spinline.net: The Blog

I attended an ISI lecture today featuring Rep. Thad McCotter of Michigan. The talk was mostly Q&A and the issue on most peoples’ minds, including McCotter’s, was the financial crisis.

(Disclaimer: I didn’t take notes, so I’m working from memory and all this could be a bunch of nonsense. In fact, I might have dreamt everything, I’m not sure, OK?)

There was some interesting inside baseball stuff, like how the Bush administration is triangulating by negotiating directly with a Democratic leadership that’s not at all hostile to the essence of the Paulson bailout plan, while leaving the Republican minority, including those dissenters from the Paulson plan like McCotter, on the outside looking in. Therefore, for the main players–the Bushies and the Democratic leadership–the Paulson plan itself is not really a matter of negotiation; the real question is how many concessions such as provisions on executive pay the administration throws in to get the Dems to come on board.

This makes the Paulson bailout plan sound like a virtual certainty but McCotter refused to call it inevitable. He disagrees with the Paulson plan and prefers the approach of University of Chicago finance professor Luigi Zingales, available here (pdf), a plan which McCotter discussed in some detail. It’s worth reading the whole thing—and it’s pretty short—but here’s a taste:

… Since we do not have time for a Chapter 11 and we do not want to bail out all the creditors, the lesser evil is to do what judges do in contentious and overextended bankruptcy processes: to cram down a restructuring plan on creditors, where part of the debt is forgiven in exchange for some equity or some warrants. …

… The decisions that will be made this weekend matter not just to the prospects of the U.S. economy in the year to come; they will shape the type of capitalism we will live in for the next fifty years. Do we want to live in a system where profits are private, but losses are socialized? Where taxpayer money is used to prop up failed firms? Or do we want to live in a system where people are held responsible for their decisions, where imprudent behavior is penalized and prudent behavior rewarded? …

More interesting to me than the discussion of the financial crisis were McCotter’s comments about broader economic issues. He seems to dissent from the free-trade orthodoxy and spoke of the imprudence of letting our manufaturing base erode away. He criticized the mentality that globalization is an unstoppable, inevitable force and stressed that human beings with the capacity to choose are still in control of the process. He expressed concern about wage stagnation and spoke of the need to restore a balance of trade. He questioned the sustainability of an economy based on ever-expanding credit and ever-increasing consumption. He also managed to get in a couple of references to Russell Kirk and Wilhelm Röpke, both of whom have obviously influenced his thinking—in fact, the theme of the talk was to be on “an agenda for a human global economy” (following on Röpke) but it seems that the original plan got a bit derailed by the financial crisis.

McCotter is an interesting dissenter from the neoliberal-neoconservative consensus on economics and trade, and is worth watching. It’s heartening that someone who displays some originality of thought can have a leadership role in the Republican party—he chairs something called the “Republican House Policy Committee,” whose function is a mystery to me but it sounds kind of important. (Unfortunately, McCotter is distressingly neocon-ish on foreign policy, but you can’t have everything.)

What endeared me most to McCotter was the end of his talk, just before he left, when he notified us that his schedule was forcing him to return to work and, he mumbled laconically, “do terrible things.”‘

UPDATE: McCotter has unveiled his own proposal, the details are here.

This entry was posted on Tuesday, September 23rd, 2008 at 12:22 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.