Why You Should Be Happy About the Bailout's Demise

by Eyck Freymann

When I heard that the House of Representatives had killed the bailout plan, I was shocked and pleased. Because there has been so little substantive discussion about the merits and detractors of this proposal, I intend to lay out my view of the issue in a clear and accessible way (unlike both Presidential candidates).

When Sweden faced a similar economic crisis, they approached it with the priority not being the megaprofits of the corporations but the social and economic security of the taxpayer. The government bought the bad debt for a competitive price and created a department to manage the tremendous quantity of mortgages and debt. By tending to their investment, Sweden was able to rescue the financial system and give a positive return to the taxpayer.

The Bush administration suddenly turned away from thirty years of free-market Reaganomics, telling us that we would enter a Depression unless we immediately and thoughtlessly signed off on their package. On further inspection, we realized that this would give 700 billion dollars of taxpayer money to the Treasury Secretary who could use it, manage it, and sell the loans it bought whenever or for whatever he chose. There would be no oversight and no legislative review.

In effect, this amounts to giving 700 Billion dollars to a single, unchallengable authority who answers to no one. That's not democracy, that's dictatorship! Henry Paulson himself doesn't have the greatest track record. For a CEO of a major investment firm, he displayed no interest as Treasury Secretary in resolving this subprime issue until months after the moment of opportunity had passed. He refused to acknowledge the impending collapse or the credit crunch and did nothing to stop them. Ben Bernanke, the Fed Chair, has been working around the clock for months to stop this crisis. But the Fed Chair can't do much without the active participation of the Treasury Secretary.

Our reckless spending over the past eight years has been the epitome of wastefulness. We give no-bid contracts to Halliburton, paying them several hundred dollars of taxpayer money for each lightbulb they change in the heavily fortified Green Zone in Baghdad. This is been the most fiscally irresponsible White House in history. Why should they start now?

John McCain is similarly questionable when it comes to fiscal policy. One of his favorite examples of an earmark is the "three million dollars to study the DNA of bears in Montana". He voted for it. He also voted for the war in Iraq, a ridiculous venture that costs us ten billion dollars a month, roughly seven times as much as his earmarks cost us.

Aside from this, the bailout reflects the corporate world's true feelings of the free market, namely that they should be free of government interference, regulation, and taxes when they don't want them but still deserving of government cleanup when they make a mess of things. All of this, of course, is financed by the taxpayer. It's a heads I win-tails you lose attitude, and it is fundamentally dishonest. Any true free-market Republican would oppose this bill.

But there is a reason why Democrats, too, should oppose this bailout plan. There is moral injustice at its very core. I cannot bring myself to understand how we can in good conscience refuse to oversee the the behavior of the rich and then, even when they have squandered everything, continue to implicitly approve of their behavior by having the middle class sponsor their irresponsibility. If Wall Street can't pay for itself, than how can we expect the middle class to do the same?

Ultimately, there will be a bailout package. Hopefully, the new plan will include greater oversight of our treatment of the debt, making sure we stand up for the taxpayers by buying and selling the bad loans at good prices. According to Breitbart, Citicorp CEO Vikram Pandit bought Wachovia intending to make money off the government bailout plan. Already we see the big corporations licking their chops as they see the taxpayers marching like lambs to the slaughter. If Congress can grow a spine then maybe it can stand up for regular Americans who will be hit hard by this irresponsible bailout plan. Most likely they will not; they will add some minor modifications to the existing plan and rocket it through the House and Senate.

Obama's position on this plan is not good, but it is preferable to McCain's. We'll just have to wait and see how this issue affects the voting in November.