Ross discusses possible scenarios following the failure of the bailout.  The idea that the House GOP can really be blamed (credited?) with the defeat of the bill seems strange to me.  No doubt many people will blame (or credit) the House GOP with defeating it, because far too many on the Democratic side were unwilling to back it without the cover of bipartisanship, but this must be one of the first times I have heard the argument that the minority party in a lower house of the legislature was able to stop a bill when almost a third of its members voted for it.  Obviously, if you think passage was imperative and disaster awaits, the majority of House Republicans would deserve severe criticism along with two-fifths of the Democrats, but this apportioning of blame gets something seriously wrong. 

Whatever Boehner promised to deliver (and if he promised 80, he was just making it up), anyone following the political news from the outside could have told you that he was going to get maybe 45-50.  As it was, he delivered 65, which was a lot more than expected just a day or two ago, and that’s not too bad considering that the Republican conference didn’t hear about the deal from their leaders first before the media were reporting it.  Knowing this, which she should have known, Pelosi should not have scheduled a vote for today.  The markets would have remained edgy, but nothing significant would have happened one way or the other. 

Bringing the bill to the floor when the result was seriously in doubt raised and then brutally dashed expectations, which I imagine contributed to the severity of the decline in the market today.  The Speaker determines what happens in the House, and she has to take the bulk of the responsibility for the success or failure of any legislation that she is promoting.  This is not the same thing as what the GOP leadership is now saying (“Pelosi was mean, so our members had to vote no!”), and that particular line of nonsense deserves to be mocked.  Of course, you can attack the House GOP on the grounds that the bill was actually a good bill and TARP was a good thing to do, but you’ll notice that no one is actually doing that, because even the people crying, “Irresponsible!” know that TARP is a terrible program.  Having called it a “terrible precedent” and “the worst possible course of action,” my Scene colleague Jim Manzi chides the House GOP for not going along with something that he cannot defend.  This is one of the worst cases of do-somethingism I have ever seen.  

I agree with Ezra Klein that we are seeing, in one sense, the “failure of politics” today, but it is not the failure he means.  The failure of politics that culminated in the defeat of the bill was the failure of the proponents of the legislation to make an argument that did not rely very heavily on prophecies of disaster.  There was no real attempt at persuasion, and the haste in which everything was done generated far more intense opposition than was necessary.  The supporters of the bill wanted to ram it through with as little deliberation and scrutiny as possible.  On any other issue, on any other bill, this would be seen as outrageous and you would hear about the wisdom of having a lower chamber that was more responsive to the people.  Now opposition to this hasty adoption of a bad plan is derided as irresponsible? 

Let me break it down for you: if things are indeed as bad as the proponents say, and if they are the responsible, sober voices of wisdom that they pretend to be, the truly irresponsible thing was to wait up until the last weeks before the recess, rush out a terrible plan, demand immediate adoption of this terrible plan (which they were happy to admit in public was a terrible plan) and then not even correctly gauge the level of support for the legislation before bringing it to a vote.  Calling the question when there likely wasn’t enough support (as opponents of the bill had said yesterday!), if you believe what these people claim to believe, was an act of brazen recklessness.  If they are wrong about the consequences of not adopting this plan, they are merely politically incompetent.

The most amusing reaction to this has come from Kudlow, as he says that he would now abandon his support for the bailout if a more liberal version of the bill were introduced to bring more Democrats along and he would opt instead for recapitalizing banks through the FDIC.  That means that there was another way, and one that very few would have balked at supporting.  So now Kudlow will switch to advocating one of the main, plausible alternatives to this horrible, awful, dreadful plan, but only if those nefarious Democrats try to change bankruptcy regulations.  That’s more than a little confusing, since it was just last week that the version proposed by Frank and Dodd already had those provisions and they were scrubbed in the (obviously futile) effort to get more Republican support, but at no point did those provisions push Kudlow into opposition.  Kudlow, of course, endorsed the original Paulson proposal, which was completely indefensible, but if the bill is cluttered up with some liberal vote-buying junk it must now be time for Plan B.  That makes you wonder, especially if the GOP leadership believed that Plan A was terrible, why the Kudlows of the world weren’t advocating some form of this Plan B last week.  Oh, that’s right–they were too busy pushing capital gains-tax cuts and complaining about ACORN.  Remind me again who the responsible people are?

