I think this talk from Brad DeLong (download the video here) does a very good job of laying out a “from 30,000 feet up” view of the case for the Obama administration’s response to the Crisis of 2008. It floats above the specific details of program design and implementation and makes the case that faced with the scale and nature of the economic crisis, the Obama administration’s response is broadly correct.
Brad attributes the flaws and shortcomings of the direct interventions into the financial system largely to political constraints. And I’ve come to accept that this is correct.
That said, one lacuna in Brad’s story is why are the political constraints so tight. He focuses on ideological and narrowly partisan reasons for congressional hostility to the sort of outlays that could make a bolder cleanup of banking possible. But for my money, when you’re thinking about congressional politics you should first and foremost be thinking about interest group politics. And this is where things get interesting. After all, the executives of America’s non-financial firms ought to have a strong interest in seeing the banking issues dealt with as expeditiously and effectively as possible.
So where are the CEOs of Federal Express and ExxonMobil and UnitedHealth and all the rest? Well, it seems they’re more interested in making common cause with the administration’s congressional opponents in order to defeat the Employee Free Choice Act, to kill the “public plan” component of health care reform, to block efforts to address the climate crisis, and to ensure that income taxes on rich individuals are as low as possible than they are in uniting with the administration to get congress to hand over the authority needed to bring back economic growth.