Why the Blogosphere has Turned on Paulson

What has happened to the vibrant heterogeneity of views and voices in the blogosphere? Among finance and economics blogs, I can’t think of a single one which thought that the short-selling ban was a good idea, and I also can’t think of a single one which has any enthusiasm whatsoever for the Paulson bailout plan. Jack has a good roundup of the incredibly wide range of voices which are highly skeptical of what’s going on here.

I don’t quite know what to make of this, but I do think that the two are connected.

The Paulson bailout plan basically comprises the Treasury secretary saying "trust me, I’ve determined that this is, sadly, necessary". But the fact that Paulson signed off on the short-selling ban is prima facie evidence that he’s not worthy of that trust.

It’s conceivable that both schemes are necessary ideas. But the US government has done an atrociously bad job at even trying to explain why they’re necessary. As Paul Kedrosky said on our finance-blogging panel at Blog World yesterday, the government is treating us all like children, and if they really want to ask us for another $700 billion, it’s high time they started treating us like grown-ups instead. This is supposed to be a democracy: we’re meant to be in charge here!

There’s one other possible explanation, which is the youth of the web as a communications medium. Paulson did the round of Sunday TV talk shows today, I’m told, defending his plan and trying to explain it. But I didn’t see any of it: I don’t watch TV and in any case I was travelling back from Vegas. If any Paulson defense of his plan were easily linkable by the blogosphere, I think there might be more debate. But you can’t easily link to a talk show, let alone copy-and-paste Paulson’s statements and bat them around in the way that bloggers like to do.

Treasury can and should do a much better job of communicating its policies and the thinking behind them, especially when it comes to the web. Press conferences and TV apperarances are no longer remotely enough.

Incidentally, this is not the kind of unanimity from the blogosphere which one finds in cases of clear-cut idiocy like John McCain’s proposal during the primaries to temporarily abolish gasoline taxes. No one’s saying that Paulson is stupid or that an argument can’t be made for his plan. It’s just that no one seems to be making that argument.

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