Corporate Socialism has Come to the United States

The bailout has been proposed.  $700 billion dollars (and potentially more) and raising the national debt ceiling to $11.3 trillion dollars.  Write it out.  Do it.  Take a piece of paper and write out $700 billion dollars.

$700,000,000,000.00

Think about how many 4-year college tuition and board that could pay (13.5 million if state schools, 6 million if private school; in 2005, there were 17.5 million students enrolled in degree granting institutions).  Think of how many homes that could buy (3.3 million using the median U.S. home price).  Think of how teachers you could employ in a year with that money(14.6 million using the average U.S. teacher salary).

This is more than the entire 2009 budget appropriation for social security.  More than the entire 2009 budget appropriation for medicare and medicaid.  And it is only a proposed amount, with the possibility of being far more expensive (when is the last time you've known the government to come in under projections?)

Make no mistake... this is your future, my future, our children's future, our country's future at stake here.

And here is the truly sick thing. The entire plan is only about one page long.  That's it.  One page and $700 billion at stake.  Everyday, I read 100-200 page agreements, prospectuses and side agreements covering amounts that are not even a fraction of $700 billion, but somehow, when it's an amount so staggeringly big that it will impact every man, woman and child in America, it is covered by one page.

And it is a plan with gem provisions like these:

Sec. 2.   Purchases of Mortgage-Related Assets.

(b) Necessary Actions - The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

and the deeply unconstitutional...

Sec. 8.  Review. 

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

I don't care about all those whiny bankers out there who bleat about how the government needs to solve this problem or else it will cause the domino-esque collapse of all business in America.  Really?  Ok, why don't you give back your multi-million dollar yearly bonuses for the past decade first? Because you profited from this ponzi scheme and I see nothing but a lose-lose scenario for me.

I don't even particularly dispute that something needs to be done to prevent the lemming-like flight to safety that the market has already engaged in. 

But to respond to hysteria with hysteria?  That's where I absolutely draw the line.  And this plan... IS hysterical. 

Has everyone forgotten what happened the last time a government official came to us, hysterical about the END OF THE WORLD AS WE KNOW IT, pushing us and our elected representatives to give him FULL AUTHORITY to rid the world of the kind of EVIL capable of MASS DESTRUCTION? 

Oh, right... the Iraq War.

And how is it that we've had 6 months since Bear Stearns, and the government has not yet put in place a bankruptcy system that would more effectively unravel the obligations arising from credit default swaps (CDS) that everyone is so worried about now?   Or, better yet, gotten some broad authority to force the investment banks to unravel their CDS exposure (such as setting up a mandatory central clearinghouse)?  No prudence, yet we are expected to hand the country over one day's, or one week's deliberation?

I refuse to play by these rules anymore.  I refuse to be scared into giving away the country and get nothing in return but an unaccountable executive officer.

I urge everyone to write or call their Representative or Senators.  Tell them that if they vote for this bill, without the kind of deliberation that anything costing $700 billion demands, you will vote for their opponent in the next election. 

To WRITE:  to your Representative
                    to your Senator(s)

To CALL:  search your Representative using the link provided above, then google his/her official website.  There will be phone numbers for his Washington DC and local offices.  Or you can use this House  directory.  Senate contact can be found at link provided above.

Update: For those interested in alternatives, I've collected some proposals made by other well-regarded economists over the past few days at my personal blog.  Also, if the post is otherwise too wonky, do yourself a favor and scroll to the very bottom of my post, where you'll get a truly frightening commentary from a current congressional staffer.

Second Update: Looks like this monstrosity is going to pass.  Here is good round-up via Politico of economic commentary critical of this bailout.

Kady blogs at Wonkess.

 

Comments

[lildb]

oh, my dear, sweet lord jesus, kady.

i need a fucking cigarette after that. you know you make me just want to run and find you and hump your leg to the point that it's gone beyond funny and even beyond embarrassing to just plain horrifying.

that's all. i just had to say it. we were both thinking it.

