Very good Jonathan Chait column in New Republic

[scheming daemons]

Last week I wrote that economic conditions plus the swollen Democratic majority would predict a 45 seat Democratic loss. So, I concluded, before we even have the "what did Democrats do wrong" conversation, we need to first establish that they did anything wrong at all, with "wrong" being defined as a loss in excess of 50 seats or so. Now that we see Republicans gained some 20 seats more than mere fundamentals would predict, let's have the "what went wrong" conversation.

I think the root of the Democrats' political troubles lies in the initial flurry of activity--the stimulus, restructuring TARP, and the auto bailout. In the public mind, this all become jumbled together as "the bailouts" -- a conflation carefully nurtured by Republicans--even though obviously Keynesian fiscal policy is not the same thing as a bailout. But the truth is that all those policies were highly unpopular, and all came to symbolize big government rescuing bad actors while average people paid the bill. It became a frame that colored perceptions of the entire Democratic agenda.

The trouble with laying the blame for the loss on this is that I can't see a good alternative. You could give the people what they want -- let the banks fail, let the auto companies fail, respond to economic crisis with fiscal contraction rather than expansion. But that would have been insanely bad policy, deepening the crisis and ultimately driving more public discontent. The fundamental dilemma is that the economic crisis made Democrats unpopular, but so did steps they took to resolve it. What are you gonna do? Sometimes the people are wrong about macroeconomic policy. The issue of AIG bonuses might have given the White House a chance to take a populist turn. I'm skeptical that scolding Wall Street would have had much political impact. It is indeed amazing that Republicans held a double-digit lead among voters who blame the banks for the state of the economy. On the other hand, if open Republican shilling for the banks during the financial regulation debate didn't cure that, it's hard to see what would.

A more preventable problem was the extended health care debate. From Al Franken's seating, in July of 2009, through Scott Brown's election in January, Democrats had 60 votes. Democrats desperately needed to pass health care reform, and end the interminable process that was slowly bleeding support for the bill. Instead, Senate Democrats let it drag out. That was a huge mistake.
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Much more here:

http://www.tnr.com/blog/jonathan-chait/78907/regrets-ive-had-few

[FrenchieCat]

1. The media never inspects the media as the cause of anything.....

Here Jonathan Chait could have discussed the fucked up media propaganda
so many of us have been forced to hear over and over again,
and the millions that were paid in advertising to the media from
shady unknown money.

But no.......

Of course not.

[jpgray]

2. This is exactly right.

[Supersedeas]

5. "carefully nutured by the Republicans" with the help of the Corp. Media

[Jim Sagle]

3. Whadda buncha shit. TARP was a hijack plain and simple.

[BzaDem]

4. As the article said, "Sometimes the people are wrong about macroeconomic policy."

This is one reason we have representative democracy instead of mob rule. So people who have positions that are intuitively reasonable but economically ignorant don't get to cause a great depression.

[Jim Sagle]

6. Real economists, unlike the cash and carry phonies who advised w and Obama, know TARP was robbery.

The Cost of the TARP: One More Time

Sunday, 03 October 2010 15:07

Since some folks are determined to spread nonsense about the TARP, I suppose it's necessary for those of us not on Wall Street's payroll to keep trotting out the truth. The basic points of the TARP backers are:

1) it didn't cost us anything;

2) it was necessary; and

3) Dodd-Frank ensures that it will never happen again.

Claim 1 is just absolute nonsense. We gave the banks trillions of dollars worth of loans and loan guarantees through the TARP, the Fed and the FDIC at way below market rates at the time. It is true that most of this money was paid back, so the government got back what it lent, but that does not mean there was no cost to the taxpayer.

<snip>

Claim 2 implies that the economy would have collapsed absent the TARP. It assumes an absurd counter-factual: that the government and the Fed would have allowed the banks to collapse and then done nothing in response to boost the economy. Of course that would have been a catastrophe, but it is simply a lie to claim that our options were either doing TARP or never doing anything.

<snip>

Claim 3 ignores the fact that we have bigger too-big-to-fail banks than we did before the crisis. Most of the largest banks are larger today than they were before the crisis because we allowed a series of major mergers (e.g. J.P. Morgan Chase with Bear Stearns and Bank of America with Merrill Lynch) as a result of the crisis. It is very unlikely that the future regulators will be any more willing to tolerate the collapse of these giants than was the 2008 crew.

Much more is available at the link. And please don't make yourself look foolish by trying to impugn Dean Baker's credentials as an economist.