Wow. Maybe John McCain should have skipped the presidential debate on Friday afterall. Because whatever progress he deemed there to be on the bailout legislation under negotiation, it was not enough progress to pass it today. The measure just failed by a vote of 228 – 205 (65 Republicans and 140 Democrats voted for it). While it would have passed with 12 more votes, more likely is that 20 more members would have needed to support the deal, so that no 1 member sealed its fate.
What can we learn from this vote? First, neither John McCain, nor Minority Leader John Boehner, leads the Republican caucus in the House of Representatives. And if John McCain loses this election, watch for the results of another election – leadership elections in the House next year. Fiscal conservatives have been growing bolder in the waning years of the Bush presidency. This vote, above all others, shows that their resurgence is all but certain. If Barack Obama wins, he’ll have a devil of a time passing tax hikes on the wealthy.
We also learned that Democrats and Wall Street make for strange and ultimately uncomfortable bedfellows. The liberal wing of the party just wasn’t willing to reward what they consider to be Wall Street fat cats. In this, they have more in common with the conservative Republicans. But more importantly, Pelosi wasn’t enforcing party unity on this vote on purpose; the Democrats were bent on a balanced vote – which they did not get, and for which they were willing to let the bill fail, for now.
Meanwhile, the Dow drops five hundred points in less than an hour, following the House vote.
Ben Pershing discusses why the bailout failed, starting with the fact that the Bush administration never should have let the “Bailout” label stick.
Poor Salesmanship. Did you know that the general consensus is now that this bill will not cost $700 billion? If you didn’t, it’s because the bill’s proponents did a poor marketing job. From the start, the Bush administration did not do enough to emphasize the point that taxpayers would get at least some of the money back, and that gigantic price tag got stuck in the head of the public (and the media). The administration was also too eager and ambitious with its initial proposal, alienating many lawmakers right from the start by seeming to ask for the moon — give us everything we want, with no oversight . . .
Vulnerables Scared. If you have a difficult reelection race, what was your motivation to vote for this bill? “I voted in favor of a bill that I didn’t really like, because I had no choice,” doesn’t make for a particularly snappy campaign slogan. “I stood up to my party and Wall Street,” sounds much better . . .
No Center of Gravity. Who’s running Washington right now? Bush is the lamest of lame ducks, with a miniscule approval rating and no clout or political protection left to offer . . .
Ideological Problems. The simplest explanation of all for the loss was that a lot of members just didn’t like the bill. Capitol Briefing outlined last week all the reasons why House conservatives balked at the initial proposal, and the basic point still stands: A massive expenditure of taxpayer funds and intervention in the free market, combined with tough new regulations, simply offended too many conservatives’ most basic principles. And Republicans, being in the minority, feel no responsibility to govern. They calculated that the bill’s failure will be blamed on Bush (so what?) and the majority Democrats.
On the liberal end of the spectrum, most members believe this really does represent a “bailout” of Wall Street and a power grab by the Bush administration, and that the current crisis vindicates their longtime warnings that the financial system was riven by greed and insufficient regulation. For those members, the final package didn’t have nearly enough help for struggling homeowners.
Oh, and then there was ‘partisanship’. The House Republican leadership claims that Pelosi’s pre-vote speech (which, among other things, blamed the Bush administration’s policies for this disaster and promised a “New Direction” next year . . . ) so deeply offended swing Republicans that they swung the other way. Maybe she could have held off with the blaming, but can you really imagine some Republicans switching their vote on a subject of such vital importance to the nation’s economy over that?
So, what now? Apparently the House will vote on the bill again shortly (today). The sad fact is that the bill is now more likely to succeed after the first failed vote. The ensuing panic on Wall Street this afternoon, painful as it was, was probably just the bailout this bailout needed.