Resident Fellow David Frum

Thursday was a terrible day in the financial markets. Hit by dire unemployment numbers, equities tumbled, and investors raced for the safety of U.S. government bonds. The interest rate on short-term treasuries has dwindled to 0.02 percent; the interest on low-grade corporate bonds has soared to 20 percent.

In the shocked and bloodied aftermath, everybody seemed to be saying the same thing.

Paul Krugman, the liberal economic columnist for the New York Times, opined on Friday morning about a "disturbing parallel between 2008 and 1932"--namely, "the emergence of a power vacuum at the height of the crisis. The interregnum of 1932-1933, the long stretch between the election and the actual transfer of power, was disastrous for the U.S. economy, at least in part because the outgoing administration had no credibility, the incoming administration had no authority and the ideological chasm between the two sides was too great to allow concerted action. And the same thing is happening now."

And here was Rush Limbaugh, at the opening of his show at noon Thursday:

"Where is [Barack] Obama?" He's naming his cabinet, but he's hanging back. Where is he? The auto chiefs, they're sent out of town without getting their bailout . . . Why is Obama absent here? Well, you might be saying, 'Rush, he's not president yet.' Don't give me that. He's the president-elect. Bush is the definition of a lame duck. Obama is the guy everybody's looking to."

Nobody can accuse the U.S. government of inaction during this crisis. Since March, the Federal Reserve has been lending money to support financial institutions, maybe more than $2-trillion (all figures U.S.). Congress has approved a $700-billion bailout to buy troubled assets. Government lending agencies are working with Fannie Mae and Freddie Mac (now under government conservatorship) to slow foreclosures.

But as the crisis spreads from the financial sector to the broader economy, these emergency measures look increasingly inadequate to many. The demand rises: Something must be done! Only there is nobody to do it.

As Krugman observes, this crisis occurs at a gap in the U. S. political cycle. But this gap is not some naturally occurring phenomenon. Nor is it even, as Krugman says, entirely an ideological words "federal infrastructure program.") But the plans are there, ready to go. The balance of power is clear: Democrats have more, Republicans have less, but not zero.

Nor is it very difficult to imagine how power could be shared during the emergency. The reason that Washington is bogging down has a political, not an ideological, cause: expectations management.

As happened in 1932, the incoming administration in 2008 has two very immediate and obvious messaging goals:

1) Think how many histories of the New Deal open with the nightmare situation prevailing on Inauguration Day 1933: banks closed, breadlines extending around corners, etc. What if FDR had worked with Herbert Hoover to improve conditions starting in December? Would the "coming of the New Deal" (to borrow the title of a famous book) have resonated nearly so dramatically in March?

The persistence of emergency into January will enable the incoming Obama administration to easily enact all its legislation, including legislation unrelated to the crisis--like a big new healthcare plan.

2) The worse things look in November and December, the more indelibly the new team can stamp the outgoing team with the stigma of failure. It's urgent for Barack Obama that the Republican brand remain discredited not just for a season or two, but until November 2012.

Times may remain tough for some months to come. The worse Bush looks in 2008, the longer Obama can blame him for the problems of 2009, 2010, 2011 . . . who knows how long?

Democrats campaigned against Herbert Hoover into the 1960s. John McCain campaigned against Jimmy Carter 28 years after the failure of that presidency. George W. Bush will be a Democratic byword for a generation to come--and if it takes one unnecessarily nasty winter to maximize the impact of the byword, that seems a price that Democrats are more than prepared to pay. Or more exactly: to have Americans and the world pay.

Addendum, November 24, 2008: It's rare for a column to be so immediately and spectacularly invalidated as was my column (above) in Saturday's National Post. That column analyzed the political motives for President-elect Obama's refusal to advance a stimulus plan of his own before Inauguration Day. Twenty-four hours later, Obama . . . advanced a stimulus plan of his own.

There's a lot to be said in opposition to this plan on the merits. While the (temporary?) preservation of the Bush tax cuts is welcome, the big public works programs Obama has endorsed (in conjunction with a lot of subsidies to the solar and wind energy industries) have two big failings: (1) They are slow--the money usually arrives after the recession has already ended--and (2) they use the cover of economic emergency to smuggle into the budget spending that would otherwise never pass scrutiny.

But my column didn't deal with the (de)merits of the plan. The column offered political analysis. That analysis has proven very wrong, and in the interest of journalistic quality control, I'll be the first to say so!

David Frum is a resident fellow at AEI.