A Libertarian Democrat Status Report Of This Crisis

Here's how I feel as of Thursday morning. Expect me to feel differently later today.

First, I'm not in favor of the bailout. As Steve Chapman writes on Reason:

"Not only that, the more effective it is, the more damage it will do to the free market system. Saving companies from their bad gambles turns business into a game of "profits for me, losses for you," corroding the incentives that make capitalism so innovative and efficient.

And for what? Bernanke warns of a recession. But economic downturns are not to be avoided at all costs. And one good thing about recessions is that they end, usually in a matter of months. An intervention of this nature, by contrast, would have malignant consequences for decades to come.

A group of 122 economists, including at least two Nobel laureates, signed a letter this week summarizing the danger: "If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted."

Not to mention the risk of giving the executive branch powers that a Russian czar would envy. If this bailout goes through, the term "limited government" will have to be permanently retired.

Paulson and Bernanke say, and probably believe, that their program is for the good of us all. But remember what Thoreau thought of their 19th-century counterparts. "If I knew for a certainty that a man was coming to my house with the conscious design of doing me good," he wrote, "I should run for my life."

Second, if there has to be a bailout, I prefer a version of the Swedish Plan, because it has worked, and I understand it. It also protects the taxpayers, which I doubt other plans will.

Third, I like Warren Buffet and William Gross, but their touting this bailout worries me. I feel as if they know something we don't, and that they're going to profit handsomely in this crisis. Again, they're two of the few financial people I respect.

Fourth, Sen. Dodd and Rep. Frank and the Democratic party have greatly improved the original Paulson proposal. In fact, the Democratic party has proven itself far more capable than the GOP in this crisis.

Fifth, many liberal blogs like Kos have featured a lot of libertarian themes in discussing this bailout, and the chatter on Reason, Cato, and libertarian democrat blogs, and also from liberals like Bob Kuttner, Bob Reich, Henry Blodget, Ezra Klein, Paul Krugman, etc., has been much better than GOP blatherers like David Brooks in the NY Times.

Sixth, Sen. Obama has proven himself far more capable in this crisis than John McCain.

Seventh, I've realized that I distrust these hybrid plans being put forward, precisely because they are neither fish nor foul, and so far easier to turn into a disaster.

Eighth, I wonder if there would even be a crisis if the Bush administration wasn't in power.

Ninth, even when I understand credit default swaps, I don't understand them. That can't be good.

Tenth, as a libertarian Democrat, I feel very good about how people I respect are reacting to this crisis, and am more determined to pursue this road in the future. A mix of libertarianism and liberalism in the Democratic party is the only way forward for those who want a less intrusive and powerful goverment.