Posted in Rants on April 27th, 2010 by Ed

Many years ago a famous political scientist named William Riker (who I bet never tired of Star Trek related jokes) coined the term "heresthetics" to describe the process of "structuring the world so you can win." The best example in recent years is the successful efforts to brand third trimester abortions "partial birth" abortions by the National Right to Life Committee in the mid-nineties. Nobody is going to support something called a partial birth abortion. So the efforts by the NRLC and Chuck Canady to saturate the media and political spheres with the term – one that was simply made up by an NRLC lawyer – structured the debate so that they could easily win it, hence the Partial-Birth Abortion Ban Act. They succeeded in defining the debate, and consequently the issue was debated when, where, and how the NRLC wanted. Well played.

To see an even clearer example we need look no farther than today's headlines. Frank Luntz's talking points have so totally defined the debate over financial reform that there is no plausible way to reach any outcome that is less than a smashing victory for our Too Big to Fail banking institutions.

Everyone – and I mean everyone, from Krugman to to Ambinder to Obama to the average liberal on the street – is conducting this debate according to the terms set by the Senate GOP and their masters. Just look at the primary point of contention with the proposed reform bill, the $50 billion "cleanup" fund for the next time our lending institutions walk up to the button labeled "DO NOT PRESS" and press the living hell out of it. Republicans have followed Luntz's advice to call this a "bailout" in what Krugman has not-so-implausibly called "possibly the most dishonest argument" in the history of politics. Democrats have responded by pointing out that the $50 billion is posted by the banks themselves, a security deposit against their own potentially damaging behavior in the future.

They are correct, of course, but also missing the point entirely. As we are completely distracted by this debate – the primary point of contention between Senate Democrats and Republicans – we are conveniently ignoring the question of real importance: What in the hell good is $50 billion going to do when this system collapses again, which the absence of meaningful derivative reform in the legislation essentially guarantees will happen? The financial industry does not want anyone to discuss this, so they have structured the debate in a way that distracts us with an irrelevant symbolic issue. And it worked.

Estimates of the total cost of the interventions into the financial industry range from hundreds of billions to $12 trillion dollars. The much-debated Cleanup Fund is like change in the couch cushions compared to numbers like that. But here we are nonetheless, debating what Wall Street would prefer we debate rather than creating a system that might, you know, stop this from happening. Mike summarizes the reform proposals quite well: "The realization, and I’ve reflected on this a lot, is that we are rebuilding the 2007 financial sector with some additional legal powers for regulators to exercise in the middle-of-the-next financial crisis." On some levels I think he means this as a good thing. I see it as both terribly depressing and indicative of how completely our economic betters won this debate before it even started.

This is a reform bill without any meaningful reforms, and history has shown that window dressing is considerably worse than doing nothing at all. It creates a thin veneer of "reform" and "regulation" over the financial system when in reality it does little beyond making us slightly better prepared for the inevitable repeat of this entire process. And when that happens, Wall Street and its allies will have the "We failed because of excessive regulation!" argument ready to serve. They haven't merely structured the world so that they can win the current debate; they're also laying the groundwork for winning the next one as well. A neutered reform-in-name-only bill will leave them well situated to do exactly that.