Economic Solutions

Written by: David Reiter on Sep 27, 2008 12:22 AM EDT

Linked to groups: Democracy for America Miami-Dade (DFAM), DFA-Link Organizers, DFA Blog Network, Florida DFA, Progressive Businesses and Professionals for America, Blog For America, Democracy for Wall Street

Linked to campaigns: Obama for America

According to McCain last week, the economy is fundamentally strong.  Acording to McCain this week, the economy is in such terrible shape, he must suspend his campaign. 

George Bush surprised everyone with his Paulson-authored plan to socialize the banking and mortgage industry.  I think the Democrats are shocking us all for appearing to go along with it. 

Republicans appeared to support the bail-out plan, then reverted to the old mantra of 'let the market sort it out.' Now, both parties are debating how best to prop up our 'economy' by lending money or taking ownership (socializing) of domestic and foreign banks that have mismanaged their portfolio of risk.  Meanwhile, the parties are talking a good game about how they are ultimately protecting the taxpayer with these plans.  Oh...and hard-line Republicans are supporting the 'your on your own' policy of thinking the market will correct itself.

I put the word economy in quotes (above) because I think there is a clear disconnect between what the economy is and encompasses and what the offered solution addresses.  The economy encompasses many things: GDP, credit, productivity, value of currency, trade, wages, employment, taxes, markets, banking, industry, inflation, and much more. What is being discussed in Washington is myopic in nature because it is only addressing one or two small areas of the economy---and the proposed solutions come with a hefty price tag.

What this $700 Billion plan addresses is a small portion of what the economy is.  In addition, to put this amount in perspective, $700 Billion is what we have spent on a war that has driven us deeply into debt over the past 5 years.  $700 Billion given, loaned, or taken in shares of ownership...is a short-term solution that promises to put our economy in further trouble down the road.  This $700 Billion, in whatever form it leaves the Treasury, will decrease the value of the dollar, provide more credit liquidity for companies and people to get into deeper trouble with, increase inflation, and do absolutely nothing to help the average American in the long run.

I'm not going to pretend that I have any answers or clear solutions, but I do have some ideas that I don't hear anyone debating.  Many are talking about taxpayer protections for the money used in the bailout.  Nobody is talking about helping the average homeowner or coming up with any ideas about how to prevent the rapidly increasing rate of foreclosures.  The bailout does nothing for that person sitting in a home they can no longer afford.  The bailout does nothing to increase demand for properties, and the bailout does nothing for the average American in the way of protecting their tax dollars.

If our government wants to socialize the mortgage system, then they should be giving low interest loans or taking partial ownership of homes that are in foreclosure and providing some payment relief to homeowners.  It is the American homeowner that is in danger of foreclosure that needs the bailout, not corporations that had the expertise to mange risk effectively, but chose not to.  Franklin Roosevelt had the sense to care for the American people when he bailed us out during the Great Depression, and the economy as a whole benefited from it.  In fact, the banks and shady institutions that created the problems were finally regulated to a degree that prevented future economic collapse ( until Republicans deregulated over the past decade).  The companies were punished, the people were protected, and the economy grew stronger than any other in the world.  The economy did well because it was driven from the bottom-up not 'trickled-down.'

John McCain says that the American worker is more productive now, than ever.  This is true...but the more productive the American worker is, the less compensation we get.   Here lies the thread of disconnection of what the economy is, versus what is being addressed as the economy in the public forum.  For Republicans to suggest that the fundamentals of the economy are strong because of the productivity of the American worker, really shows where their values lie.  It appears that this view is almost one that relegates the American worker to slavery status...that the workers are doing better and producing at a higher level than ever before, but wages are down and companies can't make a profit.  This is disconnection at its base level.

The problem is that companies overextended on credit, forced the American worker to do the same (to borrow from the companies that extended their borrowed money as credit) as a result of the cost of living, and the return on the investment of that credit was less than the interest paid for it (the money borrowed). 

So why are the companies getting bailed out, and the taxpayers are left holding the bag?  Why is there no plan on the table to bail out the average American that is staring down the barrel of a foreclosure?  Why is nobody repealing the recent bankruptcy legislation that ensures people could be enslaved to debt for the rest of their life? 

There are plenty of solutions that can help the homeowner and taxpayer, but what is being debated in Washington is nothing but a short-term fix to provide short-term confidence in the stock market--and longer term problems.  There should be no rush if the solution is to be done right.  A solution will not arise from our elected representatives (who are not economists) debating solutions...because they do not know what solutions will work.  There should be a panel of economists in every meeting with our legislators to guide them on the appropriate course of action.  An elected official should be able to tell a panel of economists what the desired end result should be, and the economists should suggest the appropriate course of action for that result.  Listening to Bernanke, Paulson, and selected lobbyist-paid advisors in private doesn't solve anything.  From what I saw this week when Paulson and Bernanke were questioned, is that our elected representatives don't know any more about the economy that you or I.

We should be taking our time to develop the right solution, not the quick solution.  Lets not get '9/11'd' into a decision we will regret.  Lets keep our eye on the ball and not be distracted by short-term gimmicks designed to last through an election. 

DReiter 9/08

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