I had a friend many years ago who got seriously annoyed with me when I admitted, without embarrassment, an ignorance of economics. “How could any educated person talk like that?” he said. “If you don’t understand economics, you don’t understand anything!
I think that’s overstating it, but at moments like these, I wonder what he is doing and whether he remembers his old friend, the economic dunce, now reading the papers and trying to figure out what the hell is going on in America.
It appears there are three separate camps fighting over what to do about the Wall Street bailout:
A. those who want to give Paulson $700 billion;
B. those who don’t because they are against big government;
C. those who don’t because they believe it’s rewarding people who should be punished.
My head is with those in Group A, because all the smart people seem to be there – people like the Democratic Leadership, Paul Krugman, Barack Obama. And David Brooks. As Thomas Friedman put it this morning, “This is dangerous. We have House members, many of whom I suspect can’t balance their own checkbooks, rejecting a complex rescue package because some voters, whom I fear also don’t understand, swamped them with phone calls.”
My heart is with Group C, people like Barbara Lee, Dennis Kucinich, Michael Moore and that vast majority of American people - the kind of people making the phone calls. “…(O)ne of the best votes of my career,” says Representative Peter A. DeFazio of Oregon, about his decision to say no.
And, if you’re interested, going around is a list of a couple hundred economists who actually believe the bailout will make the economy worse.
Group A has a parallel mondo bizarro set of strange bedfellows. Pelosi and Reed and Barney Frank and Steny Hoyer all on the side of George W. Bush.
At the heart of Group B, from all reports, are the Republicans in greatest danger of losing their seats in the next election. They are aware just how angry their constituents are, and are joining hands to throw George W. Bush under a bus and demonstrate they are part of the McCain future, not the Bush past. Group B also includes right-wingers like Jeb Hensarling, star student of Phil Gramm and poster boy for the spending limits ideologists of the Republican Party dedicated to "protecting the family budget from the federal budget.”
What a delicious turn of events, watching Republicans fall all over themselves to vote with the extreme left. Will we ever see such goings on again?
I understand that the 777 point drop in the Dow Jones Monday represents a loss on paper of 1.2 trillion dollars. That’s $1,200,000,000,000 and no cents, right? Right? A trillion starts with twelve, count’em, zeros? The 777-point drop is an indication, the pundits tell us, of what will happen to all of us if they don’t agree on a bailout pronto. 1.2 trillion dollars we have one day but don’t have the next. Man, that’s impressive. Imagine what you could do with that money. One source I read suggests the burden of the bailout carried by Berkeley voters would pay for a year’s health care for every man, woman and child in Berkeley, with money left over.
But wait. The day after we lose 1.2 trillion, the Dow Jones goes back up 500 points. Doesn’t that mean that half a trillion dollars comes back? See? Not such bad news after all. And all those savvy investors pouncing on the opportunity to make a buck by buying low. Isn’t that a sign of health? Apparently not.
The guy who kick started all this deregulation business is McCain’s economic advisor Phil Gramm. Talk about throwing people under a bus. A better metaphor might be watching somebody kick doggie do off his shoe, McCain being the kicker and Gramm the doggie do. And, by the way don’t you love how the media pounced on McCain over his gaffe – saying on September 15 that the economy is sound, well after it became obvious the opposite was true. Just like his insistence that he saw this coming, after admitting he didn’t see this coming. What did we do before YouTube?
It seems pretty clear now with the failure of the first couple of rounds that they’re doing the requisite tinkering. Thank God. Imagine giving that lobbyist for Goldman Sachs, Hank Paulson, unfettered control over that $700 billion? Imagine giving any Wall Street banker that kind of taxpayer money? Any Bush appointee? Jesus, it makes your skin crawl.
But will the tinkering be enough? As Michael Moore points out, they may cut off the $60 million retirement bonuses to CEOs who bankrupt their companies. But couldn’t they just as easily increase their own salaries to make up the difference? Can the government really control salaries? Isn’t this a very strong argument for letting the markets work themselves out and let these greedy bastards take the hit?
The other side we always come back to is that there is no way, given the setup, that we can get these guys to take the hit without wrecking the entire economy in the process. Already people are talking about large corporations being unable to access the funds they need to make payrolls. And that will lead to layoffs. Loss of healthcare. Loss of pensions. And this whirlwind of spinoff effects leading ultimately to the economy screeching to a halt.
How many people can talk intelligently about leveraging? Tell you precisely how credit figures in and how much of this is “confidence building.” Explain market mechanics. This is an issue like stem-cell research where we would like to turn it over to the experts but know we have to get involved because the politicos certainly will and they will screw it up.
Like it or not, because there is so much we don’t know and don’t have the time to learn before a decision gets made, we are going to be at the mercy of “the experts,” including many of the foxes guarding the henhouse.
Chief of these is Hank Paulson, of course, a man who, I notice with alarm, once worked for John Ehrlichman. According to a Wikipedia article on him, in the leadup to the debacle,
• In August 2007, Secretary Paulson explained that U.S. subprime mortgage fallout remained largely contained due to the strongest global economy in decades.
• On July 20, 2008, after the failure of Indymac Bank, Paulson reassured the public by saying, “it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”
• On August 10, 2008, Secretary Paulson told NBC’s Meet the Press that he had no plans to inject any capital into Fannie Mae or Freddie Mac.
• On September 7, 2008, both Fannie Mae and Freddie Mac went into conservatorship.
This is the guy who’s going to fix things?
I note he is also devoted to fixing the environment. Was an Eagle Scout. A Christian Scientist. Maybe, this little voice says, he’s more than just another member of this Bush gang.
And that makes me worry I’m just one more of America’s millions of wishful thinkers.
Wonder if we are going to survive this one.