30 September 2008

The Wall Street bailout, or the Public's denial of Facts.

I watched part of yesterday's floor debate in the House (surprisingly inspirational) and subsequent vote (surprisingly tense, especially for CSPAN) on HR 3997 (bizarrely titled, "To amend the Internal Revenue Code of 1986 to provide earnings
assistance and tax relief to members of the uniformed services,
volunteer firefighters, and Peace Corps volunteers, and for other
purposes" — some of the maneuverings of the legislature are far too arcane to figure out).

What I've most been struck by in the aftermath, however, is the denial on the part of the voting public of the facts of the situation. I suppose there is a strong instinctive urge towards vengeance, and thus people are bizarrely satisfied with watching the Dow tumble, because to them it represents "the fat cats getting what they deserve." Back in the world of reality it represents the health of the entire economy, including the parts which pay their wages, or provide for their retirement and the education of their children. Unfortunately, Congress (facing down the barrel of a tight election) has been held hostage by this short-sighted reaction among the populace.

Who's to blame for the failure to communicate that this rescue package is to rescue the whole economy and not just stockbrokers? Well, I think there are a number of culprits. Certainly that aforementioned desire on the part of the public to punish Wall Street for its excesses played a role. Note that nobody complained when selling a house for far above its actual value, or making money hand over fist in his 401K on the back of this bull market. That's just Capitalism in action, baby! Congressional leaders did a decidedly poor job of communicating the situation to the public (and it was on them to do it, since the President is basically on extended holiday now). Even though some of the floor debate was great, not that many people actually bother to watch it. Which brings me to my final point: the media loves a story so much that they spun the whole deal as a "Wall Street bailout", which might've doomed it from the beginning.

David Brooks, whom I often find smarmy and obnoxious, lays it out well.

Also, Paul Krugman, whom I find myself liking more as I become more and more liberal, dispels one popular notion that all these billions are coming from Red China.

Finally, Nate from the ever-awesome fivethirtyeight.com has a few interesting thoughts.

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