Update: Kling adds:

I see free markets as very much the underdog going forward. But if there is no bailout, then at least markets have a fighting chance. I would want to defeat this particular revolt of the elites, realizing that larger battles probably lie ahead.

The issue here is not that Palin didn’t know the answer. There are many possible answers to this question, some of which are right and some of which are wrong. The issue here is that she didn’t know the question. Because she was apparently ignorant of the subject, she endorsed Hamas’ victory, and, in essence, called for the U.S. to “protect” Islamists who seek to use democratic elections to lever themselves into power. And, of course, Ahmadinejad came to power in a more-or-less democratic election. Palin’s answer was truly remarkable. A person who could be President of the United States has shown herself to be completely ignorant of one of the most vexing and important foreign policy questions of the day. Freshman congressmen know how to answer this question. ~Jeffrey Goldberg

I would submit that there are more than a few freshmen in college who would know how to answer this question.  

Goldberg is responding to her answer on Hamas and democracy, which I had called pathetic last week.  In fairness to Palin, what she said was not exactly “endorsing” Hamas as Goldberg puts it, since it would require her to know what Hamas was for her to endorse it.  It’s true that she didn’t know the question, and so fell back on the old stand-bys of warning about mean ol’ Ahmadinejad and praising good ol’ democracy.  So she unknowingly blundered into holding the same position as…the Bush administration.  The relevant issue here is not that Palin blundered into unwitting support for Hamas, but that the Bush administration, fully aware of what Hamas represented, actively pushed for Palestinian elections.  Palin has the excuse that she doesn’t know anything about the situation–what was their excuse?

The House has rejected the measure 228 (95 Dems, 133 Reps)-205 (140 Dems, 65 Reps).  The market is responding very dramatically.

P.S.  The vote is still open, so the result might change later today.

Update: Rasmussen released poll results today showing that support for the bill had edged up from 24% to 33%, and opposition dropped considerably from 51% to 32%.  That suggests that non-stop fearmongering can drive public opinion pretty easily, which means that the pro-bailout forces might have been able to turn more people around if they had taken more time.  Ironically, had there not been such urgency on the part of pro-bailout folks the bill might very well have passed at a later time.  The fearmongering was working to weaken opposition, even though just as many people were moving into the undecided column as were coming around to support the bailout.  What these numbers fail to reflect is the sheer intensity on the anti-bailout side, which makes the higher levels of support for the bailout less significant.  In this, what has happened today is very much like the immigration revolt: supporters of the “comprehensive” bill were convinced that they had to pass something, the establishment was fully behind it but had no stomach for a real fight, and the opponents–backed by a grassroots revolt–were extremely motivated.  All of the emotional and rhetorical power was on the side of the opponents, while supporters appealed to necessity.  In both cases, the opponents were also right in rejecting the legislation.  Whenever genuine populism appears on the scene–not the phony, blow-dried kind on display at the Republican convention–it often ends up having a better track record than the consensus of the serious people in Washington. 

Viewed simply as a tactical matter, the administration could not have handled this more poorly had they set out to sabotage their own plan.  First, Paulson’s proposal overreached so much that there was no chance Congress would have accepted it as it was, and then Congress was told that it had no choice.  Never tell people that they don’t have a choice, because they will remind you that they do have one even if it means doing things that you think are crazy.  Instead of making any attempt to persuade members of the merits of the plan, supporters gave up on that out of early recognition that it didn’t have any and resorted to bludgeoning opponents with the blunt instrument of fear.  People also respond poorly to this kind of bullying.  Add in some of the Democratic leadership’s holier-than-thou attitude, the GOP leadership’s half-hearted endorsement and McCain’s absurd theatrics, and you have one of the most impressive displays of establishment ineptitude that I can recall.

