The Bush bailout is dangerous. 192 economists from the highest rated institutions in America are going on record to make sure Congress and the American public are not fooled by the Bush Administration's scare tactics.
These leading economists say Congress should slow down and develop a plan that is more fair, less ambiguous, and has fewer long term effects on the budget.
It is easy to believe Bush and Paulson when they say that the a bailout is required to avoid a depression. The fact is that cash exists for American businesses to continue. It may come from different sources, though. The current investors in our financial institutions may not be that source. This does not mean we should save these investors. Their risky decisions should result in losses.
Government intervention is necessary to facilitate a smooth transition in the capital markets. Facilitation is not acquisition though. Voters do not need to buy these assets to ensure that they land in the hand of more responsible investors and managers.
Ask yourselves why free market, anti-interventionist Republicans like Bush and Paulson are recommending such an expensive and risky strategy that violates everything they believe. The answer is in their backgrounds. Paulson's career and a significant portion of his personal fortune of $700M are tied to the financial institutions he wants to save.
The rest of us in the middle class, on the other hand, have less to fear from the failure a few financial stocks. Our fortunes, the fortunes of Main Street, suffered last year when housing prices started falling. Our incomes have been further put at risk by the increase in taxes that will be required to pay for this expensive plan. This bailout will cost $700B. The government only collects $1,600B in federal taxes. This means the bailout is the equivalent of a one time tax increase of 45% to the average American.
Bush is cutting taxes now but increasing spending so we will have to pay later. He is no better than a predatory lender that convinces you to sign for increased payments by cutting your introductory interest rate. Allowing this bailout makes us no better than the lender that signs the deal. The bailout is simply the latest and largest in a string of Bush policies that use fear to convince us it is OK to tax the middle class to save the rich.
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