Overshooting the Mark Still Misses the Target

Krugman’s cental point today re. the AIG / Wall St. bailout is crucial, and after I quote his salient paragraphs, I’ll explain what I think he means, beyond the econo-speak.

For the economy is still in deep trouble and needs much more government help. Unemployment is in double-digits; we desperately need more government spending on job creation. Banks are still weak, and credit is still tight; we desperately need more government aid to the financial sector. But try to talk to an ordinary voter about this, and the response you’re likely to get is: “No way. All they’ll do is hand out more money to Wall Street.”

So here’s the real tragedy of the botched bailout: Government officials, perhaps influenced by spending too much time with bankers, forgot that if you want to govern effectively you have retain the trust of the people. And by treating the financial industry — which got us into this mess in the first place — with kid gloves, they have squandered that trust.

Here, in a sentence, is the principle Krugman reminds us of today: to overshoot the mark is still to miss the target.

No one reasonably informed about what happened last year would say that AIG or any of the other mega-institutions of Wall St. should have been allowed to fail. The problem was in the excessive and misdirected measure of the bailouts, not to mention the fact that we’re still waiting to see if it might occur to anyone in government that it may be time to break up several of these monsters into functional but far less threatening pieces.

In other words, the help given was delivered with the same carelessness as caused the problem that necessitated the bailout in the first place. And remember, most of this was done by Bush admin officials and appointees, most notably Hank Paulson.

To adapt another and somewhat coarser popular metaphor: Stuff ten pounds of shit into a five pound bag riddled with holes, and you wind up with a mess on the ground and a bag with as many if not more holes in it as before. In short, nothing is corrected.

Once again: I don’t want AIG to fail. I want to see AIG’s bag properly repaired and made relatively hole-free. And seeing five one-pound bags where AIG’s offensively large sack once sat would be a vast improvment.

But I am also one of the millions on the ground under that bag, and I’m tired of seeing a disaster of excess being treated repeatedly with…excess. Moderation — not excess, not sacrifice, but moderation — must become the keystone of all our policy and public discourse now. If we can truly integrate this message into our public and private thought and action, from the White House down to town hall and from the executive boardroom to the office water cooler, then we will be turning a corner into a more well-lit path of progress than we have known for a long time.