Sanity Injection

Injecting a dose of sanity into your day’s news and current events.

Final take on the bailout bill

Posted by sanityinjection on September 29, 2008

Congress is voting today on the revised financial bailout bill. The new bill reflects compromises made over the weekend as the result of bipartisan negotiations involving both the House and Senate.

After a lot of thought, I have decided that if I were a legislator, I would vote for this bill. This is not because I think it is a great piece of legislation, or that I am convinced that it will do what Treasury Secretary Paulson says it will do. Regardless of how you spin it, we are talking about the government taking over a bad investment.

However, the bill has been greatly improved by the bipartisan efforts. (Which, by the way, is how government is *supposed* to operate all the time.) Democrats and Republicans, despite their differing views, came together and tried to put the good of the country ahead of politics for a change – working throughout the weekend even as many members would prefer to be out on the campaign trail. That is to be encouraged. Both sides made concessions – Republicans on the $700 billion size and the principle of government purchasing the debts, Democrats on bankruptcy revisions and using any and all profts for debt relief (stripping out the noxious giveway to ACORN, La Raza and other left-wing groups.)  Additional oversight provisions and protections for taxpayers have been added. The result is something that nobody loves but most can live with.

The only alternative at this point seems to be to do nothing. Whether the economy could technically survive this crisis on its own without government intervention, I don’t know. However, it seems clear that to fail to act after all this discussion would have a very negative effect on investor confidence. Like it or not, our financial markets depend more on investors’ impressions of economic conditions that the reality of those conditions. If everyone starts pulling their money out, the system will collapse even if there’s nothing fundamentally wrong with it.

Economic policy is not a certain science, and economists differ widely as to the value of this action. Much like the stock market, this is a calculated gamble. Congress is genuinely trying to do the right thing, so in the absence of hard evidence that their course is disastrous, I think we should back their play.

Meanwhile, non-interventionists should really be up in arms about the auto bailout that just passed the Senate – $25 billion in loans for automakers to make capital improvements. This dwarfs the size of the Chrysler bailout of the 80s, and it was rushed through with very little public debate. Just because there is a $700 billon elephant on the other side of the room, doesn’t mean we can afford to let $25 billion rats run loose on the other.

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One Response to “Final take on the bailout bill”

  1. sanityinjection said

    Update: The failure of the bill to pass seems to be the result of numerous legislators not wanting to defy tons of e-mails from constituents opposing the bailout. Last time I checked, legislators were supposed to be leaders, not followers. Sometimes you have to do what you believe is right even if you have to suffer the consequences.

    The bill’s failure is particularly bad news for John McCain. His high-profile involvement was supposed to help bring the conservatives behind the bill, but in the end the rank-and-file refused to go along with their leadership, making McCain look ineffectual. Plus, the economic fallout if no solution is found could torpedo McCain’s chances of winning the election.

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