I'm a bit unnerved by the populist glee some folks are taking in the bailout bill's failure. Some people think they've put one over on the experts, who are always talking down to them. Others think they've finally stuck it to those fat cats on Wall Street. Still a few more are glad to have saddled Bush and the Republicans with one last reminder of the utter bankruptcy of their ideology. This seems like a very weird understanding of power in this country. If this bill fails, and the worst does come to pass, the experts will be fine. They are tenured academics, or highly paid analysts. Their jobs will remain safe, and their advice will be in even greater demand. As Chris Rock said to Bill Maher this week, "no economy is bad for everybody." So too will the fat cats ride out the crisis. Wall Street's top players have plenty of options. They will apply for jobs at commercial banks and new firms. They will go to law school, or parlay their Ivy League degree into a more spiritually fulfilling and emotionally enriching career. And Bush and his friends will certainly live out their lives in comfort. Bush will stumble his way through speeches, and lose the card to his own presidential library. Defeated Republicans will gladly take jobs as lobbyists. But other things will happen. Money market funds could be wiped out. Plenty of pensioners could love the investment income they use to survive. Then there are the bigger problems: The credit markets could seize up. Without access to credit, economic demand will plummet. Unemployment will hit double digits, wages will fall sharply, small business will shutter their doors. The people hurt in that scenario are not rich and they are not powerful and they will not be okay. They will lose their jobs and their savings and their health care. Now, there's an argument that this won't happen. Indeed, much of the debate about this bill is, in theory, a combination of a judgment on 1) how likely that scenario is in the absence of a capital infusion and 2) how risk averse we should be. You could place the probability of collapse at 20%, and say that's an acceptable risk. You could place it at 10% and say it isn't. Having seen the damage wrought by Lehman's bankruptcy, I'm inclined to be pretty risk averse here. Observing folks like Kurgman, Kuttner, Galbraith, Frank, and others confirms that instinct. Others may weight the issue differently. Fair enough. But this really isn't about the elites or the politicians. Blocking a bailout proposed by the Bush administration may be a political "win," but that doesn't make it a victory. The question is how likely you think an economic collapse is, and how much you think the bailout will do to disrupt that chain of events. if you think it unlikely, or believe the bill ineffective, make that argument and show your work. But don't pretend this is about screwing over Hank Paulson. Hank will be fine either way.
