Congress hits the panic button

As George Bush speaks of doom and gloom, lawmakers fret about whether it's worse to pass a bailout plan or not to pass a bailout plan. And Republicans get nervous.

Published September 26, 2008 1:32AM (EDT)

Early Wednesday night, a few hours before President Bush predicted an economic nightmare on national TV, Joe Lieberman slipped into the back of a room on the second floor of the Capitol to listen to Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke make their case to the Senate Democratic caucus. For the Bush administration's financial crisis duo, it was yet another contentious meeting with a skeptical Congress. But Lieberman thinks their work may soon be done -- he knows just what it will take to pass emergency legislation.

"I think to help make this a bipartisan solution, we need Sen. McCain, so I'm glad he's coming back," the erstwhile Democrat said afterward. "He's always been in the middle of solutions here. I think he just said to himself, 'Why am I out here campaigning, even though I'm talking a lot about the economic crisis -- I should be back there trying to find a solution.' I think that's what he will help us do."

With the possible exception of Paulson and Bernanke, Lieberman was probably the only person in the Democratic meeting who believed McCain held the key to steering the country away from an economic meltdown. (One Democratic aide, after Lieberman left the room to talk to reporters, asked, "Who let him in there?") Senate Democratic leader Harry Reid had said Tuesday McCain needed to sign off on any legislation for it to pass, but he clarified Wednesday that he didn't mean McCain actually needed to show up to help write it. John Kerry, asked about McCain's decision to freeze his campaign and call for postponing Friday night's debate, called it "silly," "impulsive" and "erratic." (Lieberman loved the idea, naturally: "It's a leadership decision, and frankly, I admire it.") Over the last two years on the campaign trail, McCain has missed nearly two-thirds of all the votes in the Senate, so the notion that Congress suddenly can't function without him could be a tough sell.

Still, where McCain -- and Barack Obama, and yes, even George W. Bush -- could prove influential is by giving political cover to lawmakers skittish about the administration's bailout proposal. With barely a month before the election, Republicans and Democrats alike are visibly spooked by the prospect of spending 700 billion taxpayer dollars to buy financial instruments everyone agrees aren't worth anywhere near that much money. (And when you think about it that way, it's hard to blame them.) If the presidential candidates both get behind a bill -- any bill -- so they won't be out on the trail bashing the bailout for the next 40 days, a lot of incumbent members of Congress would feel a lot better about getting on board, too. (Of course, whether the bailout is really the best policy choice right now is an even bigger unknown than how the politics will all shake out.)

Bush won't get what he initially wanted: the full $700 billion, with no strings attached, for Paulson to use however he sees fit in the few months before either President Obama or President McCain takes office. Members of Congress from both parties, as well as both presidential candidates, have already spoken out too forcefully against the proposal as originally offered. Lawmakers said Wednesday that caps on executive pay for companies that get bailed out would probably be added; there will probably be some way for the government to claim a share of the profits the firms take after the bailout; and Congress will wind up having some ability to oversee how the money is used. The cash might even be doled out in small chunks, rather than all at once.

For once, Bush seemed to recognize that this wasn't the time for brinksmanship, or at least that he didn't have enough political power left to make demands, in his televised address Wednesday night. The usual threats that legislation must be passed exactly as the White House wanted it were absent; by the time he spoke to the nation, he had already gotten Democratic and Republican leaders from the Hill, as well as Obama and McCain, to agree to meet with him the next day to discuss the next step. Bush sketched out a grim scenario for what might happen if Congress fails to act at all: "More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet."

Now the question will be whether the pitch will be enough. With Bush's poll numbers threatening to break the all-time records for low public confidence, the speech might not have helped that much. Leaders on the Hill weren't sure. "He's still the president," one senior House Republican aide said. "It's different hearing it from the president than from Hank Paulson."

The biggest hurdle for the bailout is its lack of support among House Republicans, who are desperate not to be seen by voters as administration flunkies. "There's a lot of skepticism," the senior aide said. Listening to the outcry from the previously pliant House GOP, you could be forgiven for thinking Democrats already held the White House. "Our job as representatives is to do the people's will, and, so far, you're a far cry from having the people on your side," Rep. Deborah Pryce, R-Ohio, told Paulson and Bernanke in a hearing Wednesday. "We can't say to them, 'Trust me, trust the Fed, trust the Treasury,' because they already feel that that trust has been breached." Pryce, who nearly lost her Columbus-area seat in 2006, is not running for reelection in November.

Democrats, meanwhile, aren't going to vote for anything that doesn't have plenty of Republicans on board -- the last thing the party's strategists want is to let the GOP paint them as Bush's new enablers. The House is so freaked out by the whole situation that lawmakers say the bailout legislation might have to pass the Senate first, even though it's not clear that's legally possible. (The Constitution says bills that "raise revenue" must come from the House, and under normal circumstances, House members say that provision covers any bill that would spend federal funds.) In the Senate, lawmakers are insisting that any proposal pass with an equal number of Republican and Democratic votes, so neither side can blame the other for failing to act -- or for acting, if it turns out voters hate the deal. They'll probably need 30 from each side to prevent a filibuster: "There are some people on our side that are pretty dug in," Sen. John Thune, R-S.D., said.

The problem for politicians on both sides is that so far, the more the public hears about the bailout, the less popular it gets. There isn't much time left for them to figure out what to do: Congress is gone most of next week for Rosh Hashanah, and of course, McCain has a campaign to revive from his self-imposed suspended animation. On Thursday, the House and Senate will keep negotiating at the Capitol, and the presidential candidates will meet with Bush at the White House. The last place anyone would have thought the campaign trail would lead, barely a month before Election Day, is back to Washington. But for the next 24 hours, at least, Pennsylvania Avenue is the center of the political world.

By Mike Madden

Mike Madden is Salon's Washington correspondent. A complete listing of his articles is here. Follow him on Twitter here.

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George W. Bush Joe Lieberman John Mccain R-ariz.