Wherein I Waffle

They're debating the bailout bill and the Sanders amendment in the Senate. Sen. Obama gave a speech that was a mixed bag. There was some real populism in it, and he set out some excellent ideas, like a second stiumulus with a focus on infrastructure investment, allowing bankruptcy judges to restructure mortgages, re-regulating Wall Street, and creating a new HOLC to have the government buy up mortgages as well.

But of course, all of those are left out of this bill. At the time when progressive leverage is at perhaps its greatest point. And the taxpayer protections and oversight boards and executive compensation limits in this bill leave me wanting; in fact, they're cosmetic and pretty terrible. Not only that, but suspending mark-to-market somehow wormed its way into the bill, which is a recipe for disaster. While Obama says that "passing this bill can't be the end of our work to strengthen the economy" it certainly throws a wrench into those efforts. Obama admitted that some useful programs would have to be delayed as a cause of the bailout (although that can also be attributed to the downturn of the larger economy, which this bailout doesn't begin to try and fix). I do like this, though:

There are certain investments in our future that we can't delay precisely because the economy's in turmoil. We can't wait to help Americans keep up with rising costs and shrinking paychecks and we're going to do that by making sure that we are giving our workers a middle-class tax cut. We can't wait to relieve the burden of crushing health care costs. We can't wait to create millions of new jobs by rebuilding our roads and our bridges and investing in broadband lines in rural communities and fixing our electricity grid so we can get renewable energy to population centers that need them. We need to develop an energy policy that prevents us from sending $700 billion a year to tyrants and dictators for their oil. We can't wait to education the next generation of Americans with the skills and knowledge they need to compete with any workers anywhere in the world. These are the priorities we can't -- cannot delay.

Now, let me just close by saying this. I do not think this is going to be easy. It's not going to come without costs. We are all going to need to sacrifice. We're all going to need to pull our weight. Because now, more than ever, we are all in this together. That's part of what this crisis has taught us, that at the end of the day, there's no real separation between Wall Street and Main Street. There's only the road we're traveling on as Americans. And we will rise or fall on that journey as one nation and as one people. I know that many Americans are feeling anxiety right now about their jobs, about their homes, about their life savings. But I also know this. That we can steer ourselves out of this crisis. We always have. During the great financial crisis of the last century, in his first fireside chat, F.D.R. told his fellow Americans that, "There is an element in the readjustment of our financial system more important than currency, more important than gold and that is the confidence of the people themselves. Confidence and courage are the essentials of success in carrying out our plan. Let us unite in banishing fear. Today we cannot fail. We cannot fail -- not now, not tomorrow, not next year.

That sounds like the beginnings of a new New Deal, and I would hope that Obama runs the last 34 days of the election on that platform.

I must confess to being torn on this bailout. While the media, the establishment elite and Wall Street have to some extent conspired to hype the danger to our economy, there isn't any question that the credit markets are hitting a precarious place. The interbank lending rate is skyrocketing and no money is moving through the system. Worst of all, this is crushing municipal governments who are closest to those who need help in a time of an economic downturn.

Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks, raising the cost of day-to-day operations, threatening longer-term projects and dampening a broad source of jobs and stability at a time when other parts of the economy are weakening.

The sudden loss of credit, one of the ripple effects of the current financial turmoil, is affecting local governments in all parts of the country, rich and poor alike. In New York, a real estate boom has suddenly gone bust. Washington has shelved a planned bond offering to pay for terminal expansion and parking garages already under construction at Dulles and Reagan National Airports.

Billings, Mont., is struggling to come up with $70 million more for a new emergency room. And Maine has been unable to raise $50 million for highway repairs.

That is a very real problem, and not wanting to reward Wall Street for failing won't make that go away.

Now, there are other ways to deal with it, of course, most of them better than this ill-conceived plan. The Soros alternative, based on purchasing an equity stake in failing banks and investment firms, getting "Warren Buffett shares" the way he got them from Goldman Sachs, is better. There's the Michael Moore angle, having the rich pay for their own bailout and taxing stock transactions and closing loopholes so corporations actually pay taxes. These two may be liberal boogeymen, but the ideas are sound.

But you don't really get your pony plan here, at this stage. I'd much prefer a band-aid, throwing some money at Paulson and telling him to go away, and we solve this in January with a popular mandate. This gives us the proper time to assess the problem and solve it. As Brad Sherman (D-CA), who has led opposition to the bailout, says:

It is in the interest of Wall Street to cause us to panic and pass bad legislation.

No one can say for certain whether our economy will be better off next year if we pass the bill or if we defeat it. Only by avoiding a panic vote can we write a good bill next week.

The White House declared that the sky would fall if we did not pass a bill by September 24. They also said they would veto a bill with significant controls on the Administration or on the salaries of executives of bailed out firms. If not for Administration interference, we would have passed a good bill already.

Ultimately, I don't think this bill will solve the long-term problem, which is why Obama's New Deal must be taken up immediately in January. But part of me is where Krugman is; tepidly supporting, but mindful that the real heavy lifting will happen after the election.

...then again, Krugman could be completely wrong.