It has been vexing to find my old support of Ron Paul so starkly at odds with the my later support of Bob Barr.   I admit that I have been discouraged by the falling-out between them and what is admittedly the mistake of Ron Paul in refusing to make a choice several weeks ago rather than offer a blanket endorsement of third-party candidates generally.  In end, despite my reservations about the disorganization inside the Constitution Party and the various state-level efforts to recruit Paul as presidential nominee, all of which reflect the typical confusion and disorder that I have come to expect from my party, I am actually a registered member of the New Mexico affiliate of the Constitution Party.  I had not watched Barr’s running commentary on the presidential debate on Friday, and I only heard his post-debate remarks today.  Give Barr credit–he is talking about providing leadership, and his remarks on Friday have led me to conclude that I will not vote for him in November. 

No doubt he has the support of various Reason folks who refused to defend Ron Paul against the attacks leveled against him when it actually mattered, and he is welcome to that unreliable support.  The main reason for supporting Barr rather than Baldwin in the first place was that Barr would prove to be a more viable candidate and would win more votes than any Libertarian or rightist third-party candidate in recent history.  The objective in supporting Barr was supposed to be that he would provide someone who would unite both Paul-supporting libertarians with cultural conservatives who remembered Barr’s past record and wanted a conservative alternative to McCain.  However, Ron Paul’s endorsement of Baldwin has made clear that the better candidate to support to pursue that end is Chuck Baldwin. 

Considering how recently Barr has endorsed a whole host of libertarian positions, he is no position to lecture anyone about a lack of fidelity to the cause of liberty.  I was willing to overlook much of Barr’s past record on the grounds that he had changed his mind, but through a series of decisions that he made I am no longer inclined to do that.  If I wanted to hear Chuck Baldwin attacked as a theocrat I could find that just as easily on the left.  In the end, Ron Paul retains a great deal more credibility in my eyes than Barr will ever have.  Whatever mistakes he has made this year, I take him far more seriously and his endorsement has more weight with me than anything Barr might say. 

Vote for Chuck Baldwin for President!

I’m as much a limited government guy as the next fellow, but let’s not pretend that we live in some libertarian utopia in which the state has no role in the market. ~Stephen Bainbridge

Of course, that’s just the point.  Bainbridge isn’t as much of a limited government guy as the next fellow if the next follow is Mike Pence or, say, Daniel Larison, and his position on the bailout is the proof.  He thinks that socializing financiers’ risk on the dubious basis that it will avert catastrophe does not significantly compromise his claim to be “as much a limited government guy as the next fellow,” when it necessarily does.  What these people mean when they say this is that limited government is a nice thing to talk about and it is fine to defend when times are good, but when the going gets tough we basically accept that the welfarists and socialists have been right all along, at least up to a point. 

Bainbridge takes comfort in the distinction between principle and ideology, but what conservative principle has ever approved of the concentration of power in one man’s hands that is being vested in the Secretary of the Treasury?  What conservative principle ever celebrated the accumulation of vast amounts of public debt to prop up financial institutions?  This reminds me of the pathetic and servile response of more than a few conservatives to executive power-grabs and unconstitutional surveillance powers.  They would cry out, “The Constitution is not a suicide pact!”  Perhaps not, but I have never quite understood why that required us to euthanize constitutional government.  

Few on the right are more hostile to the perverse appeal to “creative destruction” than I am when it is used to justify de-industrialization, the displacement of people, the transformation of local communities or demographic upheaval through mass immigration, but what we are faced with this week is the victory of Hamiltonian collusion between finance and government to use the latter’s apparatus of power to shore up the former’s wealth.  Central government is robbing the people to prop up concentrated wealth, and claiming in the process that it is doing us a favor.  Never mind that the government’s alarmism may well be wrong. 

People have been cajoled into submission through fear and intimidation, and above all by the threat that life might become less comfortable.  In other words, advocates of the bailout are quite happy to say that liberty has a price and they are very happy to pay it so long as it avoids most of the unpleasantness.  “Give me liberty or give me a comfy retirement!” is not exactly a phrase that will live forever.  Thus an abject abandonment of liberty is here being implausibly dressed up as a defense of liberty.  Burke and Kirk would, I suspect, feel like retching if they had lived to see their understandings of constitutional government and social order used in this way.

