The House has rejected the bailout.
Two-thirds of House Republicans voted against it. The bigger surprise was that forty percent of House Democrats did. (See here.)
Goddamn fools and goddamn cowards. To hell with them all.
Brian, I guess I'm a little surprised at your sentiments.During the bailout discussions, one commentator (I think David Brooks) said that there are no libertarians during economic crises. Well, maybe. At the very least there are no deontologists left -- we are all consequentialists now. No one is talking about standing on principle and suffering through whatever may come because the principle is worth it. Rather, everyone is talking about the consequences of acting or not acting in a certain way.I think on many issues we are much more principle-based, unwilling to sacrifice even if the going gets rough. In the current bailout situation, though, I haven't seen a thorough defense of standing on principle and letting the business fail.One problem is: what principle is worth sticking by? The best I can come up with is some sort of vague free market package involving the need for market corrections and the idea that govt. should stay out of things, etc. That's not very appealing, and not very concrete when the negative consequences are much more tangible. I suppose living in an era made prosperous thanks, in part, to some government tinkering (and much, if still not enough, regulation) has lessened the ideological furor against such things. Maybe this situation is so purely economic that no great principle commands our attention. For that matter, maybe economic matters are inherently consequentialists. I wouldn't go that far. Sometimes, economic principles will involve moral principles (I know this because I once thought about reading the Road to Serfdom), but maybe this just isn't one of those times. Whose freedom is at risk? What group is being singled out and injured? What harm is really being done?
Slate.com has perhaps the most . . . evocative description of this development:Main Street to Wall Street: Drop DeadOn a more practical note, this isn't necessarily a bad thing - at least in the long run (on the other hand, in the short run things may be very interesting). The current crisis has exposed problems throughout the financial world, some of which (such as derivatives) have posed problems in the past. And as long as the crisis is fresh and raw, there will be a lot of energy and interest in fixing them. But if we apply too many stop-gap and band-aid measures to the problem, we could achieve just enough of a superficial fix that we (the American people) allow ourselves to be distracted from achieving any sort of substantial solution (at least until the next financial meltdown). And I would argue that this may be the real reason why "Main Street" opposed the bailout. Even if we get evey penny of the $700 billion back, that's an incredible amount of money for us to tie up for any length of time (particularly since we'd have to borrow that money), and people seem to be very skeptical that we're going to see real (positive) reform occur piecemeal. So let's skip the tourniquets and get right on to the heart surgery. Congress has already proven that they are willing to forego their vacation to deal with the crisis, the financial world's willing to consider a variety of options, and the world is watching (which will hopefully cut down on any corrupting influences or back room deals). So let's go for the real deal - an actual series of fixes and reforms that will allow us to deal with this mess and (hopefully) help us prevent future crises.
Alex:Thanks, as always for your insightful thoughts.I can't compete, alas, with your knowledge and understanding of philosophy. However, I do perhaps know enough about economics and politics to offer something in the way of reply to your points about acting on principle v. acting on practicalities. There are, at a very general level, two kinds of arguments for free market polices. The first is in the consequentialist vein: Free market policies lead to greater prosperity than alternative approaches. But the second is decidedly moral in nature: free market polices minimize the use of force or threat of force by government against the people (ie. coercion) and thus maximize individual liberty. You are quite right that the first line of argument has become much more prominent than the second in the modern economic era. But major free market thinkers still discuss both extensively, and thinkers from the era of emergence of free market thought(let's say from the publication of The Wealth of Nations in 1776 to the end of the 19th century) focused mostly on the second. There are a number of reasons for that shift, I think (including the concreteness factor you mentioned), but the second vein is still very much around.Your comment and Bryan's comment have prompted me to write a post explaining further why I don't think philosophical objections to the bailout hold much water. I look forward to your reaction to my reaction to your reaction.P.S.You really, really should read The Road to Serfdom. I was already heading towards becoming a conservative/quasi-libertarian before I read it, but the book contained insights into economics, politics, law, and history that lead me to reconceptualize my views on a lot of things. It has influenced the way I think about the world more than any other work.Next time we see each other I'll have to lend you my copy. :)You'd also really like Bastiat's The Law (lots of free translations online), which puts forth as good a case for economic libertarianism as you'll find anywhere. (And if you haven't already read his Candlemaker's Petition --http://bastiat.org/en/petition.html-- do so ASAP.)
