Atlas Blinked

At the press conference, Republicans proposed fixes with little chance of making it into a bailout bill. Rep. Kevin Brady (R-Tex.) suggested that business tax cuts could attract investors to our shores, bringing in more revenue from “profits left stranded overseas.” Rep. Joe Barton (R-Tex.), a dogged supporter of more oil drilling, claimed that the policies he favored would, conveniently, pull us out of the crisis. Mike Pence was the only legislator at the events who ruled out any vote for the bailout. He tried, in vain, to challenge the premise. “There are those in the public debate,” he said, “who have said that we must act now. The last time I heard that, I was on a used-car lot.”

“I would amend that statement,” added Rep. John Shadegg (R-Ariz.). “The last time I saw the phrase ‘act now,’ it was advertising one of those time-share condo deals that lock you in after a free trial period.”

“Did you try it?” asked a reporter.

“No!” Shadegg laughed. That summed up the fiscal conservatives’ effort: outraged gallows humor with no expectation of success.

Members of the RSC got a louder megaphone for their ideas when GOP presidential candidate John McCain flew to Washington to tacitly support them. The stunt drew some attention to the House Republicans’ proposals, and a coalition of Republicans and liberal Democrats defeated the bailout in an initial vote. But the suggestions themselves didn’t challenge the central proposition of the bailout: that the government, in a crisis, needed to nationalize whole chunks of the finance industry. The minority of Republicans who spoke up were accused of being Chicken Littles stoking false fears about the “end of capitalism.”

Rep. John Campbell (R-Calif.), an Ayn Rand devotee who made his name voting against earmarks, said he would reluctantly support Paulson’s bailout. “People are struggling with it around here like you can’t believe,” he explained. “This proposal is anathema to everything I believe. I’ve voted against million-dollar bills, and here’s a $700 billion one. But to do nothing—that really threatens a massive expansion of government.”

Campbell says he was willing to make the sacrifice, just this once, because he believed the crisis was comparable to 1929. “If John Q. Lunchbucket doesn’t understand this stuff, and waits in line for a block to get into his bank, and then is told ‘we don’t have your money,’ he will respond to any proposal to prevent that in the future. Any populist who says ‘I’ll make sure these guys never get your money again’ will have his ear.”

But who’s to say that this scenario hasn’t already taken place? If libertarians had won the argument on the economy—if they were as influential as social democratic writers such as Naomi Klein and Thomas Frank claim they are—they would have dominated the argument about the causes of the crisis and the damage intervention would wreak. That didn’t happen. A bill that failed on September 29 was re-written in the Senate, then passed the House on October 3. Among the congressmen who changed their votes was Shadegg, the man who had compared the bailout to a time-share ripoff.

Rep. Ron Paul (R-Tex.), with a media profile burnished by his presidential campaign, appeared on CNN many times over the weeks of the crisis to explain why the Federal Reserve was to blame. But Paul was lonelier than ever. No other Republican was willing to suggest that avoiding a bailout and risking “a bad year,” as he put it, would forestall several more years of economic central planning. They accepted the crisis narrative and attempted to legislate around the margins.

“This does ensure that President Bush will have a legacy,” laughed Competitive Enterprise Institute president Fred Smith after that Americans for Tax Reform meeting. “It’s a legacy that will set back the concept of economic liberty by a century. The free market, for all intents and purposes, is dead in America.”