See if any of this sounds familiar:
"What was there to hamper the furious onward march of business? Not the government, whose regulatory officials and commissions seemed to be napping...What was destined to halt the forward progress of business was the fact that (Wall Street) had become bemused with paper values - with the piling up of speculative or artificially generated wealth which had little relation to the production of goods...The irresponsible actions of men who did not stop to think they were constructing a caricature of the capitalist system were paving the way for disaster...Who could have halted the disaster? (The Republican regime) was apparently too wedded to the idea that government must keep its hands of business."
So wrote historian Frederick Lewis Allen, looking back at the root causes of the 1929 Wall Street crash. What followed, of course, was a marked shift in the political winds. Four years later, the voters gave Franklin D. Roosevelt a mandate (however ill-defined) to do something about the economy. As Allen would later write, laissez-faire capitalism was out and federal oversight of the markets was in - thereby eradicating the old order "in which everybody's economic fortunes were determined by the action of buyers and sellers in the open market, with the government standing aside."
We appear to have reached a similar juncture today. The modern conservative movement - founded on a philosophical hostility to government - has largely exhausted itself, thanks to the excesses of those cowboys who were allowed to roam free, constructing a caricature of the capitalist system. A new chapter in our national saga is at hand. Many Americans, including swing voters, are not necessarily fans of strengthened government intervention (indeed, as we well know, the government screws up a lot), but, as in 1933, Americans look to government in times of serious crisis.
This is one of those times - and most polls suggest that this sentiment is buoying Barack Obama's prospects. For instance, it's particularly noteworthy that, in the latest Quinnipiac survey of battleground states (released this morning), Obama is now leading John McCain by eight points in the state of Florida. I repeat, Florida. Florida is McCain's make-or-break state. The key statistic concerns the economy. When asked to choose the candidate who could best handle our economic woes, Floridians favored Obama by 14 percentage points; independents favored Obama by 17 points.
There are durable stereotypes in American politics. Maybe, in a normal year, the "liberal" tag would be hurting Obama, as it tends to hurt most Democratic presidential candidates. Same goes for the "soft-on-terrorists" tag (formerly, the "soft-on-communism" tag). But not this time; indeed, Obama's Florida numbers actually got better after the first presidential debate, despite the fact that McCain tagged him as the most liberal senator. The problem for McCain right now is his party label. When the economy is seriously distressed, voters tend to favor government action, and they view the Democrats as the party of government. That perception was formed during the Hoover-FDR years, and it has persisted ever since. Voters generally don't trust the Republicans to govern wisely during an economic crisis; indeed, McCain is also burdened by the record of the Bush administration, which has demonstrated that this generation of Republicans can't even govern competently.
Republicans are stereotypically viewed as the free-market party, and when the markets go seriously awry, Republicans generally suffer. Voters perceive this even without knowing all the supporting evidence, including: GOP activist Grover Norquist's ambition to shrink government and "drown it in the bathtub"; the Reagan administration's decision to relax provisions of the Depression-era federal oversight law that was designed to regulate the big financial firms; the 1999 GOP-sponsored legislation (supported by McCain) that removed the last shackles of that federal oversight, thereby allowing the financial industry's Ponzi schemers to run wild.
And on Monday of this week, we had the House Republican conservatives, behaving like those Japanese soldiers who stayed in the bush to fight another day, refusing to believe that their war was already lost. Granted, the bailout bill had flaws, and the predictably inept Bush administration sold it badly. But two-thirds of the House GOP members voted no primarily in fealty to their outmoded principles, the belief that the government should leave the markets alone. The same principles that got us into trouble were apparently deemed ideal for getting us out.
Ideological rigidity works in tandem with willful amnesia. They seemed incapable of remembering what happened nearly two decades ago, when the savings & loan banking industry collapsed (as a result, naturally, of a deregulation climate). In response, the federal government stepped in, established an agency called the Resolution Trust Corporation, and cleaned up the mess at a taxpayer cost (in today's dollars) of $200 billion. We essentially socialized those bank losses, and we survived.
David Brooks, the New York Times columnist and troubled conservative, said it best yesterday about the House conservatives: "It has been interesting to watch them on their single-minded mission to destroy the Republican party...With this vote, they've taken responsibility for this economy, and they will be held accountable. The short-term blows will fall on John McCain, the long-term stress on the existence of the GOP as we know it...What's sad is that they still think it's 1984. They still think the biggest threat comes from socialism and Walter Mondale liberalism. They seem not to have noticed how global capital flows have transformed our political economy" - and that this new reality requires "the steady and powerful hand of some public institutions."
Some kind of rescue plan is still likely to pass. And regarding the potential long-term political fallout, conservative commentator Ross Douthat writes: "This is still George W. Bush's economy. Republicans who think the public will blame the Democrats, and specifically a President Obama, if the bailout is massively unpopular come 2010 or 2012 are almost certainly kidding themselves. Whether it succeeds or fails, the bailout seems likely to be remembered as the last great fiasco of the Bush Era, not the first big-government fiasco of a new liberal moment, and there's very little the Republicans can do to change this."
The last great fiasco of the Bush era...with similarities to the fiascos of the Hoover era. The national zeitgeist is shifting, and if Obama wins this election, conservatives will be forced to seriously reexamine their precepts. It will no longer be enough to declare hostility to government, or to assume that cutting taxes is a sufficient government action.