So what happens now? Douthat:
The worst case: You know what.
The most likely scenario, as of 3 PM this afternoon: The stock market continues to drop. Some version of the bailout passes in the next week. The American economy staggers into a recession, but passes through the storm without 1930s-style suffering; the Republican Party is not so fortunate. Even though most Americans claim to oppose the bailout [update: not anymore], the House GOP’s obstructionism is widely viewed as having worsened the economic situation; the fact that these are contradictory positions does not faze an electorate that wraps all of the country’s current troubles up, ties them with a bow, and lays them at the feet of the Bush-led GOP. John McCain loses by a landslide in November. The Democratic Party regains years or even decades worth of ground among the white working class, consolidates the Hispanic vote, and locks up a large chunk of highly-educated voters who might otherwise lean conservative. The much-discussed liberal realignment happens. And a politician running on a Ron Paul-style economic platform does very, very well in the GOP primaries of 2012.
1. It’s highly likely that some sort of bill will pass the Congress. What kind of bill, I don’t know. But the Dow is liable to act as something of a thermostat. The lower the Dow goes, affecting people’s 401Ks, the more banks that fail, the less unpopular the bailout becomes, and the more of those swing district congressmen will flip over to support the package.
2. Now, if the Dow is rational, it ought to recognize all of this. What were the chances as of this morning that the 110th Congress was going to pass some sort of bailout bill before it adjourned? 90 percent, I’m guessing? What are the chances now? Higher than you’d think because of the thermostat effect I described above — perhaps 75 percent. So if a 15 percent reduction in the probability of the bailout passing was worth 600 points on the Dow (and granted, that 15 percent number is plucked out of thin air), what would a complete failure to pass the bailout translate into? A 4000 point loss?
3. Yes, the Democrats absolutely have the Republicans by the short and curlies. An LA Times/Bloomberg poll released last week revealed that 32 percent of persons blame Wall Street for the financial crisis — generally conceived of as a Republican institution — and 26 percent blame the Bush Administration. Just 11 percent blame Congress. The worse the economy gets, the more of a hole the Republicans have to dig themselves out of.
4. Having said all of the above, the schadenfreude of certain liberals on this issue is absolutely obnoxious. A lot of people are going to be hurt by this, and not just those in the investor class. I tend to see this more as a failure of our democracy than a reaffirmation of it. The congressmen who are retiring this year — and who therefore can perhaps be described as the most neutral arbiters of the public good — voted overwhelmingly for this measure.
Also, the House’s website is down. Hmph.