Home > So, what do you think? > Archives > 2008 > September > 23 > Entry
Who’s going to bail out the rest of us?
This editorial will appear in Wednesday’s edition of the Telegram:
Washington doesn’t do emergencies well.
The United States rushed into a decision to invade Iraq … because it was an emergency. Congress passed the U.S. Patriot Act … because it was an emergency.
Now comes U.S. Treasury Secretary Henry Paulson pressing Congress for a $700 billion bailout of Wall Street … because it’s an emergency.
In every instance, the onus has somehow fallen on Congress to act quickly, whether the move made sense or not. Should Congress fail to do so, the fault somehow gets shifted to Capitol Hill because of the lawmakers’ “short-sightedness.”
Lord knows, Congress has been guilty of thousands of other poor decisions, and the bailout may indeed be the only sound course of action for the U.S. economy. But here’s hoping senators and representatives will make that call after hearing reasoned arguments and evidence - not on panic-stricken cries from the financial institutions who cared little about abandoning their responsibility during the past couple of years.
The $700 billion it will cost U.S. taxpayers to rescue lenders is more than the war in Iraq has cost us thus far. For that kind of money, let’s hope taxpayers get a few reassurances out of the bailout legislation.
As Wall Street struggles back to its feet and begins to turn profitable again, those profits should be returned to the people who threw them their life line - that’s U.S. taxpayers. And the notion that the people who steer the recovery should be paid handsomely for their efforts needs to be thrown out the window, also.
Taxpayers are dog-tired of paying through the nose every time trouble comes along - in airline prices, at the gas pumps, for failed savings and loans - only to see how well the CEOs and other corporate leaders line their pockets.
We’d much rather help the family down the street in danger of losing its house because of the sub-prime meltdown than write another check to a Wall Street tycoon.
If Congress can come up with a plan that addresses those concerns, we’ll swallow the pill a little more readily.
Comments
By Cleisthenes
October 7, 2008 1:46 AM | Link to this
Before Americans take up the banners of Robespierre and Morat and start sending the Wall Street Financiers to the guillotine. Before Americans reconstitute a modern version of the Committee for Public Safety and charge them with treason or crimes against the people and send them to a national razor, there are much more important things to consider…
The productivity of the American worker and Americans is a source of strength. This productivity needs to be the focus of economic policy rather than support of archaic financial methods. Productivity in the United States has increased year by year and decade by decade. This has occurred because of a strong work ethic, industrialization, computerization and general modernization. The riddle becomes, that, with all of the productivity improvements, why do we have to work harder than ever before? When all of the productivity increases then, as a society, we should have to work less hard, not more. We are more efficient, so there should be more to eat, more to enjoy, and we should be able to feed the hungry and shelter the homeless. What has happened is that the increases in productivity often leave society in more debt. Typically borrowing is done to produce a new good or service. That is all well and good. However, if unadjusted, there are more goods and services than the sum of money and credit. This causes deflationary prices and economic contractions (depressions). The chairmen of the Federal Reserve, Alan Greenspan and Ben Bernanke, have primarily addressed the threat of economic contractions and crises by loosening credit. The tech bubble of 1999-2000 was resolved by looser credit and growth in construction (lately resulting in the current bubble). New technologies were brought to us in the 1990’s, and we were the beneficiaries of new construction in the 2000’s. How wonderful! Society has more goods and services. But the productivity was largely balanced by credit and not money. Bernanke, Congress, and the President are continuing to play the credit game (adding credit to try and maintain economic growth). The cost of the credit game is risk, cyclicality and unused productivity gains by the general public. The risk and cyclical nature occurs because sometimes increased credit is available, sometimes it is not, and sometimes it shrinks due to market conditions more related to confidence and emotion (markets are almost always emotional). The Fed is usually able to reduce this cyclicality by loosening credit or tightening it. Currently the loose credit of the fed is being overwhelmed by the confidence and emotion problem. Credit and finance need public and business confidence. That need is another weakness in the classical credit and financial model. A stable model should not have to rely on emotion.
An individual (and the public) in a high credit environment can fail to use society’s productivity gains if he or she does not borrow. If production of housing is high, individuals fail to participate in that productivity gain if they do not purchase a house. If production of education is high, then individuals who fail to get a loan for an education do not participate in that productivity gain. The cost of these items is debt, and it is a large debt for items whose prices have been increased by credit inflation (The cost of these items rose because of the easy availability of credit). A majority of Americans have some sort of debt. It is not a straight line, but increased debt has correlated with increased productivity.
The cost of relying on credit to balance the economy (productivity) is debt and cyclicality. As the alternative. there are risks with primarily balancing the productivity with money, that is, increasing the supply of money rather than increasing the supply of credit. Too much money creates inflation. However, adding money in a deflationary economy (or deflationary sectors) stabilizes the value of money.
Too much credit can cause sector inflation (housing a few years ago). If you release money into one sector of the economy or to one class of people you can also cause sector inflation. A release of money needs to be broad based, and if not broad based, then at least at sectors of the economy where productivity is at risk of falling and where deflation is present. These things can be measured and are currently measured by the government.
The kicker on the end of this policy is that a higher percentage of economic productive capacity is used and it becomes easier to address other society problems or needs (more is used, less is wasted).
By DO More Math
October 12, 2008 10:42 PM | Link to this
Try your Math again on ElectriCities. No raise read the daryl barber letter to the editor in wilson with the detailed $8 million in cuts. then see what you come up with. Tilton screwed up the refinancing - 2% on your rate. He hired, overhired, over raised. overpaid people including two people who got 60-90k in salary increases over 5 years.