoritist tax policies that has taken place under the Bush administration “deregulation” is ill-informed. The only regulations the NeoCon faction have ever advocated repealing are the ones that that are in the way of their own investments; for the rest, they love to meddle. Now, in their incredible stupidity, they have managed to discredit the whole concept and lose themselves and the rest of us a ton of money in the process. GFG, assholes, welcome to the People’s Republic of America.

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