One thing is clear from the last week of bailout negotiations: Americans have, at least for the time being, gotten past letting fear control our emotions. In that respect, it should be a proud day for our country. 130 republicans and 95 democrats actually listened to the voices of the American people and rejected what many call "Corporate Socialism". Rather than give the public the full details of the bailout plan and enough time to make up our own minds, the House decided to make a snap vote under the mysterious guise of expediency, and it failed. On the other more pessimistic hand, among 38 incumbent congressmen in races rated as "toss-up" or "lean" by Swing State Project, just 8 voted for the bailout as opposed to 30 against: a batting average of .211. By comparison, the vote among congressmen who don't have as much to worry about was essentially even: 197 for, 198 against.
In any case, it all amounts to the same tactic that got us into Iraq, scare us so fucking stupid that we don't bother to educate ourselves.
The fact of the matter is that we've been living on the credit card far too long. We are fighting two wars that are being financed entirely by funny money, and are the only conflicts in the history of the country that have not accompanied a tax increase. Pulling 700 billion dollars out of our ass to stabilize the economy in the present is only going to serve to bog us down in the future. I think we have a moral imperative to not scoot by in the present and dump wallstreet's idiocy on our kids in the future just because we could.
Anyway, here are more reasons why the bailout is bad. Take these with a grain of salt and recognize my bias though- I'm 26, make almost enough to buy a condo, and live in freaking Los Angeles. A total collapse of the housing market is the best thing that could ever happen to me.
First of all, a bailout is morally irresponsible. Here is a short list of some moral dilemmas that a bailout poses:
- A bailout sends the wrong message about personal responsibility. It tells Americans in no uncertain terms that the major financial decisions they've made will have no consequences; the government will pick up the tab.
- A bailout allows banks, mortgage brokers, speculators, and refinancers to benefit from abuse of the system. By doing so, it encourages these people to act irresponsibly in the future. As long as we are ABOUT TO DIE A HORRIBLE DEATH papa bear will fix it.
- A bailout will force Americans who acted responsibly to pay for those who did not. My wife and I are going to have to save probably 20% to buy a house- but even still might be out of luck because speculators and over-extenders boosted home prices beyond affordability- and now we'll be forced to pay for the homes of those who were less scrupulous.
- A bailout will have a disproportionately negative affect on people under 35. Americans under 35 are disproportionately underrepresented among homeowners; only 42% of Americans under 35 own homes, compared to 80% for Americans 55 and older. A government bailout will perpetuate this gap by propping-up inflated housing prices, thereby permanently pricing a generation of youth out of the market. And in a Kafkaesque irony, these folks will actually have to pay to prevent themselves from buying homes (i.e., taxes).
But a bailout is also fiscally irresponsible:
- A bailout shifts the risks of falling market prices from financially secure banks to the American taxpayer. As a result, either taxes or the federal deficit will skyrocket.
- See this PDF from Denniger here.
- And another one here.
- Additionally, the methodology of the distribution of the 700 billion dollars is subject to the whims of Henry Paulson. Yes, the failed bill had oversight in it, but how many economics professors are in Congress? Oh yeah.
Finally, I'll close with some pretty hiliarious pre-vote McCain gushing. Oh John, you came and you made it allllll better...
"[T]his bill would not have been agreed to had it not been for John McCain. ... But, you know, this is a bipartisan accomplishment, a bipartisan success. And if people want to get something done in Washington, they just watch John McCain." — Former Massachusetts governor Mitt Romney, 9/29/08
"Earlier in the week, when Senator McCain came back to Washington, there had been no deal reached. ... What Senator McCain was able to do was to help bring all the parties to the table, including the House Republicans." — Senior adviser Steve Schmidt, 9/28/08
"But here are the facts, and I’m not overselling anything. The fact is that the House Republicans were not in the mix at all. John didn’t phone this one in. He came and actually did something. ... You can’t phone something like this in. Thank God John came back." — Sen. Lindsey Graham (R-SC), 9/28/08
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