The debates rage on in Washington and Raleigh about how to respond to the greatest economic crisis since the great Depression. In Washington, most of the talk now is about bailouts for banks, investment firms, and the automotive industry to preserve thousands of jobs and steady the stock market by reassuring investors that more large companies won't collapse.
In Raleigh, the challenge is how to address a projected state budget shortfall that could reach $3 billion when lawmakers begin to write the spending plan for the next two years. That's almost 15 percent of the state's operating budget, yet ideologues on the Right are already drawing lines in sand about taxes, saying legislators should slash state programs and services to address the shortfall.
The debates are connected. North Carolina is one of 41 states facing budget problems, many made much worse by the sputtering national economy. The National Governors Association is asking Congress to help and North Carolina Governor-elect Beverly Perdue has written members of the state's congressional delegation asking them to support a stimulus package.
The debates are similar in another way too, boiling down to two distinctive sides, one unyieldingly promoting a free market ideology that only exists in textbooks and think tank essays, and the other offering a more measured approach, recognizing that government must play a role in preventing economic disaster and understanding that people's lives are more important than adherence to any rigid doctrine.
In North Carolina, the market ideologists refuse to consider raising taxes to balance the budget, no matter how much suffering the budget cuts create. The same people want Washington to do nothing and let banks and car companies fail and millions more people lose their homes to foreclosure.
The market will eventually correct itself, they reassure us, with little regard for the lives ruined waiting for the correction. The other side is more diverse, some opposing the financial bailout because of the way it was structured and because financial executives benefitted while struggling homeowners received no help.
Author Kevin Phillips is in that camp because be believes the banks have too much freedom in how to use the money-or to not even use it at all.
Phillips said in an interview with Bill Moyers recently, "Because what they want to do with the money and seemingly it's okay by a lot of the people involved is use it for bonuses, for dividends, for sitting around so they feel comfortable, for mergers. It's mind boggling. They created a panic psychology, which has taken a lot of people's 401(k)'s and savings accounts and pension opportunities and pointed them right toward the toilet. And now they got their bailout, scaring everybody to death, and what do they want to do with it? Nothing."
Some people on that more reasonable side in Washington support rescuing General Motors to save jobs, but only if there are specific strings of strict accountability attached. President-elect Barack Obama falls into that category. So do many economists pushing for more federal investment in public works to create jobs and stimulate the economy.
People on that side also support more regulation of the financial industry to prevent the excesses that contributed to the current economic meltdown. And not just progressives think that's important. Less doctrinaire conservatives do too, as Bill Kristol put it in two key paragraphs of his Monday column in the New York Times.
"But I suspect that free-marketers need to be less doctrinaire and less simple-mindedly utility-maximizing, and that they should depend less on abstract econometric models. … And I don't see why conservatives ought to defend a system that permits securitizing mortgages (or car loans) in a way that seems to make the lenders almost unaccountable for the risk while spreading it, toxically, everywhere else."
"I don't see why a commitment to free markets requires permitting banks or bank-like institutions to leverage their assets at 30 to 1. There's nothing conservative about letting free markets degenerate into something close to Karl Marx's vision of an atomizing, irresponsible and self-devouring capitalism."
Kristol and Phillips often disagree about the role of government but they both know that the market cannot solve this crisis alone. Their counterparts in North Carolina know that the budget cannot be balanced entirely by slashing budgets without devastating the fundamental institutions of the state and the people they serve.
That's what the debate comes down to in Raleigh and Washington, blind devotion to an unrealistic and unattainable perfectly free market or a thoughtful hybrid of market forces with government oversight. That's the decision before state and federal lawmakers, to decide which is more important, serving an ideology or helping people.