After yesterday's events, the relevant political question is determining how some kind of financial-crisis bill comes out of Congress -- specifically, out of the House, where Minority Leader John Boehner is holding up an otherwise straightforward compromise. While the House GOP's free-market conservatives are refusing to commit, the reason negotiations collapsed is John McCain, whose decision to come to Washington without either presenting an alternative or announcing his support for the bill delivered by congressional leaders yesterday -- which seems to meet all the requirements that both he and Obama agreed upon yesterday -- gave House Republicans the cover they needed to detonate the negotiations.
Now, McCain has released a statement (after the jump) saying that he suspended his campaign (false), that before his arrival there was no bipartisan agreement (false), and calling Obama's decision to participate in the leadership summit "political posturing." McCain says he "listened to all sides," but isn't that what he criticized Obama for earlier in the week? He even has the mendacity to say the Democrats opposed taxpayer protections when Democratic legislators spent the entire week securing taxpayer protections that McCain himself supported. He's trying to rewrite history, but really he came to break the bill so he could try and pick up the pieces -- a truly reckless move.
Talking to a Democratic political operative unconnected with the presidential campaign, it's clear from polling that the public's negative reaction to the bailout will require Republican votes to ensure that whatever bill comes out of the House can't be a campaign issue. Even more depressing, polling reveals that most people don't sympathize with foreclosed homeowners and don't want to see them get help from the government. While I'd agree that many foreclosed homeowners don't necessarily deserve sympathy (victims of predatory loans and poor government housing policy aside), keeping them in their homes is at the root of solving this crisis, which is entirely based on the capital value of those homes and their associated mortgage payments.
Democrats worry, rightly, that House Republicans will vote against any bill that comes up (unless it involves tax cuts that will have no effect on the crisis) and then demagogue it on the campaign trail. I argued earlier that the key is passing a much more progressive bill and campaigning on the merits. It's either that or get McCain to publicly support the bill (a bill that he, in theory, already supports) to give House Dems enough political cover. If the Republican nominee can take that route, it will ensure he gets some undeserved credit for passing the bill -- the political equivalent of choking someone and then, upon releasing them, declaring that you saved them from asphyxiation. I can't see the House GOP crumbling for any reason; they are in a situation where they're damned if they support it (no campaign issue, betrayal of free-market principles) and damned if they don't (either Dems take credit for a bill or the economy collapses and they are blamed). Hope I'm wrong!
See also Chris Hayes on the same issue.
--Tim Fernholz
Related posts:
The Politics of the Financial Crisis
How John McCain Will Try To Take Credit for the Bailout Bill