It is easy to talk about principle when there is no crisis happening and no risk attached to standing on principle.  The real test comes when holding fast may actually cost something.  Holding to a principle, if it means anything, means that you value it more than mere self-interest, satisfaction or comfort.  A lot of Americans want to have it all–the pretense that they are free, with none of the responsibilities or dangers that go with it.  In reality, you can either have the latter and remain free, or you can cease being free and then be kept free (temporarily) from responsibility and danger. 

Update: Rep. Mary Kaptur (D-OH) is not going down without a fight.

I have to agree for the most part with Gregory Cochran against Dan McCarthy on the questions of Obama’s chances in the Electoral College and trends in the polls.  National and state polls have tended to go in the same direction with each shift in the campaign, and the state polls have followed the changes in the national tracking results.  Cochran is right that Obama’s margin in the national polls points to Democratic success.  In mid-summer, many swing state polls showed an Obama surge consistent with his national polling lead, and during late August and early September the state polls showed the reverse as McCain leap-frogged ahead of Obama on account of Palin enthusiasm.  Ever since 9/15 when the markets tanked after Lehman’s bankruptcy, Obama has been steadily advancing in national and state polling, and Friday’s debate changed nothing here.  McCain-leaning states have started reverting to toss-up status, and existing toss-up and weak Obama states have trended towards Obama.  Just a few weeks ago, McCain had an outright lead in RCP Electoral College projections without toss-up states; today he trails by 65 votes.  There are today fewer reliable McCain-leaning states and more toss-up states that are running away from him, which makes it McCain’s tough hill to climb to reach 270.  His imploding running mate and his chaotic campaigning style do not bode well for the next five weeks.  Unless we assume that Obama has to have a five or six-point lead before Election Day to compensate for a Bradley Effect problem in his polling, Obama is in a comfortable position right now.

Dan is correct that most of the toss-up states vote Republican more often, and the toss-up status of Pennsylvania, Wisconsin and Minnesota remain worrisome for the Democrats, but I would point to a few states where movement towards Obama is significant and offers a clue to what will happen in a little over a month from now.  Colorado has not voted for a Democrat for President since 1992, but it has been more or less solidly in Obama’s column all year.  The state has been trending Democratic for several years, which is also reflected by the strong Mark Udall Senate campaign.  New Mexico and Missouri are bellwether states.  More than other states, they have voted for the winner; New Mexico matches the popular vote percentages with rather eerie regularity.  Right now Missouri is trending away from McCain after many months in his column, and New Mexico has been leaning Democratic for months.  I assumed that the significant presence of military personnel, veterans and Hispanics, plus being a neighboring state, would make New Mexico favorable territory for a military veteran and pro-immigration Arizonan Senator, but it has not been happening. 

Minnesota, Wisconsin and Pennsylvania are all traditionally Democratic states in recent presidential elections, and despite Obama’s relative weakness in rural and small-town Pennsylvania these states are very likely to come back to the Democratic nominee just as traditionally “red” states such as Indiana, North Carolina and Virginia are going to come back to McCain.  Colorado and New Mexico are going to prove to be decisive, as Obama must have them if he cannot win Ohio and Florida (and it is my estimation that he cannot), and McCain bizarrely seems unable to gain sufficient traction in these Southwestern states.  All that Obama needs to win is to hold the Kerry states and keep his leads in Iowa, Colorado and New Mexico.  That seems the most likely scenario. 

If you assign toss-up states to the candidates where they are leading by some small margin, Obama enjoys a commanding lead of 301-237.  Had the financial crisis not struck two weeks ago, things might have been very different, but that is where things are.

Speaking of Dreyfuss’ sputtering disbelief, here was a key passage of his post on the debate:

He checked all the boxes. Barack (“Senator McCain is right”) Obama couldn’t find anything to disagree with the militarist Arizonan about. Support for NATO expansion? Check. Absurd anti-Russian diatribes? Check. Dramatic escalation of the war in Afghanistan? Check. I’m ready to attack Pakistan? Check. (Actually, on this one, McCain was the moderate!) Painful sanctions against Iran, backed up by the threat of force? Check. Blathering about the great threat from Al Qaeda? Check. It went on and on.

