Daniel W. Drezner

The hazards of policymaking in a fact-poor, pundit-rich world

Political scientists have a ton of explanations for why good policy might be bad politics, and vice versa. There are limits to that perverse correlation, however. A common-sense narrative is that is a policy actually yields concerete and positive results, then it should be perceived in a more favorable light. I mean, that’s pretty straightforward, ...

Political scientists have a ton of explanations for why good policy might be bad politics, and vice versa. There are limits to that perverse correlation, however. A common-sense narrative is that is a policy actually yields concerete and positive results, then it should be perceived in a more favorable light. I mean, that’s pretty straightforward, right? 

Politico’s Ben Smith has an excellent article pointing out one whopper of an exception to this general rule: the Troubled Asset Relief Program, or TARP: 

The Troubled Asset Relief Program is widely viewed as the original sin of the Obama administration — though it was put together under President George W. Bush and succeeded far beyond expectations. It’s widely seen as the tipping point for disgust with elites and insiders of all kinds — though it could also be seen as those insiders’ finest moment, a successful attempt to at least partially fix their own mistakes….

"It’s become demonized on the left and the right by screamers — Glenn Beck and Rachel Maddow — who have no interest in the facts; they’re just interested in hyperbolizing and generating attention," lamented New Hampshire Sen. Judd Gregg, a key player in guiding the measure through the upper chamber and one of the few Republicans willing to talk about TARP in positive terms.

Perhaps it’s not a coincidence that Gregg is retiring from the Senate at the end of the year — or that hardly anyone from either party is joining him in praising TARP….

The consensus of economists and policymakers at the time of the original TARP was that the U.S. government couldn’t afford to experiment with an economic collapse. That view in mainstream economic circles has, if anything, only hardened with the program’s success in recouping the federal spending.

A study this summer by former Fed Vice Chairman Alan Blinder and Moody’s chief economist Mark Zandi was representative of that consensus. They projected that without federal action — TARP and the stimulus — America’s gross domestic product would have fallen more than 7 percent in 2009 and almost 4 percent in 2010, compared with the actual combined decline of about 4 percent.

"It would not be surprising if the underemployment rate approached one-fourth of the labor force," they wrote of their scenario. "With outright deflation in prices and wages in 2009-11, this dark scenario constitutes a 1930s-like depression."

Despite this policy success, public attitudes towards TARP are pretty hostile.  Of course, part of that is due to some ignorance over the content of TARP itself: 

Polls suggest the public has only the haziest view of what TARP was. It’s often conflated — not least by politicians who voted for it and now seek to muddy the waters — with the stimulus, a piece of policy whose supporters and foes have fallen into a much more familiar debate about the role of government and public spending….

Even Nevada GOP Senate nominee Sharron Angle at one point referred to TARP as "the stimulus." And few Americans seem to know that the banks at the center of TARP have paid the money back — with interest.

Pollster Ann Selzer asked voters this summer, "Do you think the Troubled Asset Relief Program, known as TARP, was necessary to prevent the financial industry from failing and drastically hurting the U.S. economy, or was it an unneeded bailout?"

Fifty-eight percent of Americans said TARP was unneeded. Only 28 percent called it "necessary." 

Smith is correct to point out the myriad ways in which TARP has been lumped in with the other bailouts and stimulus programs that got enacted in 2008 and 2009. No doubt the mass public would not necessarily be able to pick, choose and evaluate each individual bailout/stimulus program.

Still, it’s very troubling to see a manifest policy success get almost no love whatsoever from its creators. Over the long run, good policy should translate into good politics. The failure of that to occur in this case could lead to some very perverse policy outcomes after the midterms. 

 Twitter: @dandrezner

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