I hate the Seven Hundred Billion Dollar bailout plan (full text at Huffington Post). Rich guys screwed up, and now rich guys are getting $2300 from each of us so they can keep gambling on the stock market.
O.K., it's not that simple. I understand the Rube-Goldberg nature of our economy. Pension funds now depend on rising stock indices. Investors rely on $46 trillion of magic money in "credit default swaps" to buoy their confidence (I don't understand credit default swaps yet, but they're out there). The bankers and brokers are rich with real estate, but they need liquid assets to make loans so businesses can grow and hire more people so they can buy more stuff at Wal-Mart and keep the GDP from going negative.... Leave the banks all constipated with their illiquid assets (foreclosed real estate that buyers aren't snapping up quite as quickly as the bankers would like), and the economy might indeed creak to a halt.
But thirty years ago, when my dad's personal economy came creaking to a halt after his plant closed and a real estate deal went bad, the government didn't send him any liquid assets. Dad went on the road to find work and slept in his truck. If Pat Powers can't sell any houses this month, the government won't cut him a check for groceries. If some drunk idiot smashed into your car and puts you in the hospital, the government won't rush in to pay your bills; you're on your own.
Imagine this, though: imagine some virus threatened to put everybody in the hospital. Or suppose a hurricane put everybody out of work and home on the Eastern seaboard. Would we say, "You're on your own?" No. CDC, FEMA, the whole Leviathan would be mobilized to fight the crisis.
We would, in essence, socialize the risk, socialize the damage, socialize the effort to save the country from total disaster.
It doesn't even take a nationwide crisis to provoke us to our innate socialism. Ten years ago, a tornado wiped out Spencer, South Dakota, a town of 315 people. Now this is nothing personal (my uncle Howard lives there still), but from a cold economic perspective, Spencer could have been left a pile of rubble, and the state economy (not to mention the national economy) would hardly have noticed. Nonetheless, we didn't say to Spencer, "You're on your own." Republican Governor Bill Janklow raced to the scene in his SUV that night and started directing a massive socialized recovery operation. Janklow put state resources and hundreds of volunteers to work clearing debris and providing other assistance to Spencer residents. Folks didn't ask, "Who's paying for this?" or "Where's my cut?" South Dakotans just came together and solved the problem.
Capitalism is fine and dandy when the sun is shining, although it seems to excuse a great deal of indifference to individual failures. But when the deluge comes—and Bush, Paulson, Pelosi, and Boehner are saying the economic deluge is a-comin'—"you're on your own" just doesn't cut it. In a crisis, we are all socialists.
Update 09:10 CDT: The Economist on the bailout: "Unpleasant but essential."
Dennis Kucinich on the bailout: "I'm not just going to vote no, I'm going to vote hell no!" See Dennis's counterproposal, the Main Street Recovery Plan. Love ya, Dennis!
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