Clowns to the Left of Me, Jokers to the Right

There may be more than one point on which the Tea Party and the Occupy Wall Street folks converge, but the most prominent one is the populist notion that Wall Street (big banks, etc.) should not have been bailed out. The Tea Party folks base their position on some amalgamation of free market economics and hatred of government, while the OWS protestors decry the bailouts as an inequitable wealth transfer. While there may be some truth to both strains of anti-bailout vitriol, they are each dangerously wrong in their policy prescriptions.

What would TP and OWS have the US government done instead? Simply let large banks and investment houses fold? Regardless of one’s policy views, it is impossible to envision a scenario in which the Bush administration (and the Obama administration) allowed Wall Street to fail without causing an economic collapse much greater than the Great Recession. In fact, it would have been more like the Great Depression. The losers would have been spread far and wide, and would have included tens of millions of middle and working class Americans. Would the Tea Party and the Occupiers really have wanted that?!

Look, I get the angst and outrage over Wall Street. I get that we have a financial elite in our country who have stacked the deck so much in their favor that they simply cannot lose (too big to fail, anyone?). But the same forces that allow them to stack the deck have also allowed them to become so entwined in our country’s economic well-being that allowing them to fail would have had enormous collateral damage.

I think that many who support the Occupy Wall Street movement (I count myself among them) get that the solution to reducing the power of the financial elite lies not in allowing them to fail and taking the rest of the economy down with them. Rather, we need to reform and re-arm our regulators to ensure there are no more too big to fail institutions. We need to eliminate the outsized influence of financial elites on the US government (better campaign finance disclosure laws, lobbying reform/end the revolving door).

I also believe that this is where the Tea Party and OWS part company, which gives me some hope. I have never been comfortable with populism, whether its roots are on the left or the right.

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One thought on “Clowns to the Left of Me, Jokers to the Right

  1. “What would TP and OWS have the US government done instead? Simply let large banks and investment houses fold?”

    A number of people say that this would have been the best policy in the long run. Recessions can be thought of as corrections that wring out malinvestment in the economy, allowing it to flourish again once the correction ends. Sort of like a fever in the human body. It isn’t pleasant, but it helps your immune system fight off disease. Our current policy could be said to be aimed at ending the fever, when the fever is exactly what is needed.

    I found an interesting article that shows how Iceland’s bank failure may have saved its economy. Check it out.

    http://reason.com/archives/2011/10/27/iceland-loses-its-banks-finds

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