A rare event occurred today--in their respective NYT columns, Krugman and Kristol have more areas of agreement than of disagreement in their reactions to Paulson's proposed Wall Street bailout. Their areas of disagreement, however, are highly instructive.
Krugman's column offers the more trenchant analysis. He worries about the dictatorial power that Paulson is trying to grab in this plan:
Mr. Paulson insists that he wants a "clean" plan. "Clean," in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review "by any court of law or any administrative agency," and this adds up to an unacceptable proposal.
Krugman further notes that Paulson basically found religion overnight on the need for a rescue plan:
I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.
Krugman's column is clearly written to Obama and to other Congressional Dems. It cogently advises them that, since Paulson is "making it up as he goes along," they should be very cautious about giving him what he now demands. In his closing paragraph, he offers the following sound advice:
I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.
Kristol's piece is clearly written to the McCain campaign. To his credit, he offers an observation that's similar to Krugman's:
But is the administration’s proposal the right way to do this? It would enable the Treasury, without Congressionally approved guidelines as to pricing or procedure, to purchase hundreds of billions of dollars of financial assets, and hire private firms to manage and sell them, presumably at their discretion. There are no provisions for — or even promises of — disclosure, accountability or transparency. Surely Congress can at least ask some hard questions about such an open-ended commitment.
Kristol even offers a practical common-sense condition that could be attached to any bailout plan:
"Any institution selling securities under this legislation to the Treasury Department shall not be allowed to compensate any officer or employee with a higher salary next year than that paid the president of the United States." This would punish overpaid Wall Streeters and, more important, limit participation in the bailout to institutions really in trouble.
In his closing paragraphs, however, Kristol veers off into dangerous territory. He basically tells McCain to double down in the present crisis:
McCain — more of a gambler than Obama — could take a big risk. While assuring the public and the financial markets that his administration will act forcefully and swiftly to deal with the crisis, he could decide that he must oppose the bailout as the panicked product of a discredited administration, an irresponsible Congress, and a feckless financial establishment, all of which got us into this fine mess.
Critics would charge that in opposing the bailout, in standing against an apparent bipartisan consensus, McCain was being irresponsible.
Or would this be an act of responsibility and courage?
The differences between Krugman and Kristol exemplify the choices offered by the 2 nominees in this election. One nominee oozes responsibility--occasionally to a fault. While Obama has laid out terms and conditions he wants to see attached to any bailout plan, the very idea of his not supporting it would be unthinkable. He will work w/i the existing system, try to tweak the plan a little, and ultimately support it.
I don't see McCain following Kristol's ultimate advice. For starters, the inner circle of his campaign is too tied into the existing financial structure for him to "just say no." Plus, Sen. Straight Talk suddenly proved himself to be remarkably flexible when the s**t really hit the fan last week. Charles Keating proved how cheaply McCain could be bought by the financial sector 2 decades ago, and McCain is the type who, once he's bought, stays bought.
The fact that this advice is being publicly offered in our paper of record, however, speaks volumes about the present state of the GOP. As exemplified by his support of the Palin for VP trial balloon, Kristol has some influence in the McCain camp. He's now telling McCain, in essence, to take the Herbert Hoover route.
I've resigned myself to the fact that whatever plan is ultimately passed will be tolerable at best. Like any rational person, however, I understand that inaction here is not a viable option. There are times when no plan at all is better than the plan that is ultimately on the table, but this time is not one of them.
What's especially instructive here is the fact that a man who helped create the problem is being told that he can escape responsibility for addressing the problem. Last time I checked, McCain has been a member of Kristol's "irresponsible Congress" for 26 years. If McCain deserves credit for helping to create the Blackberry, he sure as hell deserves blame for helping to create this crisis. It's even more instructive that a columnist who thinks that the US can and should exert military hegemony across the globe also thinks that a financial meltdown that would immediately reduce the US to a 2d class power can be consciously risked.
We have seen 8 years of crisis and catastrophe resulting from the type of approach suggested by Kristol. We can't afford 4 more years of it.