The Next Bailout?

It's possible that President Obama will soon face the toughest economic question since his original stimulus decision: join a global bailout of the European periphery countries or not?

In 2008, President Bush moved to rescue US banks deemed too big to fail. The really scary possibility in a European banking crisis is that the hardest-pressed European banks may be too big to save by the European Union acting alone. American and Japanese help may be needed. There may have to be a role for China too.

Back in 2008, however, President Bush could mobilize crucial support from congressional Democrats who recognized a shared responsibility to prevent a second great depression. If a Euro rescue package must be assembled, will President Obama have any hope of gaining any Republican buy-in? The answer seems grimly negative.

We are living through the most dangerous sequence of economic crises since the 1930s. This time, at least, we have the benefit of experience. We should be able to avoid or mitigate the worst-and indeed to some extent, we have done so. And yet in the process, partisan passions have accumulated in the system to a point where even the most obviously necessary actions (raising the debt ceiling) almost overwhelm congressional decision-making.

What happens when the next decision is actually tough on the merits, as a Euro bailout would be? It's worrying. It's way beyond worrying-it's terrifying.