Bryan Caplan  

Opposition to the Bail-Out: Strange Bedfellows

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From ABCNews:

The main opposition in Congress has come from GOP conservatives, especially in the House. Democrats also hope that, after the compromises, enough House Republicans will vote for the package to give Democrats political cover.
From FOXNews:
Lawmakers had to navigate between angry voters -- many of whom view the plan as a rescue package for the wealthy on Wall Street -- and Bush administration officials who warned that inaction would cause the economy to seize up and spiral into recession.
If the sources were reversed, I'd chalk this up to ideological bias. But as it stands, there's a weird pattern. Conservative Republicans are hardly the natural spokesmen for voters angry about a rescue of Wall Street. What gives?

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COMMENTS (20 to date)
Will Luther writes:

Having lost an ideological battle on many fronts, fiscally conservative Republicans (as to distinguish from typical Republicans) can only be persuasive when they accept the ideology of their opponents.

Rather than saying "it is fiscally irresponsible to dole out money for X, especially knowing that X will likely make things worse later on," they succumb to the argument you see at present: "We shouldn't give money to those guys! They are greedy Wall Street bastards."

...I wonder what they will do when less abhorrent individuals attempt to raid the coffers.

TC writes:

If you divided the House Republican caucus in to 2 equal halves, creating a moderate wing and a conservative wing, you'd find that the conservative wing of the House Republican caucus is usually the most ideologically free market group of politicians in the country.

Will Luther does make a good point that in this case the House Republican leadership used Left-Wing rhetoric to justify their opposition to the Paulson plan. Perhaps this is because some House Republicans have converted to Marxism. But a more reasonable explanation is that the Republican leadership simply found an effective way to communicate to voters who have neither a degree in economics nor a membership in the Hayek-Mises book club.

Still, the word is out that the Republican leadership is going to support a deal and it's not clear how much of an improvement this revised version is compared to the original.

Alex J. writes:

Coastal elites (Dems) and Big Bidness (Bush Administration) vs. Blue-state flyover "Main Street" Republican congressmen. (Not senators, apparently.)

Just a guess.

Unit writes:


are you still of the opinion that a commission of experts (economists) running the economy would be better? I'm saying this in view of Bernanke's recent behavior and the political pressures that would ensue.

David writes:

I think opposition to this bailout is perfectly in line with "small c" fiscal conservatism.

Randy writes:

What bothers me is the accusations of "greed" coming from McCain. Greed isn't the problem here. Incompetence is. There's a price to be paid for incompetence. But the accusations of "greed" are philosophically inexcuseable.

PrestoPundit writes:

What gives is that you're an idiot, Byron.

The CEO's of the big firms on Wall Street are mostly Democrats, as is Paulson. The Congressional Democrats and Wall Street have been in bed for a long time now.

You write:

"Conservative Republicans are hardly the natural spokesmen for voters angry about a rescue of Wall Street. What gives?"

So, your understanding of Wall Street politics comes from some New Deal cartoons in a high school history book, or what, Byron?

"Conservative Republicans" have always come from mainstreet, and they've opposed the "Rockefeller Republicans" who once existed on Wall Street and in the North East. This species is now mostly extinct.

It 2008. Let's live in it.

John Fast writes:

I can't speak for anyone else but the biggest reason I'm a hard-core free-market advocate is because I don't want *anyone* to get special treatment.

The fact that some people want to give unfair advantages to labor doesn't justify giving unfair advantages to capital.

Plus, there is a strong strain of populism in the fringe of the GOP (as there is in the Democrats) and there's an anti-Wall Street strain in populism.

A true libertarian supports free enterprise, opposes big business; supports local self-government, opposes the nation-state; supports the National Rifle Association, opposes the Pentagon. -----Edward Abbey
Brad Hutchings writes:

It's bootleggers and Baptists, Bryan. On economic issues, the bootleggers are Wall Street and the Baptists are the Dems in Congress who see it as an opportunity to score points on CEO pay. Senate Republicans go along with what the Administration says about the seriousness of the problem. House Republicans have no reason to fall in line without getting it how they want. They're only needed to keep the bailout from being a campaign issue akin to Newt's 1994 Contract for America.

All that said, I don't see any upside to any House Republican keeping his or her word and actually voting for this thing. If it doesn't pass and everything goes to Hell, the Dems won't be able to blame them because the Dems have a majority. If it doesn't pass and everything doesn't go to Hell, it wasn't urgent. If it passes and everything goes to Hell, they were right. And if it passes and nothing goes to Hell, they stood on principle.

It's not Wall Street -- it's the fact that all of the companies going under were led by Democrats. Seriously. I think Bush is just doing whatever Paulson tells him to do, because Bush doesn't actually know what to do. In the meantime, Paulson is working to cover the fact that it's the Democrats' regulations, etc. that caused all this in the first place. Finally, if you pay attention to who passes what laws rather than to the rhetoric of the Demcorats, you will find the the Democrats are constantly and consistently passing laws that protect and support the biggest of big businesses, while Republicans are more likely to (though not perfectly so, as Bush shows) to support the free market, which actually benefits small and medium-sized businesses, not large businesses. The fact is that the Democrats support the creation of monopoly, especially government supported-monopolies, while Republicans oppose the kinds of high taxes, regulations, and licenses which prevent entry into the market so that others may compete with the big businesses protected by those very things.

