The current financial crisis is not only a disaster for the economy but it exposes in the starkest terms the collapse of American democracy.
A significant number of legislators in Congress, both Democrats and Republicans, refused to vote for the first version of the $700 billion bailout bill because they got a lot of heat from their constituents. Why bail out the banks and not help the people who are losing or have lost their homes because someone tricked them into buying a balloon mortgage? Why bailout the big banks and investment firms without penalizing them for their terribly bad judgment? We are being told over and over again that many of the bankers and investors who lost billions of dollars bought securities which they did not completely understand. It is quite clear that a large part of responsibility for the current economic situation rests with large banks and their leadership. But Congress is being asked to spend an unbelievably large sum of public money to rescue them without holding them responsible.
The bailout pointedly ignores ordinary citizens. Ordinary citizens are held responsible for their lack of judgment or care in buying their homes. A while ago when the suggestion was made to help homeowners who lost their homes, the President refused to take the suggestion on the grounds that we do not want to encourage people to be irresponsible. The lesson is clear: if you are irresponsible in a small way, stand in the corner and be ashamed of yourself and then go live in your car. But if you are irresponsible to the tune of many many billions of dollars, the government will help you out.
Congress is about to pass a bailout bill. It does not contain significant help for homeowners. It does not contain serious punishment for irresponsible investors.
Add to all of this the fact that those $700 billion come out of taxpayer's pocket because that's the only place government gets money. Since the government already is in debt over its ears, it will simply have to borrow more money and our children and grandchildren will have to pay back, to make up for the bad judgments and irresponsibility of the likes of Merrill Lynch and Lehman Brothers.
But then you say: wait a minute. Is this not supposed to be government of the people, for the people, and by the people? Is that not what they taught us in school? Did they not tell us that we control the government through the mechanism of electing representatives who either fulfill our wishes or will be punished by not being reelected?
But if these representatives represent us, the people, how can they take our money and give it to the people who already have more than they possibly need over many lifetimes?
In this way this financial crisis is also a deep crisis for democracy because it shows that ours is not a people's government.
On Wednesday, October 1, 2008 the Boston Globe ran this paragraph:
"A nonpartisan watchdog group calculated that U.S. Congress members who voted yes [to the proposed bailout plan] received 51% more in campaign contributions from the finance, insurance, and real estate sector in their congressional careers than those who opposed the emergency legislation."
The big banks insurance companies and real estate interests have bought a lot of representatives. Their money counts for whole lot more with these representatives than the votes from their electorate. These Representatives voted to bailout their benefactors. Congressional representatives less generously gifted by a banking and insurance and real estate listened to their voters more closely and voted against the bill.
Obviuously, this is a grand generalization. Not every Representative who voted to support the bailout is bought off by large financial institutions. Not every Representative who opposed the bailout did so from regard of ordinary ctizens. But the numbers cited convey a grim message: taking Congress as a whole, the votes go where the money comes from. Orinary citizens count for very little.
This crisis not only shows how fragile our economy is. It also shows that our democracy is in terrible trouble.
Can we still bail it out?