Washington Blame Game

“I’m with stupid” seems like the appropriate caption for President George W. Bush and House Speaker Nancy Pelosi after a $700 billion bipartisan bailout plan went down in dramatic and surprising defeat yesterday to – of all things – bipartisanship.

That’s right, folks, for all the finger-pointing and recrimination going on in the nation’s capital right now, the simple, unavoidable fact is that a majority of House members didn’t “assume the position” for a controversial bailout plan backed by their leaders that lacked constraints and constitutionality, as well as common sense. And we’re not just talking about a few people bucking the “powers that were,” as the dissenters Included two-thirds of House Republicans and 40% of the Democratic Caucus.

Pelosi probably didn’t help the bailout’s cause with an excessively-partisan floor speech prior to the vote, but yesterday’s stunning rejection of this flawed behemoth made it abundantly clear that there are at least a few politicians left in the nation’s capital who not only understand the value of an asset – but understand the difference between democracy and a downward spiral towards a new socialist nightmare.

Meanwhile, President Bush clearly still doesn’t understand what it means to be a Republican, to say nothing of the words coming out of his own mouth.

“Our strategy is to continue to address this economic situation head on,” a shell-shocked president told reporters.

And then in the very next breath, “We’ll be working to develop a strategy.”

So to recap, Bush has a strategy – yet is simultaneously working to develop a new one. That must be what he calls “double strategery.” Of perhaps “double strategification.”

Anyway, this bailout plan going belly-up is good news … and yet also “not.”

Backers of the failed plan do raise some important questions, one of which was effectively crystallized in a local column by South Carolina political consultant Bob McAlister, who bluntly asked leading bailout opponent U.S. Sen. Jim DeMint “what’s your plan?”

With the Dow Jones plummeting by 777 points (its largest single-day point loss ever) and the economy still leveraged to the max, something needs to be done.

What that is, exactly, remains to be seen … yet sadly, the Washington establishment was too busy pointing fingers yesterday to focus on anything beyond the immediate, thermonuclear political fallout.

“I don’t believe (Republicans) had the votes,” said a bitter Barney Frank, who five years ago ignored Enron-style accounting and excessive risk accumulation at government-sponsored mortgage giants Fannie Mae and Freddie Mac. “They are covering up the fact that they don’t have the votes.”

Frank obviously forgot about the 95 Democrats who joined 133 Republicans in rejecting a plan designed to alleviate the implosion that his endorsement of government incompetence and corruption helped hasten.

But there we go pointing fingers … which as we’ve noted is no longer productive.

So what (if anything) should Washington do to bail out Wall Street?

Glad you asked …

A start would be to pass a law tomorrow banning the sort of government mandates that helped usher in this crisis, ensuring that the quaint but utterly unrealistic goal of universal home-ownership doesn’t ever rear its ugly head again.

Another idea would be to place an immediate cap on government spending that’s equal to the growth in population plus inflation, establishing a taxpayer rebate mechanism and a reserve fund which would ensure that we’re investing more into our economy during good times and keeping a healthy stash of cash on hand during times of crisis.

Which reminds us – one of the best ways to put more people into homes isn’t by mandating bad loans, but by giving people more disposable income so they can afford to make the mortgage payment each month. And after that, if certain people aren’t responsible, we should find an alternative that falls short of bankrupting the rest of the country in an effort to artificially prop up their bad choices.

A third idea? Cut the hell out of the existing federal government (all of it) and privatize Social Security and health care. After all, the entitlement cliff is the next Grand Canyon we’re going to fall into, so why not get ahead of the curve?

Fourth? Lock up Ted Stevens … and throw away the key.

Wait … you’re probably thinking to yourself by now that none of these things would actually solve the immediate crisis … but that’s just the point.

Whether on entitlements, runaway Republican (and Democratic) deficit spending or the current bailout disaster, the fact is the government created these problems, people. And assuming more government is somehow the answer is like assuming that mainlining more heroin is going to cure your addiction.

Sure we should explore immediate solutions – like insuring as opposed to buying all these suddenly devalued assets, suspending cap gains taxes and competitively auctioning those items we can sell, but that still gets government into a business where it frankly has “no business.”

In fact, one interesting observation in all of this is that it would actually cost less to simply bulldoze all these foreclosures than it would be to “flip” them, the sort of business savvy that would just never occur to a bureaucrat.

The bottom line is that at the end of the day, capitalism works, people. It isn’t always pretty, but it works.

It’s survived worse than this in the past and it will survive worse than this in the decades to come – although we can avoid future disasters by simply bringing capitalist principles back to a U.S. government gone mad with politically-correct, socialist-style regulation and an insatiable appetite for new spending.

Get at those two root evils and you’ve not only addressed what caused our present mess, but you’ll avoid stepping in similar piles down the road.

Unfortunately, this episode has proven beyond a shadow of a doubt that neither the current leadership in Washington – or the two men who aim to lead Washington for the next four years – get the basic conundrum we’re faced with.

For all their talk of “changing Washington,” McCain and Obama were a pathetic pair of status quo cheerleaders during this crisis. Ditto Sen. Lindsey Graham and S.C. Congressmen Joe Wilson, Henry Brown and Bob Inglis.

Thankfully, a bipartisan group of lawmakers stood up yesterday where these men failed and grasped the first fundamental reality in what we hope is capitalism’s voyage back from the abyss – namely that taking the United States 180 degrees in the opposite direction of capitalism isn’t the answer to what ails us.

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