Congress and the administration have worked to avert a national financial meltdown with an unprecedented rescue plan priced at hundreds of billions of dollars. We review questions that inquiring minds are asking:
Why did a Republican administration propose such an enormous government intrusion into the economy? Isn't this anti-free market?
Pignanelli: "When someone says that the free market isn't working, what he means is that he doesn't like the way the free market is working." Nicolas Martin. Yes, everyone is an advocate of the free market when times are good. But when the cyclical downturn appears (as always happens in a free market dynamic, to correct inefficiencies), there is an overwhelming desire to blame someone. The bailout is only needed because Wall Street refuses to maintain confidence in our free market economy. Political leaders like President Bush and Congress lack the credibility to soothe anxious investors. With a national election a month away, and 401(k) balances evaporating, emotions demand big expensive solutions. Economic ideology is secondary to political reality even for Republicans. (The good news: I can always respond with the "Bush bailout" when LaVarr gets too preachy.)
Webb: No one should blame the free market for this mess. The reality is that the financial system has never been a totally free market. We don't live in anarchy, devoid of government. We live in a representative democracy where, ideally, limited government would play a limited role as referee and regulator in financial affairs. Because of mistakes made in both the public and private sectors, this enormous crisis demands that government step in to stabilize the financial system by purchasing assets of real value, at very low prices, that can be sold later (possibly at a profit) when the system and economy are more steady. It clearly is government intervention of unprecedented magnitude, but only the federal government has the wherewithal to make such a large investment. Conservatives need to grit their teeth and accept this solution as the best of all the bad choices.
Are Republicans or Democrats to blame for this crisis, and will it impact the presidential race?
Pignanelli: I remain amazed how our federal politicians shamelessly ignore and then manipulate reality. Congressional leaders of both parties pushed the various private and quasi-governmental entities to expand opportunities for Americans to become homeowners (or owners of many homes) through easy credit. Remember, helping Americans with their first home is a good and popular policy. Indeed, politicians took credit for the unparalleled homeowner boom, and those who wanted to tighten credit were slapped hard. It's disingenuous for national politicos to forget this history when screaming at Wall Street. Barack Obama will benefit because he is an outsider with limited involvement (especially in comparison to John McCain).
Webb: Blame is deserved all around, including both political parties, Congress and regulators, the highly leveraged Wall Street firms paying incredible salaries and bonuses, Fannie Mae and Freddie Mac, and also consumers racking up mortgage debt and arrangements they couldn't afford. The blame game will, of course, be ferocious, with parties and candidates maneuvering for political gain. On balance, the mess favors Obama in the presidential race, only because he is more adept at distancing himself. He, like McCain, has advisers and took plenty of campaign cash from firms and individuals associated with the mess, but he will likely handle it more adroitly.
Will there be any impact on the Utah economy and political races resulting from the unprecedented federal action?
Pignanelli: Absolutely. Utah is now the eighth largest center of financial services in the country. (Conflict note: I represent the industrial banks and other national and state financial service organizations.) Actions by federal regulators and the bailout will change in the calculation of banks whether to remain or expand operations in Utah. While employing thousands and fostering community investment, state leaders are crossing their fingers the losses will be minimal. Also, younger families will not have cheap and easy mortgages. The bailout is fostering nasty partisan bickering in Washington and needless arguing in the media. Voters, disgusted with the whole mess, may stay home in droves. This will impact tight legislative races.Webb: Utah does not exist in a vacuum, and our economy is being hit along with the rest of the country. But Utah is still growing, our economy is well-diversified with underlying strength, and I'm betting the downturn here will be smaller and shorter than in most parts of the nation. Hopefully, the federal rescue will stabilize the financial markets, providing confidence to consumers and small-business people. Confidence going forward is needed more than anything else. A big impact on local political races is unlikely. Most voters won't blame one party over another, although general disgust could provoke a "throw all the bums out" mentality. But only a few legislative races are close enough for that to make a difference.
Republican LaVarr Webb is a political consultant and lobbyist. Previously he was policy deputy to Gov. Mike Leavitt and a Deseret News managing editor. E-mail: [email protected]. Democrat Frank Pignanelli is Salt Lake attorney, lobbyist and political adviser. Pignanelli served 10 years in the Utah House of Representatives, six years as minority leader. His spouse, D'Arcy Dixon Pignanelli, is a state tax commissioner. E-mail: [email protected].