The Politics of Ending Bailout-mania

Dean Baker [1] has expertly provided the economic case for ending taxpayer-funded bailouts for Wall Street. But, as we all know, just because something makes sound economic sense does not mean Congress or the White House will change course.

That's particularly true when it comes to policies affecting the financial industry. The continuation of no-strings-attached bailouts is not merely a product of the industry's outsized political influence bought by hundreds of millions of dollars in campaign contributions and lobbying. It is also a product of both a money-worshiping media Establishment and a strain of sycophantism that inhibits the progressive movement from taking on a more confrontational posture.

Should We Bail Out This Bailout?

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When the Wall Street meltdown first hit and public opinion polls showed a country deeply opposed to the Bush-Obama bailouts, almost every television pundit, newspaper columnist and reporter portrayed bailout proponents as Serious and Sober Defenders of the Republic and bailout opponents as Unserious Luddites Who Want the Country to Enter a Depression. Perhaps the best example of this unbridled elitism came from historian Doris Kearns Goodwin, who appeared on Charlie Rose's PBS show to liken bailout proponents to those courageous legislators who supported 1960s civil rights laws, and berated bailout opponents as irresponsible. This kind of portrayal largely continues today.

At the same time, much of the progressive movement has opted to give President Obama a pass on his strong support for more no-strings-attached bailouts. The rationale for this is some mix of loyalty and worship, with many believing that to take on the White House in an oppositional fashion would unduly weaken the new president.

So, then, what to do? How can the bailout politics ever change?

Well, first and foremost, bailout politics are changing already, without the consent of the Washington media Establishment. With polls [4] continuing to show the public angry at the prospect of more bailouts, the administration has been forced to hold off asking for more bailout funds, knowing that intensified opposition in Congress means another request would likely be rejected. Indeed, Congress already stripped Obama's second $750 billion bailout request out of his 2010 budget proposal.

Second, both the fledgling protests against bailouts - on the left from A New Way Forward, and on the right from the so-called Tea Parties - suggests a potential base of support for challenger candidates who base their campaigns against incumbents on a progressive or conservative brand of anti-bailout populism. For Democrats who control Congress, this poses a particular threat, because they have far more to lose than the Republicans. And so progressive movement efforts to force Democrats to take tougher anti-bailout positions is the opposite of disloyal - it's the best way to help Democrats avoid unnecessarily emboldened GOP candidacies in 2010.

The necessity for progressives to help strengthen an anti-bailout political coalition, rather than sitting on the sidelines hoping public anger recedes, is obvious.

According to Bloomberg News, the White House, the Congress and the Federal Reserve have committed almost $13 trillion [5] to the financial industry in one bailout form or another. If even more resources continue to be devoted to bailing out the same financial con artists who got us into this economic mess, that means far less resources will be available to tackle all of the nation's other challenges (health care, infrastructure, education, etc.). And when those challenges aren't met, conservatives will have a set of failures to cite as a powerful rationale for their own political revival.

So while bailout politics have yet to become the cause du jour of the progressive movement, it must be that cause—because if it doesn't become central to progressive organizing and opposition, it could undermine the movement's entire legislative and electoral agenda.