Republi-Karma III: Economics

In the simplest sense, the economic crisis is the result of the perfect convergence of Republican deregulation and Democratic affirmative action.

To wit, the removal of barriers between, and oversight from, investment and commercial banking, which was the true culmination of deregulatory impulses stemming back to the 1980’s, combined with the policy of handing out loans deliberately to those who were more likely to default, but whose entitlement to said loans was influenced by other factors.

One may not even have to “stoop” to identifying said factor as ethnicity; it seems as if the borrower’s likely inability to pay was the deciding factor in actually lending the money. This is paradigmatic “acqusitionism”: EVERYONE has a RIGHT to OWN a home, no matter who has to pay for it. Just like health care and education.

(This also might raise questions about whether need-based “affirmative action” in academia and elsewhere is a more reasonable policy than ethnicity-based admissions/placement. I still think it is, especially with regards education, particularly due to its more intangible benefits. )

However, there are two reasons why this crisis, beyond the stereotypical Republican-as-Wall-Street-versus-Democrat-as-Main-Street stereotype, is going to hurt the Republicans more than the Democrats.

The first reason is that, while housing was the primary catalyst is precipitating this crisis, it was more a symptom than cause, particularly because while profits were being made no one was going to complain too loudly, or at least do anything about it. The Republican claim of warnings issued about Fannie Mae and Freddie Mac, whether they are true or not, lack credibility because the culture of deregulation is undoubtedly their creation.

The second reason is that, like 1968, the already hemorrhaging treasury is being simultaneously drained by an unpopular and divisive war. The party in charge paid for it then, and may pay for it now.

It also seems that the Democrats have gotten over their fear of playing politics to win; Nancy Pelosi seems willing to drag out the crisis long enough to allow the playing field to be tilted further in the Democrats favor. However, this naked tactic is certainly not unknown on the other side of the aisle; after 9/11, the Wall Street Journal advised Bush and his administration to use the events to his political advantage (although Rove, Cheney and his minions would have, and did, do exactly that in any case).

The only question is whether Congress is having fun grandstanding while the Treasury drains. There is no question of whether they care. They don’t.