I must leave to the experts the question of whether the Obama toxic asset plan makes economic sense: Brad DeLong is sympathetic and Paul Krugman is scathing. But is it true that, politically speaking, the rescue package is Obama's Katrina? That is a question I can try to answer.
Here's one answer: History may remember Obama's caution and unwillingness to punish those who got us into this mess as his finest hour. As we work our way through this crisis, one question is paramount: What is the best way to get money as quickly as possible into the hands of those who need it most? The interests of many need to be consider, but the interests of those who are losing their jobs, their live savings, and, in some cases, their lives themselves must be considered first. Justice demands nothing less. And so does economic recovery, which depends on the ability of struggling ordinary people to afford housing and medical care, let alone consumer goods and cars.
If punishing those guilty for sending the economy into its tailspin would help those victimized by their recklessness, the Obama plan would be the right way to go. But it is a fact of capitalist life that the rich and privileged can effectively blackmail everyone else to get what they want. This is one of those times when we have little choice but to give into their blackmail. Not doing so is a luxury the worst off among us cannot afford.
Yes, it is galling to see people not held accountable for greedy, if not criminal, actions. Their actions were inexcusable, and if there is a world beyond this one, one hopes they are punished for their deeds. But in this case, statesmanship requires gritting one's teeth and doing what has to be done.
While many are attacking Obama for lacking the guts to take on Wall Street more firmly, it also takes guts to resist calls for populism and class warfare. The former will always be a place where the right is more comfortable than the left. Obama is right to try to channel populism rather than succumb to it. Open that floodgate, and before long, the cries to stop immigration or return to the good of days of small town life will be irresistible.
But it also takes a certain amount of courage to resist the left's call for class warfare--the real kind, as Felix Salmon puts it. This may indeed be one of those rare times in American history where it becomes possible to mobilize ordinary people against the elites. But any temptation to do so must take into account two things. One is that before long, politics will return to normal. The other is that the best way to make long-term gains in social policy, as the example of social security demonstrates time and again, is through programs that appeal universally.
Obama's handling of the current situation reminds me of the time during the campaign when he refused to join Hilary Clinton's and John McCain's call for a gas tax holiday. Hurricane Katrina, a natural disaster, required immediate action and George W. Bush will always be faulted for his dithering. The economic crisis, a man-made catastrophe, requires getting the response right, which is why history may be grateful to Obama for his deliberateness.