Waiting for the Deluge

Some brief thoughts on the failure of today's bail-out vote.

1) This represents a failure of leadership of a truly historical scale. Yes, the plan proposed was flawed, but the reasons for voting against it were even more flawed. With an election only five weeks away, what should have been a bipartisan effort to stave off a massive economic collapse instead imploded into a party political squabble. To a degree, both parties are to blame; the Republicans, however, have to take the lion's share of opprobrium here: it was their ideology that allowed the debt crisis to balloon so massively; and it was their unwillingness to compromise when it came time to voting that ultimately scuttled the bill.

In the end, Congress has done little more than fiddle while Rome burned. Or, worse, it has helped to fan the flames. There's an element of farce to the whole proceedings -- except an awful lot or ordinary people are going to get hit hard, very hard, by the economic fallout. The effects will range from rising inflation to a further constriction on credit, from much higher unemployment to much more unpredictable access to consumer goods.

2) In a parliamentary system such a calamitous breakdown of party leadership would result in the government resigning -- or, at the very least, the responsible ministers stepping down. That the House Republicans voted down a bill upon which Bush and Cheney, as well as McCain had pretty much staked the last shards of their credibility, represents a truly massive collapse in party unity.

In some ways, it's not only the economy that's now facing organ failure; it's also the GOP itself. Over the next few days we'll be seeing something approaching a civil war developing in the party. Whether it can be papered over until the election remains to be seen, but the bitterness generated by this vote will, in the long run, radically realign America's political spectrum.

3) Some bloggers on both the left and the right are calling today's vote a triumph of democracy. Maybe, but if democracy can only triumph by its leaders throwing themselves and their constituents off a cliff, then we've got a rather serious problem (and, yes, that's my British understatement at work). That most Americans are against a bailout is not in doubt; but I mean no offense when I say this is an extraordinarily complex crisis; and since most Americans don't have a degree in either economics, political science, international relations or psychology (all of which seem to be in play in the current mess), this doesn't seem to be the moment to embrace undiluted populism when it comes to voting on a rescue package for the world's biggest economy. That the bill was unpopular with constituents made it all the more vital that both the Democrats and the Republicans pony up votes for its passage. In failing to do so, the GOP might have temporarily claimed a populist mantle, but it has also unleashed a s**tstorm of problems that will, in all likelihood, hit constituents in the pocket within a matter of weeks. And my bet is they'll pay a heavy price at the polls for this stunt.

4) Global markets are so spooked right now that a day has become a long-time and three days a virtual eternity. By not returning to the table until at least Thursday, the House of Representatives risks unleashing a chain reaction of panic in markets across the globe. Sure, they'll ultimately work out a deal -- and likely claim credit for making it "better" than the original version of the bill -- but there's at least a chance that by then things will have spiraled so far out of control that the rescue package will no longer have even a fighting chance of stabilizing the markets. And since pretty much everyone says there's only one bullet in this gun, that's a hell of risk to take.

5) If there was any doubt that America's unrivaled global dominance was unraveling, today's events ought to make clear that we're entering a dramatic new chapter in history. There's a real risk here of power vacuums emerging suddenly and bloodily, with fights for the spoils of a crumbling hegemony breaking out with increasing frequency and intensity over the coming years. Global economic crises have a nasty habit of generating truly unpleasant national and international political movements.

So, on a day when stock portfolios shed $1.2 trillion, that's my two cents worth.

The Age of Affluence? Ah... it was good while it lasted.

Follow Sasha Abramsky on Twitter: www.twitter.com/www.twitter.com

Comments

[nansofast]

The Fed has done nothing but pacify us with good rates, creating the illusion
of prosperity while wages haven't gone up. Everyone kept consuming and
borrowed on equity from their homes. Economists have seen this coming
for years and have told us what's in store.

The bailout would only put off the pain. Obama has some good ideas
infrastructure, new jobs, green living. And truthfully how could we ever pay
off the debt we have if everyone is unemployed or making starvation wages?

The money moguls have treated debt like a commodity and it simply failed.
Maybe you and I should begin on main street with what we know works.

[Zeje]

Sasha, it's not just uneducated Americans who are against the bail out. Economists all over the country have better plans and are trying to be heard.

[Aaror]

The crux, as I see it, is that the bailout was going to delay the problem, at a cost of making it worse...
I am not saying the bailout is/was a bad thing, here is what I am saying.
With Americans drowning in debt (selfimposed as it may be), and major portions of our economy facing an unstoppable slowdown (Finance is 20% of our GDP, and it will shrink. Housing and real estate will also shrink for the next 12 years or so until housing prices reach normal levels), we are facing an inevitable constriction of our economy. Fewer dollars are going to be avialable, which will at least put the brakes on the high inflation we have been seeing the last few years (see shadowstats for the actual rate). Americans will have to learn to live with fewer new shoes/games/toys, which is going to put a lot of businesses into bankruptcy. Eventually a much smaller American economy, perhaps 1/2th the current size, will emerge from the ruins and begin to rebuild, starting with infrastructure that better fits the new society we will be forced to create. A society more reminiciant of the 40s than the Boomers.
The question is whether the world can live without us until we come back. If not, expect the 1930's-40's all over again. Heck, in a situation like this, the US may well go Facist...

[WorkingClass]

Mr. Abramsky thinks the vote should have been aye. Here is a case for nay.

http://www.counterpunch.org/

[cylindar]

No one said the bailout would correct the situation. They have said that it might stave off the problem for a longer period of time and that if we are lucky it may possibly but not probably solve the real crisis. That being said it does not follow that the populace is all that wrong. Yes, they will get hit hard but I like others do not care at this point and that is something that you and others should truly worry about. I say YOU because you seem to think that we the other public should vote for this mess cause it's going to hurt us real bad. Maybe some people just don't care about what you care about. Does that scare you. As far as the economy goes I say burn baby burn. You really can't lose anything if you have nothing to lose to begin with eh!

[Henry]

If you say burn baby burn to the economy you don't amount to much. Do you have any idea how farmers pay their bank loans?

[MajorKong]

I'd say your problem is thinking that your situation can't get worse. It can always get worse. Much, much worse. Be careful what you wish for.