Now that Barack Obama has won the Presidential election, many pundits have speculated that John McCain may have been able to reverse his electoral destiny by opposing last month’s $700 billion Wall Street bailout package and distancing himself from the unpopular Bush Administration.
But there is an overlooked and perhaps more tangible angle to this hypothesis: McCain could have fundamentally changed not only the legislative course the bailout bill took but its very contents as well.
Strong opposition from McCain could have put the brakes on the bailout freight train in a way that nothing else could. As the Presidential nominee and the ostensible standard-bearer of the Republican Party, McCain was in a solid position to influence the votes of Republicans in Congress, particularly his colleagues in the Senate. It’s hard to imagine the same level of Republican support for a similar plan had he opposed it (or had it come from President Clinton, for that matter).
Furthermore, had McCain fought the bailout, Barack Obama may have chosen to follow suit, weakening the support of Democrats who were clearly unwilling to use their majorities to pass the bill on a party line vote and be left holding the bag.
Senate Majority Leader Harry Reid went so far as to lean on GOP House Members, noting that “We can’t do it alone. We need House Republicans on board.” McCain offered no counter-attack, leaving House Republicans who helped torpedo the bill the first time around without a political life preserver.
Furthermore, Presidential politics has a history of making strange allies, as when it compelled Senators McCain, Obama, and Clinton to all support an earmark moratorium earlier this year, despite both Democrats’ frequent use of the tactic. If McCain had spoken out against the bailout, Obama was unlikely to embrace the Bush Administration’s plan while his Republican opponent ran away from it.
In one fell swoop, John McCain could have undermined both Republican and Democratic support for the flawed Treasury plan. This may have been sufficient to convince leaders in the administration and both parties in Congress to craft a new approach to the credit crisis that didn’t pick taxpayers’ pockets.
They would have been wise to pursue a strategy that addressed immediate capital concerns through tax policy while simultaneously tackling some of the government policies that helped create the mess: loose monetary policy from the Federal Reserve, spectacular negligence with regard to the systemic risks posed by Fannie Mae and Freddie Mac, harmful lending mandates, and hastily designed mark-to-market regulations.
Instead, McCain dutifully cast his vote for the bill, Obama did the same, and Congress passed a $700 billion plan from the Treasury that had changed little from the original defective design.
Since then, some of the dire predictions of the consequences of inaction have come true in spite of the bailout. The Standard & Poor’s 500 Index dropped almost 17 percent in the month of October, its worst performance since the crash of 1987.
Research by the Federal Reserve Bank of Boston points out that bank lending has declined dramatically and interbank lending is “virtually nonexistent.” Evidence also suggests that consumer spending has seen a steep drop, raising fears of the weakest holiday shopping season in decades.
In the meantime, officials at the Treasury Department seem to change direction by the day. A bailout plan passed under the auspices of purchasing “troubled assets” will do nothing of the sort and has now shifted its focus to recapitalizing hurting institutions. Lobbyists for virtually every industry imaginable are now swarming the capital in search of a piece of the bailout pie like flies drawn to sugar (or perhaps a more vile substance).
McCain’s opposition to the bailout may or may not have helped him win the presidential election, but it likely would have cemented another enormously important legacy: protecting taxpayers and fostering the creation of an alternative plan to address the crisis.
In the words of a venerable philosopher, “Woulda, coulda, shoulda.”
Andrew Moylan is government affairs manager for the National Taxpayers Union.
