Posted by
Sean Engmann on Friday, September 26, 2008 6:20:33 AM
Forget about debates, ads and interviews, the 2008 Presidential election will be decided by the outcome of the battle over the bailout plan. As President Bush said, we are currently facing an economic crisis of potentially disastrous scale. Right now, the US economy is like Humpty Dumpty because if it breaks, which it's teetering on the edge of doing at this point, it will be impossible to put it back together again. Failure to act swiftly by the Federal Government will lead to a domino effect that will end up wiping out people's jobs and life-savings, spiraling us into a depression.
While polls suggest that the American public believes that something should be done, they balk by nearly 2-1 at Paulson's bailout plan. Conservatives are particularly wary of the 700 billion dollar price tag and the accompanying increase in the size and scope of the federal government. Aware of the polling data, the bailout has been treated like a political football, both sides acutely aware that a deal must be made, but neither side wanting to "take credit" for passing such an unpopular bill. Senator Reid even said earlier in the week that there is no way the bill would pass without McCain's approval.
The two candidates have staked out polar opposite strategies on this issue. Obama has taken the safe route, trying to distance himself from the process, and its inevitable result, and maintaining focus on his campaign. McCain has dropped everything and injected himself into the crisis. In doing so, McCain has bet his entire campaign on his ability to get a working bill passed in short order that will be palatable to his base, the American people and Wall Street. The rancor at the White House meeting reinforced the notion that McCain, almost alone now, is in charge of the crisis.
The House GOP split at the White House, and McCain's apparent endorsement of that split essentially means that McCain will essentially be able to pass his own bill. The Democrats currently have the ability to push their amended Paulson plan through, but doing so would hurt them politically because they would have to own up to such an unpopular plan. If the GOP plan seems more palatable to the people, they would have to support it, lest they block a popular bill at a time of peril, or worse, if nothing happens, the point would be moot because we will have lost the patient. If a bill gets passed, McCain will be seen as a leader, coming in and refusing to accept an unpopular bill and bringing people together to pass a more palatable relief bill. If the market collapses before a deal is reached, McCain will be seen as someone who blocked needed legislation for political expediency, and finally, if the plan fails, so will McCain's campaign.
The likely result? Tomorrow a bill will get passed that combines the Paulson approach and the GOP approach, one which infuses capital into the market, but not 700 billion dollars and bridges the gap by extending insurance benefits. We will likely see a cap on executive compensation while at the same time some of the tax breaks and regulatory reforms asked for by the GOP. Both sides are too extreme ideologically, let's hope we get a working bill somewhere in the middle.