Walt French writes:
Conservative Republicans are hardly the natural spokesmen for voters angry about a rescue of Wall Street. What gives?

A learning opportunity for the Left: not everything the Right does is pro big money.

Republicans have built a strong constituency among small business types, based largely on laissez-faire; these are the people who most feel the burden of regulations.

E.g., my daughter is working with a startup restaurant & is amazed at the mountains of red tape from a city govt that supposedly really wants to project a more dynamic image. (Not that Oakland is in much danger of becoming a Red district in her lifetime.)

Barbar writes:

Hank Paulson is a Democrat now?

It's sad to watch people eat their own brains.

8 writes:

My explanation is that conservatives defend business from leftist attacks and earn the reputation as being pro-business. There are very few bills, such as this bailout, which are blantantly a giveaway to big business.

Personally,I often defend Wal-Mart with lefty friends, but I don't actually "support" Wal-Mart beyond shopping there.

scott clark writes:

I like when that guy calls you "Byron".

Paulson is a Nixonian, which makes him a Democrat, even if he's officially a member of the GOP. It was Nixon after all who said, "We are all Keynseans now." A terrifying notion. Those associated with the Nixon White House have all acted just like Democrats when it comes to economic issues. Pat Buchannan, for example, once said, "I oppose the free market system." If it weren't for social issues, he and many others from the Nixon White House would be Democrats. I wish they would in fact go join them so those of us who support the free market can have a major party of our own.

caligula writes:

Government of the people, NOT for the people,NOT by the people, but stuffing the people! My horse could do better!

aaron writes:

OK, as I see it now, the bill will only make things worse. It increases economic risk. It will cause inflation which will only further burden home owners (it will likely not go into higher wages or house prices). It will decrease the goverments ability to borrow and increase the interest rate it must pay on debt. It also does nothing to change the dynamics of lending. Regardless of whether banks or the governement hold the existing risk, banks are faced with the same question, "Do they want to take on risk and probably make money, or not and watch their current wealth depreciate?"

On the other hand, it could hamsting the gov on future spending.

And, who will be buying the T-bills and where will the money come from. If it comes from people currently invested in commodities, it could ease costs and stimulate the economy. But I doubt it would come from there (which investors seem to have considered safe over the past couple years) rather than from capital ivestment.

liberty writes:

My rose-colored glasses self would say that it isn't strange bedfellows, it is natural bedfellows: those on the left angry about government propping up and helping business (the left dislikes corporatism) and those on the right angry about government propping up and helping business (libertarians dislike corporatism).

The left may have different reasons for disliking corporatism - they don't want the greedy profiteers to be made more rich - than the libertarians, but if both don't like it, both don't like it.

Left-libertarians exist for a reason: there are people on left and right that want government out of certain areas.

But that is my rose colored glasses. In reality, I think the popular reasons and the Republican reasons are both a little less ideological, and more to do with making sure money gets channeled towards the pocket of the outraged person in question.

John Fast writes:

Brad Hutchings: I love your post, and your analysis looks spot-on to me.

Ironically, David Friedman has posted a completely different analysis at his blog:

1. No bailout, the economy does terribly. Opponents of the bailout look terrible—whether or not the bailout would have worked.

2. No bailout, lots of investors lose a lot of money, the current recession continues for a while. Opponents of the bailout don't look terrible but neither do supporters, who will argue that things would have gone much better with the bailout.

3. Bailout, the economy does terribly. Supporters of the bailout will argue that this is evidence of how much worse things would have been without a bailout—and who can prove them wrong?

4. Bailout, the current recession continues for a while. Supporters of the bailout will claim to have saved us from a depression.

Okay, how does that compare to your four possibilities?

Steven writes:

The media really seems to be twisting how Americans feel about the bailout and this bill. The media seems to keep repeating that Americans don't want this bill to pass and we don't understand what will happen if it does not pass. That Americans don't understand how the system as a whole will be affected if this bill is not passed. This is not accurate. Most of us Americans are not as ignorant as this current administration and have seen this coming for some time. We are not saying that something should not be done. We are saying that this bill is not right and should not be passed. We want an alternative!!! This bill is insane and really does not involved the average American. We need to come up with a bill that corrects the problems at hand and resolves these issues. The American people need more in return. We need to be helped out. This bill stinks and we need to come up with something better that involves helping out all Americans directly and not just the top of the chain and expect this trickle down effect to work all of the sudden. It hasn't worked what will make it work now? Why are we throwing more wood on a burning fire? Lets let the fire burn out and then build accordingly. We all agree that something needs to be done. But don't let that make us pass this insane bill that is not going to correct the problem or truly help your fellow Americans! Draft a new bill with head economists and have it open for discussion. And by not passing this bill is not what is hurting the market it is the fear that the government that has forced upon this nation that is hurting the market. They are manipulating the market right now with this fear method that they always do to get done what they want. DON'T LET THEM PASS THIS BILL! IT WILL NOT WORK AND IT IS BOGUS. Make congress come up with another option bill that helps out everyone and does not mainly focus on Wall Street and banks. We have to do something but this bill is not the solution and I think everyone knows that. That is why it failed Monday.

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