The American Spectator

The Spectacle Blog

All right, I didn't mean to evoke your inner libertarians, guys. I was merely saying that the dramatic -- one might say, hysterical -- tone of the president's speech seemed a bit much to me.

The threatened "collapse" would not return the U.S. economy to 1929 levels. Financial institutions are currently holding assets that are not worth what they paid for them, but the assets are not worth zero. But these institutions don't want to fire-sale those assets in a market beset by a liquidity crunch, because then they'd lose a crapload of money and might go bankrupt.

Well, OK, some major financial institutions go belly-up. And several less-than-major financial institutions follow. And one can picture a scenario where other businesses heavily dependent on credit -- especially the auto giants -- follow in this row of toppling dominoes.

Yet there is a genuine economic floor somewhere underneath all this artificially pumped-up, credit-fueled superstructure. Even in the doomsday "collapse" scenario, the ordinary supply-and-demand mechanism remains in place, and the reset point is not zero. Real people would lose real money, unemployment would increase, but these would be relatively short-term phenomena, and the economy would eventually -- in 6 months, 12 months, 18 months -- absorb the losses and then begin to grow again.

What Paulson and Bush seem to be advocating is risk-free, pain-free capitalism -- except that taxpayers are ultimately on the hook for it all. Some Republicans are slinging the term "purist" at free-market opponents of the Paulson plan, but I'm sorry: A $700 billion lump-sum corporate welfare payment doesn't remotely resemble the conservative movement I signed up for.

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