One reason it’s not a good idea to pass a massive bailout without thinking is, tautologically speaking, because you don’t think about what you’re doing. That’s the essence of the Paulson plan, of course, to stop us from thinking-to make us react out of fear. And, as Matt Yglesias points out, another objective is to make sure we never re-think, since Paulson contemplates spending only (only?) $50 billion a month, so it would make far more sense to authorize only $50 billion in authority and then think carefully about further authority.
The Dodd plan is far better, but the more I think about it (I know that’s an unpatriotic thing to do), the more I am becoming convinced that no plan would be the best plan.
First, let’s look at what we’re being asked to do. We are being asked to borrow (god forbid we should tax ourselves to actually pay for anything) $700 billion from the Chinese (Why $700 Billion? Because “we just wanted a real big number”) to fund the purchase of assets worth far less than that amount, so that we can recapitalize entities that deserve to fail, from both a free market ideology perspective and a moral perspective. The argument is that if they fail, our economy goes down with them. But isn’t there more than one way to foster economic growth?
I’m not an economist, so maybe I’m missing something. Maybe someone out there can set me straight. Shouldn’t the first question be: is this the best use we can make of $700 billion dollars in borrowed money. If we’re going to borrow that much, wouldn’t it make more sense to invest it in something more worthwhile than worthless assets and Wall Street pigs. I think I’m right in saying that the Great Depression lasted as long as it did because Roosevelt was uncomfortable with the idea of deficit spending. He wasn’t willing to borrow his way out of the Depression. He had no choice but to change his mind during the war and the rest, shall we say, is history. It ultimately worked well back then, because the country had comparatively little debt to start out with. Whether it’s a good idea now is another story, but if we start from the premise that we are going to go out and borrow $700 billion dollars, why not put our chips on “trickle up” economics. Why not use that money to repair our infrastructure, increase our energy efficiency, provide reliable and cheap mass transit, etc. There are a host of things we could do that would yield a huge return to us. The money would be spent here, employing regular Americans who will turn around and spend it, creating economic activity. Spent wisely, it would decrease our dependence on oil and slow the advance of global warming. Who cares if we lose some big banks. Anything “too big to fail” shouldn’t exist in the first place. There are small banks that would grow big stepping in to fill the banking needs generated by the economic activity that the government would be fostering here at home. That would be an inevitable by-product of the economic activity created by such massive government spending. All to the good if the country’s banking needs are met by a host of small institutions rather than a few big ones. What, after all, have these investment banks really done for the rest of us?
Isn’t this the basic question: What is the best way to spend this money, if we’re going to spend it at all? Can this bailout possibly be the best way to spend $700 billion, whatever the consequences might be for Wall Street?