Bryan:Thanks much for your thoughtful comment.I agree that long-term fixes are needed for the underlying problems in our financial regulatory system that have helped turn a bad-but-manageable situation (the bursting of the housing price bubble) into the current credit market crisis. However, I disagree with you on a few points. First, I don't think those reforms are headed our way anytime in the very near future. Congress is leaving town for the elections as soon as some sort of bailout plan passes, and it will likely take months even after things start up again in January for the legislative sausage-making process to produce a bill that can clear both houses and get signed by the President (whoever he will be). There are simply lots and lots of controversial details that need to be worked out, and the urgency driving consideration of the (much less complex) bailout legislation won't be there to the same degree for a longer-term measure. Second, I agree that the current economic situation spotlights the need for financial system modernization, but I think that impetus might well be strengthened rather than weakened if a bailout passes. The upfront price tag of the rescue plan would push Congress toward modernization because the potential for getting most of those billions back would be tied up with the stability of the financial system for years going forward. Finally, to take up your metaphor, surgery is quite necessary in the current situation, but you have to stop the bleeding before surgery is performed in order for surgery to have any chance of working. What I mean by that is that if nothing is done very soon to help our economy to avoid a sharp downturn and that sharp downturn occurs, the public may well demand the type of longer-term measures --huge increases in taxation and spending, punitive measures toward large financial institutions, etc.-- that would hobble our economy for years, maybe decades, to come. Just my thoughts. Thanks again for yours,Brian
Brian,Your deference is misplaced; you're the real political philosopher here. I'm looking forward to your post. It has been awhile since I've thought of the morality of markets. I wonder, though, even if I gain a full Hayekian mastery of the arguments, would I be able to apply them to the complexities of derivative sub-prime mortgage packages and the need to insure those who trade in them? Maybe one doesn't have to if one can find a simpler principle to use to cut through the morass of detail.Thanks for the link; I'll check it out. I don't know where, exactly, I fall on the spectrum. I am much closer to economic libertarianism than I am to a command economy, for example. But I don't mind anti-trust laws, regulatory agencies, some taxation, etc. And, the idea of a minimal, social safety net is appealing and humane, I think. I will figure this out before I become president.P.S. I thought Bryan was bot.
Don't look forward to my post too much, Alex; like Palin and Biden in their debate tonight my hopes for success largely depend upon low expectations. (Heh.)
Brian,I'd like to point out that the very nature of the bailout package confirms my theory - that we need the crisis to drive real reform (both legislative/regulatory and market-based) in the US economy. People have been warning about the possible dangers of mortgage backed securities for months now, but it took massive problems on Wall Street, a Presidential appeal, and a trillion dollar stock market crash to actually motivate Congress to pass a stop-gap measure (I'm sure the legislative blackmail and adding a 100 billion dollars in bribes didn't hurt, either). I also have little faith in the private sector to agree to any reforms or efforts to "re-regulate" the financial industry. To illustrate my point, consider a recent editorial in the Wall Street Journal, which argued that the AIG bridge loan was abusive (towads AIG and its shareholders). However, only days later the New York Times revealed that AIG has (in less than a month) spent $61 billion of that $85 billion dollar loan - and AIG has yet to sell any of their subsidiaries. And while one could argue that this just implies that AIG's executives knew exactly how much they needed to borrow, the fact that AIG is apparently shopping around more subsidiaries than initially planned indicates that AIG is harder up than initially realized (and they are still facing a ratings downgrade, which will trigger a need for more collateral). So, to recap, Congress was willing to flirt with financial Armageddon before getting involved in the financial crisis. And a free market advocate was argued that the government screwed a private business, even as (that business's) Rome was burning due to pre-intervention mistakes. That's why I think we need to deal with the crisis here and now - even with it, we're still facing apathy and opposition. Just imagine the kinds of problems we'd have if the crisis wasn't imminent (or - for the imaginationally challenged - we could just ask the people who tried to rein in Fannie Mae and Freddie Mac before the mortgage meltdown).
Post a Comment