Yet More On DeLong/Krugman

I will say that where I am in agreement with the optimists is on DeLong’s point 2 here — the politics. I don’t think a quickly exhaustible store of “political capital” is the appropriate metaphor here; the financial crisis is not like health care, not least because it’s in the interests of many powerful social and political actors to have the financial crisis solved. If anything, nationalization will be more viable if the Geithner plan fails. (And if Brad is worried that he’s disagreeing with Krugman, what ’till he hears that we’re agreeing with Mickey Kaus. Obviously, I’m missing something.)

The problem is that the political question is less important than the substantive question; even if the better option isn’t foreclosed, it’s still not desirable to do the worse option first unless it’s necessary. So the question then becomes whether or not a Swedish-style nationalization is politically viable right now, and I don’t know the answer to that question. If it isn’t, Geithner may be the worst option except for all the rest, but if it is and Obama just doesn’t want to go to the mat, I still think Krugman is right that it’s a serious mistake.