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Sunday, November 23, 2008

Bailout: Throw Money at Success

Forget bailouts; let's build boats that float!

Robert Reich offers an explanation of the perverse narcissism of Wall Street (and the Treasury Department and Federal Reserve, which share Wall Street's mindset) that thinks Citigroup deserves a bailout while General Motors does not. Nutshell: Big financiers want to believe that they are special, that their money games are more vital to the economy than manufacturing real goods, not to mention the jobs and communities GM more directly supports.

Reich is no champion of free money for GM, either: he notes that both GM and Citigroup are in trouble because of their own management blunders. He just wonders why, if we have tax dollars (or unused deficit capacity) to throw at losers, we don't help the losers who do more immediate good for American workers.

Listening to Bob Edwards Weekend yesterday, I heard a NASA supporter, maybe an astronaut in training, respond to a question about whether we can afford to fund NASA when we have to deal with the economic crisis. He noted that NASA's budget ($17.3 billion this year) is a tiny fraction of the hundreds of billions of dollars we are throwing at failing banks. [Paraphrasing] "Instead of throwing money at failure," he said, "maybe we should try throwing money at success."

Throw money at success. We can conjure up hundreds of billions of non-existent dollars to protect bankers and investors who made selfish, stupid choices. Yet we scrape together maybe $20 billion next year for brave women and men who risk their lives for science, exploration, and the future hope of mankind (not to mention GPS and Google Earth).

Want to stimulate the economy, or even just keep it alive? Let Citigroup and GM sink. Let's throw money after some winners. I'll bet $700 billion could build a whole lot of moon rockets and Mars Rovers (how about Pluto Rovers?!).

Or if you don't want to build the Enterprise, let's look around for some successful existing enterprises that deserve a reward. Someone out there has got to be making good products, services, and investments. Maybe we should match every dollar we hand to losers like Citigroup and GM with a dollar to winners like First Bank of Madison and American-based Toyota factories (oops, wait a minute...).

I can think of a host of success stories whom we could reward with some economic stimulus:
  • South Dakota teachers: producing above-average graduates on the lowest teacher wages in the nation. Dump some $10,000 bonuses on them; those teachers will spend that money on books, computers, decks and landscaping....
  • Soldiers: National Guards leaving their jobs and families for mulitple tours, dodging snipers and roadside bombs, coming home with lifelong injuries. Time for some bonuses. Big bonuses. Three million personnel in the regular ranks and reserves, $10,000 each, extra for war-zone duty... $100 billion would cover that.
  • College graduates: let's forgive student loans! But not every student loan: Uncle Sam let's you off the hook, but only if you get straight 4.0 (o.k., maybe a 3.6), and only if you get it done in four years. No dinking around—the economy needs you!
I'm sure you can come up with your own list of winners, of individuals and organizations who have made good decisions, who done real good for their communities, and who are so much mroe deserving of a fat economic stimulus check than myopically, incompentently managed corporate behemoths. Write down your list, send it to your Congresspeople and President-Elect Obama.

When you bet on the stock market or the horses, you generally don't lay your money on a losing streak. You look for proven performance. Let's stop throwing money at failure. Let's look for programs and people—like NASA, teachers, and soldiers—who continue to prove they can succeed.


  1. When it comes to raising kids, many feel you should reward good behavior and discipline poor behavior. Why would we do anything different with corporations, banks and Wall Street? When times get tough, people get creative. Necessity is the mother of invention.

    Now is the time to consider the entire US budget and set goals to move more money toward research in wind power, sophisticated battery storage, higher fossil fuel economy standards and conservation of natural resources.

    Reallocating billions from the war efforts and bailouts into research would pay dividends for generations.

    Reward good behavior and discipline poor behavior in business and watch our country become even stronger. The phoenix will rise once we look up, not down.

  2. pennypincher11/23/2008 1:54 PM

    I heard something on Fox News yesterday that there is talk about a new economic stimulus package. They want to take the remaining bailout money that is left and devide it amongst the People vs. giving it to companies that are not using it as they should. It was figured that each family would get approximately $15,000. OH MY GOSH! ! ! Now that would stimulae the economy.

  3. Penny:

    Sounds like a George F. Will original. I would add that such a distribution should come with a condition: People must use the funds to pay off mortgages and credit cards, and then put the remainder (if there is any) in Certificates of Deposit with terms of at least 6 months.

  4. pennypincher11/24/2008 9:52 AM


    Having stipulations like that is the exact reason why they say the first "stimulus" didn't work. People paid off debt and didn't spend it in the stores as the government hoped they would.

    Have $1800 is one thing, but getting $15,000 is another. I know I for one would "stimulate" the economy with that!

  5. Has anyone done a study to find out how much it would cost to forgive all federally subsidized student loans for students who achieved graduation? It would certainly put a lot of educated people in a better position to move where they are needed.

  6. Regading paying off student loans, don't think that will happen. If it did, it would be grossly unfair to those who have paid off their loans by themselves.

    One problem with student loans is that some kids refuse to consider their future when deciding which school to attend. If they choose to attend an expensive in-state or an out-of-state school with the attendant high out-of-state tuition rates, and they major in something that will not pay much, they could be left with a lot of student loans that are hard to pay off. Conversely, if they would attend a state school or at least an in-state school which costs much less and offers the same courses, they would be much better off financially upon graduation.

    The trouble is that some kids don't think past next week. They have no conception of paying off huge loans and only want to go where they want to go. That's fine, but it's not the taxpayers obligation to forgive such loans.

  7. scb 11:00: That number was harder to find than I thought! Davidson College says students borrowed $54 billion in 2007 to attend college. This article says the amount of outstanding student loan debt was $85 billion in 2007.

    Anon 1:33, I agree it would be unfair to forgive debt for some today after past borrowers like the Obamas have paid off their student loans on their own. But it's also unfair that failing banks like Citigroup are getting $20 billion to paper over their bad luck or incompetence while competitors and homeowners get no direct aid. What do we do?

    Anyone up for some Christian principles? How about declaring a Jubilee year? Then maybe follow up by banning usury?

  8. I don't think anybody should get bailout money. Doesn't seem to be working yet and more are lining up at the well. If the gov't has to give these bailouts, I at least think they should make the recipients clean house, fire their CEO's with no bonuses, and offer detailed plans about what that money is going for. Don't think that is happening.

    My point regarding student loans was simply that it isn't always necessry to incur huge student loans. With a little planning and insight, the amount can be cut down a lot by the student themselves. My kids went in state to college. One got a graduate degree offered at USD. The oher did 2 years undergrad at SDSU and had to go out of state to get his vet degree, so he is still paying off loans.

    I also have a relative who is going out of state to pursue a marketing degree. He will have big loans to pay off, but he doesn't care, he just wanted this particular school, when he could have gotten the same degree in state. Reality will hit when his first payment is due and not before; and then it's too late.

  9. Anon 7:52: I can agree with a lot of what you're saying, especially the point about college debt. I could have incurred all sorts of debt getting my undergraduate degree at Harvard; I chose SDSU instead and came out with 4.5 years of education and zero debt. Likewise my graduate courses: I've always chosen public universities where I can find work that pays the bills. Incurring debt for a fancy designer diploma is silly.

    Nonetheless, even public-univ. tuition is more than some students can afford. Even with good planning and hard work, some still need loans to get that education.

  10. South Dakota teachers: producing above-average graduates on the lowest teacher wages in the nation. Dump some $10,000 bonuses on them ...

    Why not permanently raise their salaries to the same levels they get in Wyoming?


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