These have been terrifying days--and not just because of the spectacle of the nation's financial infrastructure crumbling before our eyes. Our political elites were warned of the immediate need to restore confidence in a failing system. But, instead of acting, these elites (of both parties) balked, or behaved like buffoons. When asked to play a reassuring role, they turned in a deeply unsettling performance.
By now, the litany against the Republicans is well known. House Minority Leader John Boehner swung wildly from one position to the next. Facing the prospect of mutiny, and with his own credibility severely diminished, he made little effort to cajole his caucus into initially supporting the bailout. Instead of leading, he allowed the House Republicans to revive the lunatic blow-it-all-to-hell instincts of the Gingrich era, and at the worst possible moment. Boehner can share the blame for failing to control the destructive impulses of conservatives with George W. Bush, a man clearly defeated by monumental crises of his own making. Perhaps it is wise that he has so rarely shown his face these past weeks, and it is certainly wise that the bailout was known as the Paulson Plan--and didn't bear his own name. But, even for his detractors, it is horrifying to see a commander-in-chief so feeble and detached.
While the House Republicans have been a real fetter to the nation, Democrats haven't exactly draped themselves in glory, either. When it came to making the case for the bailout, they were strangely passive--shifting the onus of salesmanship to Bush. Responding to the initial rollout of the Paulson Plan, Nancy Pelosi told NPR, "This is clearly at their doorstep, and now they have a proposal, which is their solution to their problem, and we're eager to see why the president thinks this is the way to go." As a matter of tactics, you could see her logic. But, as a matter of staving off economic collapse, the logic was inexcusable. The national interest dictated that Pelosi do more than round up her share of votes. Democrats needed to help overcome the public's knee-jerk populism, making a strong case that the economy depended on this legislation passing quickly. This would have involved substantially reframing the terms of the debate. Just consider the language used by many of the bill's supporters--"troubled assets," "Wall Street bailout"--and it's no wonder that it provoked such outrage.
What's more, despite the significant improvements Democrats made to Paulson's initial plan, they failed to correct serious (but fixable) flaws. They should have forced Paulson to further clarify how the Treasury will buy the billions in toxic assets--a process that is ripe with potential for conflict of interest. And they failed to demand the one step that would speak most directly to the roots of the crisis and to their own constituents: that bankruptcy judges be given the ability to reset the terms of mortgages of homeowners threatened with foreclosure. Instead, they acceded to Republican provisions that will probably have little effect on the actual financial crisis.
Finally, there is the less than admirable performance of the presidential candidates. John McCain's appalling antics are amply documented. But, in the critical early stages of this crisis, both candidates declined to take a strong position on the bailout. During their first debate, they essentially dodged the issue and returned to making broad ideological arguments that hardly seemed suited to a moment of such dire consequence. If they had convincing arguments to make in favor of the bailout, they kept them to themselves. They hedged and, through their tepid rhetoric, helped craft the political conditions that predetermined the bailout's initial failure.
This $700 billion bailout won't solve the crisis (although it will sure help). It is a prelude to more fundamental arguments about the role of the state. And Democrats will need to quickly develop a fully rounded idea of what that will look like, in anticipation of this coming debate. These next months will be vital. Although not much in the way of legislation can be accomplished, arguments can be primed, coalitions can be assembled, and the public can be prepared. After all, if the polls hold, Democrats soon won't have the luxury of dismissing the economy as "their problem." They will own it.
This article originally ran in the October 22, 2008, issue of the magazine.