Because Ron Paul is an acolyte of Ayn Rand's pure and simple-minded economic libertarianism, he cannot conceive of a government intervention in the market that would help the aggregate economy. He has a touching faith that the free market will always provide the best of all possible economies.
It's bunk, and the current crisis proves it. The market, freed from rules restraining the leverage of capital and keeping risk visible, inevitably corrects itself with a nasty recession. Paul won't admit it, but he is willing to countenance a depression in order to save his worldview.
Paul is right about one thing: Real estate has been overpriced, and the resulting bubble is the proximate cause of our current financial situation. What he doesn't seem to understand is that, just as easy credit causes markets to overshoot, lack of credit kills markets and businesses that would otherwise be solvent and very useful to sustained economic activity.
The bad thing about a bailout is that it does not punish the guilty, those who have caused the bubble. The good thing about a bailout - one that works, anyway - is that it prevents nasty damage to the economy that all of us rely on to make our lives.
The brief history of this bailout:
- Paulson proposes a typical Republican approach: Give money to the market with no strings attached and have faith the market will take care of us.
- Congressional leaders add some elements of a typical Democratic approach, though pretty centrist at that: Spend the money instead of giving it away. Get equity, limit deductibility of executive pay (which John McCain supports for the first time in his life for faux populist political reasons), provide fig leaf oversight of the power-mad Bushists.
- Republicans in the House promise to deliver a majority of their caucus, but they fail, duplicitously or otherwise.
- Democrats in the Senate offer tax cut and tax credit sweeteners to the Republicans. Once again, the Dems choose to lose to hardball Republican tactics. You might call them responsible enablers. If they had picked other items, you might be right, but the new provisions do hardly anything to actually address the credit problem. Thus the new bill is worse than the old one - more expensive with no more effectiveness.
Update: More good sense from Paul Krugman.
Update: My CNN comment threads stay open long after CNN closes theirs.