When Economics and Politics Collide
I talked to a large number of economists in the wake of Congress’s decision to trash the (heavily revised) bailout plan. Responses — from those on both the left and the right — ranged from anger to bewilderment to frustration at what is quite clearly cheap election-year politicking on an issue that should be bigger than re-election.
Here’s a particularly pointed exchange in which a fellow economist wrote to a congressman, attempting to change these political calculations:
I made a donation to Congressman Grijalva‘s campaign earlier this year, at a house party. After hearing that Congressman Grijalva voted against the bailout, I would like my money back. This was a time to make a courageous vote; one that was in the best interests of the Congressman’s constituents, even if many didn’t realize it. If a member from a safe district like yours can’t be counted on to show leadership and do the right thing, it’s no wonder that someone like Giffords (my rep, for whom I will now not vote) wouldn’t. The stakes are way too high for this stuff.
Please return my contribution. … Please also take me off your mailing list, as I won’t be interested in supporting Congressman Grijalva in the future.
If you have any doubts about whether Congress’s rejection of the bailout was cold re-election politics, Nate Silver’s very careful analysis of the Congressional vote is well worth reading. Of the 38 congressmen in close re-election races, 30 voted against the rescue plan.
Excluding these highly politicized representatives, the vote was basically even: 197 for to 198 against. And of the 26 congressmen who are retiring (and hence are unswayed by the electoral math), all but a handful voted for the bill. (More from the W.S.J.’s June Kronholz, here.)
Yesterday’s dramatic decline in the value of the stocks — and hence in retirement savings — is probably the best hope that’s out there for changing these political calculations.
Unfortunately, I get to claim prescience on this one. Here’s what I wrote yesterday:
Markets are not reassured. … I don’t think that the problem is the revised plan, but rather fear that political posturing means that we are still some distance from the bill being passed in its current form. … The biggest risk appears to be populist Republicans in the Congress.
Both of the presidential candidates seem to understand the importance of getting some sort of rescue package put together (even if they were a little late in arriving at that conclusion). This yields a serious political economy question: What is it about the electoral math that leads Congressional representatives to calculations that are so different from those of the presidential candidates?
The good news: Intrade suggests there is about a four-in-five chance that a rescue package will occur in the next month.
On a lighter note, the new New York Times blog Economix (run by the always-excellent David Leonhardt and Catherine Rampell) has the results of an excellent competition to name the rescue package. I like the Blighted Asset Relief Fund (B.A.R.F.), but you can see the shortlist here.