Aside: I'm amazed that they still haven't gotten this done. It's hard not to chalk it up to a failure of leadership from both parties. If the duly elected leaders of both parties (not to mention those vying for the presidency) feel like however bad the bailout is it still has to get done for the sake of the economic future of the nation and they can't twist, cajole and honey enough votes to do so . . . . it's hard to see exactly which part of our government is currently functioning.
September 29, 2008
"Oh my God"
That's a direct quote from Congressman Jim Marshall of Georgia (our new home state) in this short 3 minute piece on NPR this afternoon. The interview took place prior to the announcement that the bill had failed and the stunned silence after the interviewer relates the news to Marshall mid conversation is palpable and a little scary.
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9 comments:
Come on now, isn't this an example of what the government is supposed to do? Amongst those of us who don't know better, this is the largest waste of money since the bear DNA study (probably my favorite quote from the debate the other night). I read somewhere (I thought it was here) that the reason this is getting hung up in the house is that those poor saps have to go face their electorate in a couple of weeks and come up with reasons that they just spent 700B of taxpayer money on things that are less understood than the reasons why Palin was chosen as the VP.
If there are any economists out there that want to set me straight, feel free to do so, but from where I sit the market fell b/c the folks who got us into this mess were about to get off scott free and are being held responsible for it, so they decided to throw a tantrum. I am sure at some point (probably sooner than later) this will affect me. But speaking as someone who has been struggling to pay his bills for the past three years, go cry to someone else for a change...
that's definitely a possibility.
but, the only case that was made that i could understand was the case for a bailout. nobody seemed to like it and nobody seemed to like the bill that ended up on the table (which in the case of issues like this i assume that the only things that end up having a chance to get passed are bills that people don't really like) but when it came down to having a bad bill versus the consequences, even the potential consequences, of doing nothing . . . a bad bill seemed the way to go. the only argument that i heard from the other side was screw them, they deserve it, they made this bed so let them sleep in it. but the economy is a pretty big bed these days and i worry that i've got bed-mates i don't even know about. lastly, for all my cynicism, i do actually expect the government to do the right thing when our backs are to the wall - this feels like one of those moments - and they dropped the ball (this guy apparently agrees with me) . . . .
what do i know . . . . i'm also worried about the rate of germination for my parsnip seeds.
oops, published prematurely . . . . the only other thing i would add is that those in favor of the bill failed to make their case in a way that the average american (myself included) could really understand it. when congressmen are saying they are voting against the bill because they are getting calls 100 to 1 against it i worry that the driving force behind their votes isn't fiscal responsibility, or fiscal triage in this case, but votes in november. the leadership failed to convince the rank and file and the rank and file failed to convince their constituents and nobody had the guts to go against the grain . . . . or so it seems.
I hear what you are saying, but I don't hear what "they" are saying. What will the ill effects be? Paint me a picture that says something scarier than "the markets will seize" or "credit will dry up." Tell me that I won't be able to sell my house in nine months or they will repossess my bike. All I am hearing now is that we should trust these guys, they are good for it, they won't make the same mistakes again.
It is a crisis in leadership, a crisis in believing that the people at the top are capable of even acting outside of the self interest of their lobbyist friends/corporate masters. Or maybe it is class warfare at its ugliest. Or maybe this is "trickle-up economics." The bill of goods that has been sold the most susceptible is coming back to bite the seller. Should be interesting to see what happens. See you on the bread lines...
J, you would feel better if you didn't get your news from NPR. For an alternate plan check in with Newt Ginrich.
Well, the downside is that banks stop lending, causing interest rates on commercial loans to rise, and in turn increased bank failures. A good old fashioned bank run. This would impact firms ability to borrow, to expand production, etc. The response to both is a fall in income for families as they watch both their home prices plummet, and their 401(k)'s plummet due to the beating the commercial sector is taking. This triggers the shift in aggregate demand (or maybe it was triggered before), and so income falls, causing spending to fall, causing income to fall, etc - the vicious cycle of spending/income, multiplying through the economy. The final outcome, though, is rising unemployment, reduced output, and the increased family instability that always comes with even the mildest of recessions - marital dissolution, spike in suicides, increased crime due to increased unemployment, etc. Point is, critics are under the false belief that these problems are contained by the financial sector - that the costs of this meltdown will stay there. That's not what I'm hearing, and that wasn't what happened with previous crashes. The financial sector is a key link connecting savings to investment, so longrun growth is also potentially at risk. All in all, it's got a probability of being a really catastrophic situation that is above .5 but below 1, and even the most cynical economists seem to agree the Treasury needs to act immediately. The Fed pumped $630 billion into the economy today as a kind of plan B, so hopefully this failure of the House bill will be handled. But it's not like the Fed has infinite reserves. The cycle falls on the backs of working people the worst of all. They're the last to get hired and the first to get fired.
Tyler Cowen has a nice short best/worst case scenario summary
The best case scenario, Cowen writes, is a 2-year recession with unemployment that doesn't get over 8-9%! Wow, I now want to throw up. If he's bounding the outcomes like that, that is bad news - any other time in the last 50 years, and that's going in the worst case category.
I guess calling the Greenspan age the "Great Moderation" is now going to have an asterik after it.
Pomeroy, well done. Why haven't I heard it broken down like this?
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