Second-guessing the Bailout

Would the global economy have entered an annihilating black hole had the U.S. government - meaning taxpayers - failed to prop up the financial system in the fall of 2008? We can't say.

We can't say based on the principle that it's impossible to prove a negative, though that doesn't stop some people.

But we do remember the big black newspaper headlines in September and October 2008. A sample from just a few days: "U.S. Gives Banks Urgent Warning to Solve Crisis," Sept. 12, 2008, The New York Times; "Dow sheds 504 in biggest point plunge since 9/11," Sept. 16, 2008, Arkansas Democrat-Gazette; "Markets Drop Around the World on Turmoil, Fears About Growth," Sept. 17, 2008, the Wall Street Journal.

It was so bad that the then-warring presidential candidates, Sens. John McCain and Barack Obama, both left the campaign trail and hied themselves to Washington to vote for the wildly unpopular financial bailout plan.

The bailout remains wildly unpopular, with now-President Obama recently comparing that lack of popularity to a "root canal." Those seeking to unseat Arkansas Sen. Blanche Lincoln are using the vote on the Troubled Asset Relief Program, just one aspect of the government's intervention on behalf of the financial system, as a political bludgeon.

Lt. Gov. Bill Halter, working to wrest the Democratic nomination from Lincoln, has assailed her for voting for TARP. State Sen. Gilbert Baker, one of those dueling Rep. John Boozman for the GOP nod in the Senate race, also has criticized Boozman for his vote for the bailout. Both Lincoln and Boozman stand by their votes. "If we had not started on that road, we probably would have seen a much more devastating crisis," Lincoln said. Boozman called it "the right thing to do based on the circumstances."

So what if the bailout has actually been successful?

The WSJ, not exactly a bastion of left-wing thought, last week published an article stating that the cost of the government rescue appears to be less than expected: "As momentum grows at companies that looked like zombies just a few months ago to repay taxpayers for lifelines they got during the financial crisis, the projected cost of the bailout is shrinking to just a fraction of previous estimates."