WASHINGTON -- Finally, the outlines of a coherent debate on the federal bailout. This comes as welcome relief from a campaign season that gave us the House Republicans' know-nothing rejectionism, John McCain's mindless railing against "greed and corruption" and Barack Obama's detached enunciation of vacuous bailout "principles" that allowed him to be all things to all people.
Now clarity is emerging. The fault line is the auto industry bailout. The Democrats are pushing hard for it. The White House is resisting.
Underlying the policy differences is a philosophical divide. The Bush administration sees the $700 billion rescue as an emergency measure to save the financial sector on the grounds that finance is a utility. No government would let the electric companies go under and leave the country without power. By the same token, government must save the financial sector lest credit dry up and strangle the rest of the economy.
Treasury Secretary Henry Paulson is willing to stretch the meaning of "bank" by extending protection to such entities as American Express. But fundamentally, he sees government as saving institutions that deal in money, not other stuff.
Democrats have a larger canvas, with government intervening in other sectors of the economy to prevent the cascade effect of mass unemployment leading to more mortgage defaults and business failures (as consumer spending plummets), in turn dragging down more businesses and financial institutions, producing more unemployment, etc. -- the death spiral of the 1930s.
Bush is trying to move the LIBOR or the TED spread, which measure credit flows. The Democrats' index is the unemployment rate.
With almost 5 million workers supported by the auto industry, Democrats are pressing for a federal rescue. But the problems are obvious.
First, the arbitrariness. Where do you stop? Once you've gone beyond the financial sector, every struggling industry will make a claim on the federal treasury. What are the grounds for saying yes or no?
The criteria will inevitably be arbitrary and political. The money will flow preferentially to industries with lines to Capitol Hill and the White House. To the companies heavily concentrated in the districts of committee chairmen. To clout. Is this not precisely the kind of lobby-driven policymaking that Obama ran against?
Charles Krauthammer is a 1987 Pulitzer Prize winner, 1984 National Magazine Award winner, and a columnist for The Washington Post since 1985.
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