It’s a little bit difficult to know exactly how to phrase a post about the AIG suggesting that people need a bit more perspective about this that doesn’t come across as mere apologetics for the AIGsters and for screwups at the Fed, at Treasury, and at the White House. But read what Noam Scheiber has to say about this. Or note Ezra Klein’s observation about quantitative easing:
News of Bernanke’s “money from helicopters” maneuver is below the fold on the Wall Street Journal’s front page (though they do have a good roundup of expert reactions elsewhere on the site). Same goes for The Washington Post. Everyone, however, has continuing, above-the-fold coverage of AIG’s bonuses, which are about one-ten thousandth monetary value of the Fed’s move.
And it’s not just that the money is different in scale. The big macro moves out of the White House, the Fed, and the Treasury Department—the stimulus, the TALF, quantitative easing, the “stress tests”—are all important determinants of whether or not we’ll recover from this recession in a timely manner. Things like the administration’s health care and budget proposals are important determinants of social justice in the United States. The AIG bonuses are largely irrelevant to the recovery issue, and while important as a social justice matter they’re primarily of symbolic social justice importance. It’s good that people are outraged by this—it’s outrageous! And it’s good that in response to the outrage the government is now working to correct the problem. That’s the media-political-outrage cycle at its best. But it’s not healthy to just go ’round and ’round in circles over this issue endlessly. If 18 months from now the economy’s still shrinking and unemployment’s at 15 percent, nobody’s going to feel particularly happy about the fact that we stuck it to some scumbags from AIG back in early ’09.
If there’s something the administration deserves criticism for, it’s the fact that most observers think their public-private partnership for bank recapitalization can’t work. If you want to talk about latter-day conservative populists being hypocrites, talk about their stances on the tax provisions in the budget. That’s the big stuff that’s still in play. On the bonuses, the politicians have heard people’s outrage and now seem determined to avoid future such blow-ups. It’s fine.