By David Keene - 09/29/08 07:22 PM EDT
As I write this, Congress is debating the “bailout” bill initially proposed by the Bush administration and modified by Democrats and Republicans in the Congress itself.
Those members who will vote on the bill do so with the knowledge that most Americans are viscerally opposed to the idea of a bailout. Americans have an instinctive belief that men and women who make stupid economic decisions ought to be the ones who pay for those mistakes — a healthy instinct.
The worst aspect of what has gone on since the president demanded action on the Paulson package is the high-handedness of the executive and congressional leaders seeking a majority from, as they put it last week, retiring members and members in districts so safe they will be able to withstand the outrage of their constituents.
It isn’t just, or even primarily, that they dislike the folks on Wall Street or the bankers who make risky loans or people who run up credit card or mortgage debt that they can’t handle. It’s that they understand that for a free market system to work, the internal discipline imposed by market forces that rewards wise decision making and ultimately imposes costs on the foolish and greedy must be allowed to function.
They fear that government decisions that reward sloth, greed and overreaching are both unfair and destructive of the underlying economic system on which we all rely. Many — including more than a few of those who have profited from a system run amok — have been saying for years that government policies encouraging foolish lending practices, while allowing just about anybody to borrow anything in the short term, would lead to disaster in the long term.
Lenders, borrowers and those who bundled up bad loans, however, ignored the long-term dangers because they were all benefiting in the short term, and because in the back of their minds most of them were convinced that they would be shielded from the risky consequences of what they were doing by politicians who were encouraging them to act as they were.
At one very important level, that is exactly what’s happening today, and that’s why so many are opposed to the bailout. Many in Congress are demanding, for example, that whatever happens, those who haven’t been able or willing to pay their mortgage payments be “kept in their homes” and that their debt be renegotiated. Sounds like a great idea. After all, people shouldn’t be thrown out on the street, and banks don’t want to own vacant and deteriorating homes, but one has to wonder how such plans will play with their neighbors.
Consider the feelings of a young couple that scraped and saved to buy a house and have kept up their mortgage payments in spite of hard economic times, and are living next to another family in a virtually identical house that they can’t afford or on which they haven’t been making payments. What will happen if the government or the banks come in and either cut their neighbors’ interest rates or actually reduce their mortgage principal so that they will be ale to continue to live next door to the poor fools who played by the rules and now must subsidize their neighbor?
There are, of course, good reasons for voting for the legislation, and Congress has to be congratulated for improving on the truly outrageous package sent to them by George Bush and Henry Paulson. Neither the president nor his Treasury secretary seemed at all concerned, for example, with the fact that their “solution” to the problem simply ignored the fact that we have a Congress and a Constitution. In writing the plan, they ignored the Constitution and demanded that Congress rubber stamp their scheme or assume responsibility for an economic collapse that could be as bad as the Great Depression.
Presidents like to think they are monarchs, but they are not. Congress as a whole should be congratulated for refusing to give in to the panic that the Bush strategy was obviously designed to initiate.
Wisconsin Republican Rep. Paul Ryan, who helped improve the bill and announced on the floor that he would vote for the final legislation not because he liked it, but because he is convinced the crisis demands that Congress pass it, made that case this morning as well as anyone.
When it’s over, Congress should indeed look back to the causes of the current crisis. If they do so, they will discover that the problem was not (as some are claiming) that free markets don’t work, but that when government encourages bad behavior, human beings will act badly.
Keene, chairman of the American Conservative Union, can be reached at Keeneacu@aol.com.