Good news! The head of General Motors is stepping down after the once-comatose company’s second-straight quarterly profit. Chrysler, also virtually left for dead 18 months ago, is making money too. The Treasury Department recently announced it was planning to sell its shares in Citigroup for more than it paid for them. According to government estimates, the $700 billion TARP program, passed in 2008 to save the financial system from collapse, may now cost taxpayers less than $100 billion.
Bailouts, it seem, work. They even work overseas. The Marshall Plan saved Western Europe from communism and chaos, and West Germany eventually repaid its share of the money. In the mid-1990s, when the Clinton administration skirted the edge of the law to help Mexico forestall financial collapse, the U.S. ended up making a $500 million profit.
The public’s hatred of bailouts has nothing to do with economics. It’s all about morality. Bailouts are perfectly designed to ignite the rage of every segment of the American electorate.
But politically, it doesn’t matter, because the public’s hatred of bailouts has nothing to do with economics. It’s all about morality. Bailouts are perfectly designed to ignite the rage of every segment of the American electorate. Conservatives believe that not being able to pay your bills—whether you are a country, company or individual—is a sin, which must be punished. A wrathful market, like a wrathful god, keeps moral order in the universe. They also believe that since government is rapacious, once it gets its clutches into an industry, it will never let go, and America will edge closer to becoming yet another freedom-starved, socialist, gulag-state, like North Korea or Norway.
In your run-of-the-mill economic argument—over unemployment benefits, for instance—liberals can be counted on to argue the other side, in favor of a government safety net. But it’s one thing to support a safety net for jobless Americans; it’s another to support one for Wall Street titans. In their heads, liberals may understand that sometimes, bailing out investment banks or auto companies is the only way to prevent an economic calamity that would devastate ordinary folks. In their hearts, however, they loathe this trickle-down logic. If conservatives want investment bankers and auto executives punished because they have failed; liberals want them punished because they are rich.
• Paul A. Eisenstein: Is GM’s Turnaround for Real?• Peter Lauria: GM’s Latest SaviorThen there’s the always-enraged, sometimes-deranged, populist center, which hates concentrated power, whether in Washington, Wall Street or corporate America, and is sure that when they scratch each other’s back, the little guy gets screwed. The more financial and corporate elites pressure Congress for bailouts, the angrier populists get. And the angrier they get, the more anti-democratic the bailouts come to appear, since politicians must pass them in the teeth of public opinion, often dissembling as they do. And when those politicians come up for reelection, as “Bailout Bob” Bennett did earlier this year in Utah, the voters often take revenge.
The press, which chronically conflates politics and policy, has trouble acknowledging when they dramatically diverge. But they sometimes do. The politicians in vulnerable seats who voted for the financial and auto-bailouts have been vindicated. Maybe that will provide them some comfort this fall, when they begin looking for alternative lines of work.
Peter Beinart, senior political writer for The Daily Beast, is associate professor of journalism and political science at City University of New York and a senior fellow at the New America Foundation. His new book, The Icarus Syndrome: A History of American Hubris, is now available from HarperCollins. Follow him on Twitter and Facebook.