One of the early panel discussions took a frank look at the bailout and the state of the economy. The panel included Pat Toomey, President of the Club for Growth (and the most recent primary challenger to Arlen Specter) and Mitt Romney. Early in the discussion, Pat Toomey laid down a marker on where he stands on the economy and the bailout. He doesn’t think the bailout was warranted, and offers the following assessment on how we got into this mess:
Mitt Romney countered with an admission that many people in the room would not agree with his analysis, but he was going to give it anyway,
There are two simultaneous, yet distinct problems that we are facing. First, we had the very real possibility of the collapse of the financial system. Second, we have the onset of a recession. The actions to take to fix the financial system are not necessarily the same actions needed to prevent a recession. I sat down with John McCain, one of 22 financial advisors on this issue. There was no question in the room that opposing the bailout was the right political thing to do. However, all 22 of us unanimously agreed that the bailout was necessary to prevent the collapse of the financial system. Whether or not it actually was necessary, we will never know.
Mitt went on to make the point that in his opinion, the government was responsible for the creation of the crisis, and ultimately is responsible for resolving it. While Pat and Mitt were on opposite sides of the issue of the necessity, Mitt did offer the following,
I agree with Pat that we have a significant risk going forward. I think that using the word “bailout” was a big mistake, since it wasn’t intended to bailout specific individuals and institutions. However, I now worry that the Obama administration will indeed engage in bailing out troubled industries. The risk is that we now enter into a European solution, where we subsidize failing businesses to the detriment of our economy.
Considering this exchange, I thought of a point that Jay Nordlinger made regarding the Iraq war. He stated that preemption is not popular and that people can always say afterwards that it wasn’t necessary. This statement is applicable here as well, and is ultimately consistent with Bush’s style. We can’t know if the actions taken prevent a financial collapse, unless they fail and we have a collapse.
Father Robert Sirico gave the most poignant and moving assessment of the bailout, discussing the theological implications of the elimination of moral hazard, and relating it to church history. Morally, failure must be allowed.
Mark Steyn also provided an assessment of the importance to our demographic trends of the US housing market. Our leadership in demographic growth among the western world is directly attributable to the ability to buy a home of sufficient size to allow families to raise children. Families in Germany and the Netherlands will not raise more than one child, when living in a small basement flat. His concern is that we have now debauched the concept of home ownership and credit, by allowing people to borrow large sums of money for no more risk than they would incur providing a security deposit for an apartment.
Mark also offered the following dire warning when the panel discussed the current 20% GDP commitment to entitlements,
The real risk is that when an economy gets to 30% to 40% commitment of the GDP to entitlements, then people vote with their feet. This is currently happening in Greece, and the real risk is societal collapse.
The final word of the session was provided by Mitt Romney,
Free marketers may have caused this problem, but the free market did not.
Return to Part 4.
Part 6 will discusses foreign policy and America’s enemies.