A Shortcoming of Democracy

It’s politically and socially suicidal in this country to oppose fundamental aspects of representative democracy. Fearing charges of Platonic elitism, in making the following point today in a discussion in class I was compelled to preface it with “I’m not anti-American, but...” But, simply, when the personal interests of policy-makers are misaligned with the best interests of the country the results may be calamitous. Such appears to have been the result today when the House of Representatives rejected the proposed “bailout” bill.

The astounding $700 billion figure has been seared into the minds of the populace for about at least a week now. Yet, despite managing to muster strong opposition the legislation, it’s clear that the majority of the citizenry and the media do not even know (or do not care) how the money was to be used, what its ultimate costs would be, whom it was intended to benefit, how it would do so, or whom the culprits of the financial problem are.

First, it seems as though most Americans believe Treasury Secretary Henry Paulson ‘68 has proposed merely cutting a $700 billion check to affected banks, but the gesture would not have been the purely eleemosynary gesture to America’s wealthiest (“greediest”) individuals as opponents have portrayed it. It was to allow for the purchase of assets of some presently uncertain value. The ultimate cost of the plan would, only in the worst case scenario, have been $700 billion. That would only have been the final tab if every borrower linked to the assets were to default on his debt repayment. The bailout would have amounted to a long-term financial investment for the government, and, by-extension, the citizenry with the possibility of rendering a profit.

Most importantly, though, those who stand to be affected by either action or inaction are not merely the executives of an assortment of American banks, but virtually the entire population. In the short-run the Treasury’s purchases would have benefited those with employment and investment interests in the health of the financial sector; that is, virtually all individuals and businesses. For the mechanics of why the plan as proposed by Paulson was sound and plausible, see this recent report in The Economist. Sadly, this afternoon, the House of Representatives, no doubt conscious of the election a month away, rejected the proposed bill.

I’d rather not jump into the debate of culpability; but it’s worth noting that the average American (“Main Street”!!) is not free from the fault and pejorative “greed” that has been slung on banks lately. The questionable transactions were voluntarily undertaken by both parties. Charles Krauthammer nicely apportions the culpability .

Nobody questions the logic of the American judicial system’s requirement that in deciding the “truth” in technical subjects typically beyond the capacity of the average juror or judge, credible expert testimony must have been presented to the court. It’s a shame that the legislative system cannot operate similarly. Instead it has allowed the lay voter to decide the fate of perhaps the most significant piece of legislation before Congress in a generation without requiring that voters (or Congress, for that matter) have even a shred of understanding of the involved technicalities.

What was so special about democracy again?