New Deal or No Deal

That’s Eric Rauchway’s phrase for what the progressive reaction to Hank Paulson’s proposed bailout should be, and he’s right on. There are all kinds of reasons why the deal is bad policy, which I’ll let Paul Krugman and Doug Elmendorf – i.e. people who know what they’re talking about – explain. But the bigger problem is the lack of quid pro quo. This is going to be a $700 billion expenditure benefiting, almost exclusively, the wealthiest and most privileged among us. Some of that’s undoubtedly necessary if we’re going to salvage this mess, but as long as we’re slinging cash around we might as well, say, pass the Wyden-Bennett health care bill. Or limit executive compensation. Or radically expand Pell Grants such that college is effectively free. Or fund massive new job retraining programs.

Ygz is fond of commenting on the effects of this crisis on the soon-to-be-unemployed janitorial staff of Lehman Brothers. That’s a rhetorical tactic, to be sure, but he’s right to use it. If we’re shoveling billions towards the MBA’d idiots who got those janitors laid off, the least we can do is use billions to provide them, and their kids, and their grandkids, with a halfway decent safety net befitting a 21st century developed country. It wouldn’t cost that much. Hell, Wyden-Bennett is revenue neutral in its second year of operation. A massive welfare state expansion shouldn’t be too much to ask for. It should go without saying.

Obviously, Harry Reid and Nancy Pelosi can’t be expected to stand up to Paulson. Maybe, if Sebastian Mallaby’s opposition forecasts a larger DC elite aversion to the plan, they’ll be able to get away with opposing it, but the Congressional Democrats will never have the backbone to demand safety net expansions as a part of the deal. It’s too bad, as I doubt we’ll have an opportunity this good again anytime soon.

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