Missed in the wake of the titanic battle over the president’s budget has been the reaction to Treasury Secretary Tim Geithner’s plan for a public-private partnership to clean up the toxic assets still sitting on the books of many of the nation’s largest banks.
The Financial Times reports:
The liberal backlash against President Barack Obama has begun with many prominent left-leaning economists in the US attacking the administration’s plans to bail out the banks. Paul Krugman describes the toxic asset purchase plan as “cash for trash.” Jeffrey Sachs calls it “a thinly veiled attempt to transfer hundreds of billions of US taxpayer funds to the commercial banks.” Robert Reich depicts Tim Geithner, Treasury secretary, as a prisoner of Wall Street while Joe Stiglitz says the plan “amounts to robbery of the American people.”
Liberals’ criticisms are three-fold. First, the public-private partnership which Geithner has devised is a huge taxpayer subsidy and get-rich scheme for hedge funds and financial institutions, which reap almost all the rewards and bear virtually none of the risk. Second, they observe that the scheme is unduly complicated and nontransparent — the same faults which contributed to the financial meltdown.
And finally, the critics claim that it is an end-run around the Congress and the Constitutional requirement for the legislature to appropriate funds. (All of this is to be financed through and by the Fed and without Congressional approval.) As the Financial Times notes:
Most of Mr. Obama’s liberal critics argue he should have gone to Congress already and asked for a lot of money for bank recapitalisation. His defenders say that would be political suicide until the populist mood on Capitol Hill has died down.
Yes, constitutional government can be frightfully inconvenient.
So the question remains: why aren’t Republicans crying bloody murder? After all, they like to be the party of strict Constitutional interpretation. And they are supposedly opposed to the bailout culture. It would seem to be an issue tailor-made for them, yet they have remained rather quiet.
Minority Whip Eric Cantor did speak out against it, declaring the plan “fundamentally flawed” and explaining, “In its current form, Secretary Geithner’s plan is a shell game that hides the true cost of the program from the taxpayers that will be asked to pay for it.” But he was largely alone in his criticism.
Certainly, the budget has been occupying their time. There is just so much attention the GOP can garner. And getting their “spends too much, taxes too much and borrows too much” message out has been hard enough. Yet one wonders if they are hobbled by a political and ideological divide in their own ranks.
Republicans on this and other issues have a choice: defend free markets or reflexively defend business interests. Certainly the markets and the financial gurus are enthusiastic about the prospect of making money with no risk. But simply because the GOP’s natural constituency favors such a grab, should Republicans?
The alternative is to resist the urge to defend Wall Street, at least the version of Wall Street which welcomes corporate welfare and crony capitalism.
This alternative would be to embrace, to a large extent, the Tea Party movement — a popular uprising which calls for an end to bailouts, a return to individual responsibility, and a resistance to subsidizing failure. In this case, that would counsel in favor of robust opposition to Geithner’s plan which violates each of those precepts.
This seems like a no-brainer. Newt Gingrich recently echoed a similar theme when he called on Republicans to eschew knee jerk defense of big business:
Over the last eight years the Republican Party became the right wing of the party of big government, and forgot that its grassroots was with the American people. I’m delighted that they’re going back. There are simple tests: Is it better or worse for small business? Is it better or worse for the self-employed, for entrepreneurial startups, for your local synagogue, for your local community? If in fact it’s terrific for Citibank and GM, but bad for small business, then it’s an elite bill-it’s not a populist bill.
While that formula can morph into class warfare or calls for soaking big business and the “rich,” his central point is a timely one: Republicans err when they abandon conservative free market principles for partisan concerns. The party of free market capitalism, limited government and personal responsibility disregards those ideals at its own peril. As soon as those concerns are put aside to gain favor with business supporters or for the sake of expediency (Try it — it might finally work!) Republicans sacrifice their raison d’être.
And in this case, good politics just happen to coincide with good policy. The public is overwhelmingly opposed to bailouts. And a grassroots Tea Party movement opposed to this type of chicanery is sweeping the country. The Republicans would be well advised to join the Left on this one and start attacking the Geithner give-away plan. If they don’t, they will sacrifice their political soul and miss a golden opportunity to get back in the good graces of the American people.