Fluidity: The Ever Changing Bailout Plan

Henry Paulson defended himself before Congress today, arguing that the original concept of the bailout plan (excuse me, economic recovery plan), which largely involved buying up 'toxic securities' (tied to unknown amounts of bad mortgages), is no longer the best solution to the credit and financial crises. Paulson now argues that $700 billion in tax dollars should be used to buy partial ownership stakes in the banks themselves. Nationalization of banks in the good 'ole USA? The idea boggles the mind. Perhaps it'll mean better management; at least AIG won't use any more of the loan to take its Exec's on nice spa trips; but I can't help thinking that this trip down socialism's memory lane it just going to keep getting darker.

In the meanwhile, AIG is getting another $40B, while American Express convinced the Fed. to allow them to become a real bank in record time, which may now use that status to request a share of the pie. And to top it all off, the Dynamic Duo of Henry Reid and Nancy Pelosi, backed by that happy socialist, Barney Franks, is demanding to bailout the auto industry, mortgage-holders, and just about anything not nailed down, while increasing spending at an enormous pace, deficit-be-damned.

Most of us are sensible enough to cut back on spending when times get tough - to be a little more thrifty. Not the Congress. They seem to think that increasing spending, increasing taxes, and taking over private industry is just the ticket to fix the economy. Now where have we heard this before?

Other People's Money

We are in the midst of an election, spread out over several weeks (counting early voting), where the debate about the nature and morality of taxation, wealth-creation, jobs-creation, and individual rights have become very stark. On the left, we have Sen. Obama, who proposes that spreading wealth from higher income brackets to lower is a patriotic duty. In addition to proposed tax giveaways (since 40% of recipients do not pay taxes to begin with), he proposes massive spending increases, all of which is to be balanced on higher taxes among the top 5% of earners in the country. I would argue that such a system would not only dramatically increase the deficit, pushing off payment by two generations, but would move us into a genuine welfare state, and prolong the recession (if not push us into a recession as Steve Forbes argues). In the center, we have Sen. McCain, who while (in my opinion) making too many concessions to populist impulses, resists tax increases, emphasizing instead spending cuts.

I'm a happy fiscal conservative - I strongly oppose what Pres. Bush and the former Republican Congress did to balloon the deficit, and expand government. But the trillion-plus dollar deficit facing us today is nothing compared to what will occur if Sen. Obama is elected and the Democrats have a super-majority in Congress. Rep. Franks made that abundantly clear in his interview on CNBC the other day (see my posting of two days ago for the video). He wants to take actions that will immediately increase deficit spending pushing us into the multi-trillion dollar range. He also strongly implied that this spending will be only partially offset by, you guessed it, higher taxes at increasingly lower brackets. We have had a relatively long period of growth in this country precisely by ridding ourselves of regressive taxation and spending schemes. Now we face the spending proposals of Sen. Obama and Congressional leaders, and it's clear that these increases can not be accomplished without dramatically increasing taxes within the middle-class brackets as well as the 5% proposed. Additionally, why should we be punishing those 5%. Shouldn't we make it easier for them to create jobs and wealth?

Neal Boortz made an excellent case in his article on RCP today for avoiding such 'tax-and-spend' policies, particularly when we're in a nasty recession. They destroy wealth, rather than create it, and they create a culture of dependency. Policies such as these are a disincentive to work, expansion, and investment. Sadly, the well-noted biases of the wider media make it difficult to get this message out. People are hurting. I have friends and family facing job and housing losses. These are painful times for many. But, pain is not a reason to shoot ourselves in the national head. Rather, we should be looking for national policies that allow for greater opportunity, wealth and job creation. The government should have the fiscal policies and discipline to create the environment, not manage the process. Finally, the government should not be burdening my future grandchildren with debt from welfare passed out today in the interest of buying an election and sewing up power. That's just not the hope we need.

Another great video

Frankly, I think this and others like it should be running as ads everywhere.

Bailout redux