Wednesday, September 24, 2008

The Bailout Sounds Bad

Last December, I observed that it seemed like Henry Paulson had a special ability to say things that were just the opposite of what was actually happening. So I haven't been too excited about the idea that Congress would approve a plan to give him three-quarters of a trillion dollars to spend as he sees fit, in hopes that he knows how to use it to save the U.S. financial system. I was, in fact, aghast at the idea that the Democratic majority in Congress would be remotely willing to do any such thing. I guess the idea is that they don't want to be called the do-nothing Congress. They're going to take action, by God, even if the selected action is to plant explosives under the nation's economy. They're wanting to be re-elected, and then they'll deal with the fallout to the economy after November 4. In saving themselves, it seems they are torpedoing Obama. The economic meltdown is a Republican creation. Now I guess they want to grab some of the blame for themselves. In the process, they will reduce the pressure on McCain, who admits being weak on economics and who has embarrassed himself repeatedly in that sphere. If voters believe that the problem has been solved, McCain's odds improve. There definitely should be a plan to resolve the financial crisis. And there definitely is some time pressure. But this does not logically require that Congress rush to approve a bad plan. Better a slow plan than the wrong plan, for the simple reason that we can't go around spending $700 billion every week or two. It's an unprecedented sum. I don't know of anything that has ever been proposed, in the history of the American economy, that was expected to cost that much. Maybe World War II. The core of American well-being is a healthy and growing middle class, with fewer people at the income extremes. Unfortunately, it seems we've been losing that middle class. That is, the plan should preserve and enhance the financial status of typical Americans. So, for example, in a choice between taxpayers and stockholders, my impression is that the former does include the vast bulk of middle-class Americans, while the latter does not. So I would favor the interests of taxpayers over those of stockholders. And certainly I would favor taxpayers over foreign stockholders, whose financial institutions will also supposedly be able to partake of the bailout in some sense. In short, I would not favor putting taxpayers on the hook. It is the stockholders who wanted more and more profits, the public be damned; it is the investors who brought us fictive finance. It's their problem. It was hard to imagine, but it was possible to swallow, the bailout of AIG. That was enormous. This is ten times that, and much more vague. Before a dollar is voted, the structure of the plan needs to be presented in detail, with justified and specific dollar requirements. I favor the Democratic party, but economic common sense is even more important to me. I liked Bill Clinton, despite his sometimes ridiculous mistakes, because he had his head on straight about the economy; and irresponsible spending is one of my principal problems with George W. Bush. This bailout plan is not common sense. It deserves to die. Democrats who vote for this thing are, in my opinion, not qualified to manage public funds.