The Bailout

| Wed Sep. 24, 2008 11:48 AM EDT

THE BAILOUT....Matt Yglesias looks at the past year of economic upheaval and says:

This is why the right response to a Bush/Paulson decision that we have to "do something" would probably be to take their specific proposal, light it on fire, and then call up some people who hadn't spent the past 12 months ignoring festering problems and ask them to help you write a proposal.

This is unfair. Bernanke and Paulson have, in fact, taken tons of action over the past year. They've injected massive amounts of liquidity into the market through multiple term lending facilities, slashed the discount rate, opened up the discount window to all comers, passed a big stimulus package, and have become willing to accept everything from double-wides on up as collateral for loans. None of it worked. But even at that, they're still having trouble getting everyone on board for a systemic bailout bill. Does anyone seriously think they could have proposed something like this a year ago and gotten anything but guffaws from Congress?

On the other hand, my left-wing populist instincts are just fine with this:

If anything should be done, the case seems clear for wildly higher tax rates on high-income individuals than prevailed during the Clinton years. Are we afraid of stifling the kind of fat cat activity that's brought us to our current situation?

OK, I don't know about "wildly." But we could use a few more brackets with higher marginal rates for very high earners. The negative effect on the economy, contra modern supply side goofballism, would be about zero.