The end of the Reagan revolution

The vote to bail out Wall Street marks the demise of deregulation's stranglehold over the American economy

Published October 3, 2008 6:45PM (EDT)

Witnessing Congress vote to enact a landmark piece of financial legislation this week that a majority of politicians in both parties, the American public, and nearly all economists despise has been a passing strange affair.

We have been asked to trust the very people who were responsible for creating a worldwide market debacle to fix it.

We have seen uber-liberal Massachusetts Democrat Barney Frank and President George Bush on the same side.

We have seen an administration that took as one of its fundamental guiding principles the philosophy that markets are best left to regulate themselves, orchestrate a colossal intervention in the economy, matched only in American history by the actions taken by Franklin Delano Roosevelt as part of the New Deal.

We have seen the House of Representatives "jammed" by the Senate, forced to vote for extending $100 billion worth of unpaid-for tax breaks or end up being blamed for inciting a devastating financial panic. It wasn't pretty.

We have seen a Republican candidate for President who has supported deregulation of Wall Street for his entire 26-year career in the Senate suddenly become an advocate of increased government oversight of banks and other financial institutions.

We don't even have any confidence in whether the plan will actually work. All we can guess is that if the "Emergency Economic Stabilization Act of 2008" had not passed, stock markets would have crashed all over the world and the credit freeze would have continued unabated. But those possibilities are far from eliminated by Friday's vote.

During the debate in the House prior to the vote, Congressman Ron Paul, R.-Tx., the quixotic one-time presidential candidate who wants to abolish the Federal Reserve and has been warning for decades that financial doom, fueled by cheap credit, would one day lay terrible waste upon the United States, declared that "we cannot paper over the recession or depression that is coming." It is a sign of just how much has changed in the political and economic climate in the last year that his analysis sounded rooted in fact, rather than libertarian fantasy.

Nevertheless, despite the tragicomedy of watching a former CEO of Goldman Sachs, who we learned just today lobbied for regulatory changes that ended up destroying his own industry, given authority to rescue his former colleagues from their bad decisions, there is a $700 billion silver lining to this unspeakable monstrosity.

The moral authority of the Reagan revolution has collapsed. It will be many, many years before a Republican can address the nation with a straight face and declare that what we need is more deregulation. Oh, they'll try it -- I've heard Senators and Representatives make that very case this week. But the majority of Americans will not pay attention to their garbage.

Some evidence for this can be found in the reaction to the presidential and vice-presidential debates. Last Friday and on Thursday night, Americans watched candidates from both political parties make their traditional pitches. Both Barack Obama and Joe Biden delivered what, to my ears, were very familiar Democratic calls for more tightly regulated markets. John McCain and Sarah Palin, while giving lip service to "oversight," still pumped out traditional Republican talking points about tax cuts and worn out bromides about "getting government out of the way of the people."

All my adult life I've watched this tug-of-war, and since my very first vote in 1980, have been disappointed and disgusted at the result: A sellout of the American public to the forces of greed.

The results of the snap polling after both debates, declaring Obama and Biden the victor, shocked me. Not because I thought they were the wrong interpretations of what had happened, but because I just am not used to the majority of Americans seeing through the malarkey.

No more.

The spectacle of this enormous bailout is an undeniable refutation of the ruling philosophy of the last 30 years. Government has failed us. If this country survives the economic turmoil that is sure to come, we will never be the same. We might even end up better off, because of it.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

MORE FROM Andrew Leonard

Related Topics ------------------------------------------

2008 Elections Globalization How The World Works Wall Street