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Basically, if you're a failure at management and/or an economic idiot, Uncle Sam wants to give you more money. Never mind that he gets that money by either:
1) Taking it from those who were prudent with their decisions, or
2) Printing it out of thin air (basically the same as #1, just through an inflation tax)
Until the $700 billion headlines a few days ago, most Americans had no idea the scale of the drip-drip-drip of bailouts this year. They still don't. Let's review:
* $29 billion to bail out Bear Stearns.That comes to at least $1.6 trillion in 2008 alone. To paraphrase an old saw, at some point you're talking about "real money." Or to put it another way:
* $40 billion in the first mortgage-holder bailout.
* $80 billion for an additional year of Iraq war operations. (Another $150-$200 billion in war costs such as future veterans' disability benefits were incurred but not funded.)
* Up to $85 billion to bail out AIG.
* $153 billion to households for "economic stimulus."
* $200 billion, possibly more, to bail out Fannie and Freddie.
* $290 billion in farm subsidies, despite record agricultural prices and grains profits.
* $700 billion general bailout of securities backed by bad debt. (The International Monetary Fund estimates this figure will rise to at least $1 trillion.)
It took the United States 209 years, from the founding of the republic till 1998, to compile the first $5 trillion in national debt. In the decade since, $6 trillion in debt has been added. This means the United States has borrowed more money in the past decade than in all our previous history combined.I realize our dear leaders no longer consider themselves bound by the Constitution. Nevertheless, some laws are inviolable--supply and demand, gravity, and the second law of motion, for example. Standby, for what went up is coming down, and for every previous action there's about to be an equal and opposite reaction.
Secretary Paulson says people should be more scared than angry. But that just suits the government's purposes, since fear causes people to rally 'round the flag. We ought to be BOTH: scared of what our own folly has wrought, and angry as hell at the 'leaders' who encouraged a culture and debt and spending that was never sustainable.
2 comments:
Well stated! I am of mixed feelings of the latest bailout. I feel something must be done, but like you hear conservatives say why tax/pay fair share of those who take the risks? When you take risks sometimes you loose. They lost on this one, but is it risks if the US tax payer bails them out. Secondly, the underlying cause is still there, people still can't pay their mortagaes on sub prime loans. As long as they continue to foreclose at the current rate, when will the bad paper purchased by US become good? I thinks this should be fixed from the bottom up. Roll late payments back into loans. Make subprime loans prime loans or 0% interest loans until the payer can catch up. This will eventually make the bad paper held by these risk takers good. Stop bundling mortages and let the mortgage writer hold thier own paper. Just a thought.
T. Webb
And all good thoughts, too! Always good to hear from you, T!
You ID'd one of the things about this that exasperates me the most: not only are we letting people off the hook for taking risks that bit them, but we're not doing anything to keep from getting right back into the same situation. So where does it end? Reminds me of the "comprehensive immigration reform" of the 1980s that granted amnesty to illegal immigrants while promising to fix the larger, systemic problem. Twenty plus years later, those we bailed out are still bailed out, while the problem's right back where it started, only worse. This will be no different. We'll just have to keep adding zeros to the dollar figures as hyperinflation takes its toll.
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