Who knew Wall Street shared the economic views of steel workers, domestic manufacturers, and buggy-whip makers when the automobile was invented? Just like those industries threatened by market realities and a changing economic landscape, Wall Street is calling on Congress to intervene in order to preserve the status quo.
I guess we only call it protectionism when it’s men in hardhats who are at risk of losing jobs. When it’s men in pinstriped suits worried that their industry might dry up, we call it “stabilization.”
Protectionism is the right word for the bailout the House is voting on today. Without a bailout, we are told by the people who got us into this mess, the entire economy would melt down. Pittsburgh steel workers also told us that without a domestic steel industry, all of America would suffer.
Capitalists have always retorted that the steel industry was just trying to keep things static in a changing world—capital could be more efficiently and more wisely allocated without government intervention, and unfortunately for Americans trained for steel work, keeping those jobs here didn’t make sense. They were just going to have to adapt.
But today, when the invisible hand is winding up to give a strong whack to the barons of Wall Street, banking, and real estate, our lawmakers—and not just the avowed big-government advocates like Rep. Barney Frank, D-MA, and Sen. Barack Obama, D-IL, but also the Republicans versed in laissez-faire talking points—inject themselves into the economy in order to preserve the way things were.
No doubt, we’re headed towards bad times economically, and everyone is to some extent tied up with Wall Street’s fate. But imagine Congress rejects the bailout, and ask yourself this: What would the economy look like in five years?
Will we all be out of work? Will we all be struggling to feed our families? Or is the U.S economy more resilient than that?
We will bounce back. But some things wouldn’t bounce back from a credit meltdown and a stock-market crash.
Workers would no longer pour all their savings into the stock market through 401(k)s and IRAs anymore—we now understand the risk, and we might save instead by paying down debt, investing in tangible things like gold, or investing in a friend’s small business that is not listed on the New York Stock exchange.
Housing prices and pace wouldn’t return to their 2004 heyday. Folks wouldn’t be willing to pay as much or able to borrow as much. Maybe we would start buying houses we can afford. The same might be true of cars, home improvements, and school: maybe we’ll stick closer to buying only what we can pay for.
“But what kind of economy is that,” the “capitalist” might ask? Sure, a world of tighter credit would be less flashy, and would be more austere for many. But for those who are actually dedicated to economic liberty—as opposed to those in fact dedicated to a soaring Gross Domestic Product and a “booming economy”—a less free-wheeling financial world also has the virtue of being a freer market.
The economy we have today—built on debt and free-flowing capital—is the economy our government built for us. As Sen. Jim DeMint, R-SC, explained before voting against the bailout Wednesday, “We wanted our economy to grow faster, and so we allowed the Federal Reserve to create easy and cheap credit…. We wanted every American to own a home, and so we created Fannie Mae and Freddie Mac.”
He could have gone on about Congress’s hand in this economy: We wanted people to invest in the stock market, and so we made special carve-outs in the forms of 401(k)s and IRAs where they could avoid being hit twice by the high tax rates we made.
We wanted them to buy houses on credit, and so we made their mortgage interest tax deductable, while not affording the same privilege to rent (or paying outright for your home).
DeMint’s point was that government programs—often supported by “pro-growth” conservative Republicans, and, as lobbying reports suggest, often drafted by lobbyists representing Wall Street, realtors, developers, and banks—have built up this economy to the point where it is teetering. If it toppled, and we were left to our own decisions, we would all build the economy in a different way—and that’s the threat to real estate developers, banks, and stock brokers.
Where “pro-growth” Republicans tell out-of-work steel workers they have to adapt to a changing economy, today, they tell Wall Street, “don’t worry, we’re taking care of you. You’ll be all better soon.” It’s protectionism, all in the name of capitalism.
Examiner columnist Timothy P. Carney is editor of the Evans-Novak Political Report. His Examiner column appears on Fridays.