[Natalie]

What gets me is that socialism is a bad word if it could actually benefit REAL PEOPLE. Corporations? Nah, that's not socialism, because if those against any form of socialism called it that, they would have to call themselves hypocrites. Section 8 is just plain frightening. How many more companies are going to be bailed out in the name of the economy, meanwhile our national debt is skyrocketing? At what point to people start to realize that we have to stop doing this?

[Liz]

Wow Kady, thanks for putting it in this kind of context. I understand that so many people's lives are hinging on the bailout that it effects more than just the rich execs and bankers (and PS $1mm bonus? That's on the way low side in my neighborhood) but I think it should be only fair that the people at the top are somehow accountable.

[PunditMom]

But what would you propose they do? Let all the world economic markets collapse?

I don't like this either and, as a former SEC attorney, know full well that all of this was preventable, but Congress approved legislation allowing commercial and investment banking paths to cross, and the White House and it's cronies pushed and pushed to keep the regulators from doing their jobs, hence the mess we find ourselves in.

But are you really ready to go back to the days that my parents remember of rationing, people on the streets looking for handouts and money being worthless?? There is no good solution to this at the moment. The only good solution going forward is to make sure we elect people who will acknowledge the importance of regulation, because we have learned too many times that the markets will never do it for us because people are too greedy.

[Kady]

Hi PM,

I've just updated the entry with a link to my personal blog where I've collected a bevy of other Economist's proposals, all of which require more accountability from the Treasury and more pain from those being bailed-out than is the current Paulson proposal. I think that any one of these plans is far better than a no questioned ask hand out of $700 billion.

Let's not forget that $700 billion can go a long way to helping us through times of hardship, rationing, and joblessness. And let's not forget that there is no guarantee that Paulson's plan will work. His bailout only addresses one specific type of asset backed securities (mortgages). Although these may be the biggest, there are plenty of corporate bonds (including one very large one that I personally worked on and know is very close to default) and other asset backed securities still waiting to fail.

[jen]

Kady, thank you.

I can't help but think the hole we are digging will only go so far. the smoke and mirrors are only that. the fall is inevitable but the falling seems endless. since there is no one to catch us it's philosophical at best, we should just let the ground rush up and meet us and go from there. we've done this to ourselves after all.

[Redneck Mommy]

Wow. As a Canadian, I have tried really hard to keep my nose out of America's business, as we have more than our own share of messes to focus on up here in the North. However, that said, I can't help but shudder with disbelief over how unconstitutional this proposal is.

I wish you all the best in trying to stop the madness. Wow.

[Mommy Jane]

Huh. I wonder why more people aren't rapping about Palin.

Oh look! I found one!

http://fourgetaboutit.blogspot.com/2008/09/mccain-sings-to-palin-gold-powah-diggah.html

Hello? Jon Stewart?

Call me.

[cynematic]

At the very least, can we get high-flying financiers to STFU now about the "invisible hand" of the "free market"? I've never seen a group of people jump so fast for big bad government to bail them out.

You bet I'll be calling my elected reps to demand accountability.

[Daisy]

How is it that McCain's commercials threaten that the democrats will rule with "Big Government"?? What does he call this?

[Nicole]

Apparently legislators have demanded some changes to it. There's an article on Bloomberg now: http://www.bloomberg.com/apps/news?pid=20601087&sid=aYXtwpG9mw9g&refer=home.

I don't know or understand enough of it to understand if this is a good thing or a bad thing (and have a bit of preggo brain going on right now, to boot). All I can do is echo Redneck Mommy's words: good luck.

Also, an interesting story - last Monday when this all started, apparently as Lehman et al. were going down, in London, the computer systems that allowed Brits to trade stocks went down - so they couldn't get out either.

[Donna]

This morning, NPR ran a report on how Japan dealt with its financial breakdown nearly 20 years ago. Key points: it has taken them all this time to dig themselves out. They did it by going into personal savings mode -- after propping up the economy with hundreds of billions of dollars of spending on infrastructure so that unemployment did not dip below 6%. They were also able to maintain GNP levels by selling their products around the world.

I wonder how that example translates to our economy, as we are already in debt up to our ears from the Bush tax cuts -- as well as that we are more of a service based economy now instead of a manufacturing one?

I'm mad as hell.