10/26/2008 05:12 am ET Updated May 25, 2011

The Moral Subtext of the Bailout Debate

One of the difficulties Americans face in discussing the $700 billion financial bailout plan is our inability to recognize and speak about the moral dimension of the current crisis. It's not that the debate has avoided the dynamics of morality -- talk of greed, blame, fairness, and responsibility have been swirling around more pragmatic assessments of what might actually work to prevent economic collapse. Indeed, many have strong feelings that there is a fair and unfair -- a right and wrong -- way to approach the current crisis. Yet there lingers a characteristic reluctance to fully absorb the moral subtext of American economic policy.

The real significance of the bailout debate is that it lays bare the moral foundation of the conservative worldview about small government: that wealth is a sign of virtuous character, while financial mediocrity signals vice: laziness, sloth, an inability to set limits. Anything that interferes with the natural reward system for individual effort is, well, unnatural, and ought to be opposed.

When asked to explain why the government should intervene -- on a massive scale -- to prop up Wall Street giants reeling from excess and poor choices, but not to aid ordinary Americans struggling to pay their mortgage, afford health care, or access education, the free-market ideologues promoting the biggest government bailout in American history answer that in a crisis this enormous, ideology must gave way to pragmatism. "I hate the fact that we have to do it," said Treasury Secretary Henry Paulson of the government rescue before embarking on an all-out lobbying effort to get it done.

But if your ideology must be shelved when reality intrudes, what's the point of having that ideology? Ideology is a set of ideas about how the world does and should work -- jettisoning those ideas when it comes time to apply them, invoking pragmatism only during a real-world crisis, is like professing a belief in gravity only when it comes time to fly a plane.

Critics have cried "hypocrisy" at conservatives' willingness to throw a government lifeline to Wall Street while refusing to do the same for ordinary Americans. But calling free-market, pro-bailout conservatives "hypocrites" lets them off easy. In reality, there is a consistent worldview behind their position -- it's just not one most are willing to talk about: the reason government should aid the rich but not the poor is that the rich are presumed to use money more wisely -- after all, that's why they became rich in the first place.

This belief is the cornerstone of trickle-down economics: the theory is that tax breaks to those with money -- individuals and companies--are more important than tax breaks to those without, because the investment savvy of the rich will trickle down to benefit the rest of us. If a billionaire buys a yacht with his tax savings, he creates jobs for the boat builders, the crew, and at the harborside brasserie that serves up his club pate. In its best light, the theory envisions not lavish spending sprees, but thoughtful entrepreneurial investment in projects that grow the economy for everyone.

The problem is this: a tax cut that provides a million dollars to a single individual or a single dollar to a million individuals still pumps a million dollars into the economy. So what justifies giving so much of it to one rich guy instead of spreading it across a million regular people?

Only the conservative belief that the rich acquired their money by exercising greater virtue than the rest of us. While trickle-down economics theory can be used to mask a raw power grab, it is also a philosophy of moral superiority which many conservatives have come to truly believe. It credits the wealthy not only with financial savoir-faire, but with character excellence: the rich are not just financially wise, but morally good, because they use their resources in ways that promote, instead of harming, the general welfare.

With the meltdown of the Wall Street giants, it's time to admit that's just not so. Raw self-interest, high-risk behavior, old-fashioned greed, irresponsible choices -- these were the impulses of the fat cats who, taking advantage of unsound public policy, pushed our economy to the brink of disaster, imperiling the wellbeing of us all. The free market, while often an efficient allocator of goods and services, quite simply leaves too many people and too many social goods to their own devices.

Yet remarkably, conservatives still don't get it. George Will chose this moment to write in Newsweek that "to disrupt markets is to tamper with the unseen source of the harmony that is all around us." And a senior VP at the Financial Services Roundtable told the New York Times that his group supports the bailout but opposes constraints on executive pay. Apparently, "it is not appropriate for government to be setting the salaries of executives" but it is appropriate for government to be paying them.

Bailout defenders also insist the $700 billion is not a taxpayer loss but an outlay -- it's buying something of value, albeit unknown value. But of course all tax dollars go to pay for something; it's just that free market ideologues assume that public investments are inherently less worthy than private ones, a philosophy that bought us... a $700 billion public rescue.

John McCain, who was against the bailout before he was for it, said in March that he has "always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers."

At least McCain was able to offer a forthright expression of his assumptions about the moral foundation of the economic crisis. Whatever you think of the merits of the government rescue plan (and for the record, I do not oppose a bailout; I just want it to be fair, and for its ideological lessons to be clear), its moral underpinnings -- and thinly veiled class component that views the rich and poor as having grossly uneven desserts -- should be part of the conversation. Conservatives should get the chance to explain if they are hypocrites or just think they are holier than the rest of us.