Monday, September 22, 2008

Econ 101: Politics and Popularity

WE'VE MOVED! Democratic Convention Watch is now at

As you know, the White House has sent a plan to Congress to allow the Treasury Department to spend taxpayer money (which may be repaid) to bail out the economic system. That is the Clif Notes version.

We could spend many column inches looking at how we got into this situation, and the options for bailout, but that's not what we do here. Here, we look at the effects and affects on the election.

The bailout plan, as is, buys a lot of paper, clearing debt off the balance sheets so that banks can lend money again. (Which they really haven't been doing lately, except to one another, but I digress.) With "cleaner" balance sheets, and a higher reserve proportion, the banks can once again make mortgage loans, car loans, business loans, and all the other things which make a credit-based economy go.

HOWEVER, the Democrats will likely endeavor to extract regulatory programs which prevent the banks from getting into this position again, and endangering everything you and I have ever saved up for later.

And that's where economics, politics and popularity intersect.

The economic problems are real: they have the potential to very quickly affect State and Local government spending, the ability of the overall economy to function, not to mention whether or not your job remains a viable expenditure of your company/organization.

The question is whether the solution agreed upon will be based on more sound economic policy than has possessed the post-Reagan economic trickle-down wet dream, or will include the kind of brakes that FDR instituted to salvage and protect the regular banking system in the 1930's.

So what happens? Everyone postures about "saving America for regular Americans, by protecting their homes, 401(k)s, college savings and other investments". Obama and McShame (who voted for the giant deregulation package in 1999 that directly contributed to this current disaster), the House Democrats (ALL of whom are up for re-election this year if they aren't retiring), the Senate and the surrogates will all be out talking.

The question is: will regular Americans understand enough economics to make sense of the difference of the positions? Will the electorate go with the standard 'save me now, I don't care about the future' or a more intelligencic and long-lasting approach?

What do you think? (In three parts)