He couldn’t find anything to disagree about because McCain and Obama don’t disagree about very much when it comes to foreign policy.  He checked all those boxes because he thinks, or at least seems to think, that these are the right policies.  Of course, I agree with Dreyfuss that pretty much all of this is terrible stuff, but as many loyal Obama backers have pointed out to me over the months I am not exactly his target audience.  It has never made any sense why Obama, who backed the war in Lebanon of all things, has been judged to be a dove or significantly different when it comes to “America’s approach to the world.” 

This is hard for many a progressive, Obamacon and McCain supporter to accept, but it is true.  McCain supporters need to believe that Obama is the next coming of McGovern, because McCain doesn’t have a chance in this election if that isn’t true.  Progressives desperately want to believe that militarism is somehow just the preserve of Republicans and Joe Lieberman.  Obamacons are hoping to find an alternative to insane neoconservative policies.  Obama necessarily disappoints all of them, because he is not what they expected and, more to the point, doesn’t care how they portray him.  If he has united people from The Nation and The American Conservative against him and prompted their withering scorn, he might think that he is in pretty good shape for the general election.

This is why I keep finding it hard to understand why some progressives have responded so negatively to Obama’s performance, which was all right, and why some observers on the right think that Obama was somehow debating on “Republican terms.”  This is a result of either misunderstanding Obama or expecting too much from him.  To borrow a line from Obama himself, if you were surprised by anything he said on Friday about foreign policy you haven’t been paying attention.  To say that Obama debated on Republican terms on Friday is to accept the stereotype of Democrats as the party of McGovern on national security, when we all know that this simply isn’t true anymore, and to agree that Republicans have some monopoly on interventionism when we know that they don’t.

 Instead, she [Palin] went with the common sense position — Obama’s position. ~Yglesias

This just also happens to be the wrong position, and one that McCain did not explicitly reject on Friday.  He said that you shouldn’t talk about it in public, which means that he favors doing stupid, dangerous things in secret.  You have to admire the sort of willful partisanship and obliviousness to Pakistan’s own hostile response to “the common sense position” that makes it possible for progressives to laud an objectively terrible policy just because Obama has endorsed it.  Frankly, I much prefer the sputtering disbelief of Robert Dreyfuss to the embarrassing spinning that Obama’s defenders on the left enjoy doing.  Dreyfuss may be overreacting (after all, what did he expect?), but at least he is willing to acknowledge that there are sane foreign policy views that Obama could have articulated and didn’t.

The inflationary prospects of the bailout price tag may lead to spikes in oil and crop prices that could hit ordinary Americans in their cars and on their kitchen tables. And government purchases of financial assets could ironically further constrain credit through causing write-downs on even the balance sheets of financial firms not participating in the bailout by worsening the effects of mark-to-market accounting rules. ~John Berlau

There are real reasons why the dreaded wordstagflation has started circulating again.  The bailout genuinely increases the chances of recreating such miserable conditions.  The choice before us is not between nasty economic contraction and the sunny uplands of ceaseless growth, but between a normal, painful, but ultimately healthier adjustment or another artificially-induced mess.  This is not to turn around the apocalyptic warnings of the pro-bailout crowd and deploy the same kinds of alarmist arguments, but I do want to stress that there will be real negative economic consequences that will result directly from the implementation of this plan.  The counterargument is that it will stave off a worse danger, but this is very questionable.

Here’s Reihan in Forbesoffering some very positive comments on Luigi Zingales’ restructuring proposal that I mentioned last week.  Reihan:

In a stinging essay, Zingales essentially argued that Paulson was offering welfare to the rich. Rather than pay premium prices for toxic assets, Zingales called for the federal government to craft a restructuring plan that would involve some amount of debt forgiveness or a debt-for-equity swap, saving taxpayers billions and imposing well-deserved financial pain on the reckless creditor who created the mess in the first place.

So why did the GOP go along with such a profoundly flawed approach? If you can think of a better reason than laziness or cowardice, let me know.

Don’t forget stupidity–that’s always a possibility.