September 22, 2008

Needlessly Amplifying the Price Tag of the Bailout

Monique Chartier

In the last hour of his show today, WPRO's Matt Allen discussed the shopping list [sorry, no link] of additional spending which Congressman Patrick Kennedy announced today that he wishes to attach to the seven hundred billion dollar bailout, a sentiment presumably shared by many other congresspersons.

Is the congressman's shopping list dwarfed by the size of the bailout? Undoubtedly, though it starts to add up to "real" money when up to five hundred and thirty four other shopping lists are thrown in. More troubling is the mindset revealed.

One is an obliviousness that the federal budget is - or ought to be! - finite. Vast though the budget has grown, seven hundred billion is still a lot of money. And while there is optimism that the federal government may break even or possibly profit many years down the road, the only certainty is that taxpayers would be on the hook for quite a large sum of money with no guarantee that it would all work out in the end, especially if the bailout began to experience mission creep.

Secondly, in view of the finite nature of the budget, individual congresspersons and Congress as a whole should be giving thought to "what are we cutting out of the budget going forward so we can write this gargantuan check" and even, "this is not our money so let's make the check as small as possible". The "what spending can I add to this gargantuan check that will get my vote and get me votes" approach taken early on by the congressman from Rhode Island's first district is entirely the wrong attitude when signing a sizeable check to be drawn on someone else's account.

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It's a lot easier than that. The government shouldn't be in the business of bailing out corporations. Period.

Posted by: Mike at September 23, 2008 7:09 AM

How much should the bailout check be for?


End of story. I hope this thing gets bogged down in the DC swamp for YEARS.

Amazing how fast "Free Market" Bushie became a communist when it was his rich buddies in trouble.

Posted by: Greg at September 23, 2008 7:40 AM

Actually, Mike, I'm starting to have serious doubts about all of these bailouts. Bad regulations which punished bankers for failing to make bad loans, bad politicians who failed to rein in Fannie & Freddie (Barney Frank), bad mortgage brokers who failed to fully educate their customers and irresponsible borrowers who close their eyes and signed.

Now, the people picking up the bill for this inadvertant conspiracy is everyone who had no hand in it and did not benefit from it while the people who pulled it off get away without repercussions. And we're setting the stage for a.) a big ol' pork bill, the way certain congresspersons are talking and b.) endless future bailouts by the government of bad regulations, bad regulating and bad decisions.

Why is this seriously being considered as a plan?

Posted by: mm at September 23, 2008 7:56 AM

(Oops, mm is me this time.)

Posted by: Monique at September 23, 2008 7:58 AM

I hate to start the morning with "doom and gloom," but ...

I fear that right now we’re in the midst of an Atlas Shrugged like collapse – the system is breaking down before our eyes – it has been deteriorating for some time now, but it is now accelerating and the public is beginning to notice (though it hasn’t yet put the pieces together or contemplated cause and effect).

I also believe that it all began with FDR’s trashing of the U.S. Constitution – once the U.S. Supreme Court succumbed to his threats and enshrined in law the (previously deemed unconstitutional) concepts that welfare is a federal responsibility and that redistribution of wealth a legitimate federal function, then the wheels were set in motion. Consider Alexis de Tocqueville's observation that democracies are ultimately doomed, for once the electorate discovers that it can vote itself largesse from the public treasury ...

If it doesn't occur beforehand, methinks that it’ll really hit home when Social Security goes cash-flow negative in about ten years and AARP will be shocked! SHOCKED! to discover that the trust fund cupboard is bare.

In the meantime, the politicians will keep making promises (e.g., prescription drug benefit) and spending (Wall Street / Detroit automaker bailouts and earmarks and bridges to nowhere) until stopped. That “stopped” will occur from outside, not because they will become responsible; when they can no longer cobble-together bailouts, float bonds or otherwise keep the money flowing to buy votes to get themselves through just one more electoral cycle.

I also suspect that they / the Federal Reserve learned the lesson of deflation post-”Great Depression” - so we’re more likely looking at devaluation of the dollar (and thus repaying the spiraling federal debt with near-worthless dollars) via some Weimar-reminiscent inflation. We're already seeing the beginnings of that as the dollar continues to drop vis-a-vis commodities / tangible assets and other currencies.

Try these two articles:

A Separate Peace - America is in trouble--and our elites are merely resigned – Peggy Noonan

“Is The United States Bankrupt?” – Laurence J. Kotlikoff, Federal Reserve Bank of St. Louis:

I fear for this country – as some have observed, unlike the 1930’s when people peaceably stood in soup lines, today’s recipients of “entitlements” are unlikely to be so peaceable when the "checks" and "benefits" stop coming, or are even just interrupted or delayed. New Orleans after Katrina may have been a mere preview of coming attractions.

Posted by: Tom W at September 23, 2008 9:20 AM

Step 1. Buy a gun.

Step 2. Learn how to use it.

Step 3. Be ready when the poor lose their entitlements and decide that your PC and DVD player are good sources of income.

Posted by: Greg at September 23, 2008 9:58 AM

We're a long way from an "Atlas Shrugged" meltdown.

But we need to be real careful about this "bail out". Just as the legislation intending to provide relief for Hurricane Katrina was rushed through Congress and was full of pork, you can bet every Member of Congress is trying to tuck away funding for pet projects.

This is their golden opportunity and the taxpayers are about ready to get fleeced.

Posted by: Anthony at September 23, 2008 1:18 PM

At least Joe Biden agrees with John McCain on the AIG bailout.

Posted by: Anthony at September 23, 2008 4:00 PM

Not a dime should go to Wall Street.
You watch-the DEMOCRAT House and the DEMOCRAT Senate will make a lot of noise and hullaballoo and will then "roll" for this with a couple of laughable cosmetic changes they will hang their hat on.
Are you proud progressives?
Keep mailing those checks to Osama and the DNC. LOL.

Posted by: Mike at September 23, 2008 7:02 PM
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