By Bob Herbert of The New York Times
The most important thing the Democrats and President-elect Obama can do with regard to the economy is bring back a sense of fairness and equity.
The fat cats who placed the entire economy at risk with their greed and manic irresponsibility are trying to lay claim to every last dime in the national Treasury. Meanwhile, we’re nowhere close to an economic recovery program that will help the people who are hurting most.
Back in September, with the credit markets frozen and the stock markets panicking, the treasury secretary, Henry Paulson, was telling anyone who would listen that his $700 billion bailout package had to be passed with lightning speed — no time to look at it too closely, no time for dissent.
The package was modified, but hurriedly. Now we learn that while all eyes were focused on this enormous new burden for American taxpayers, Mr. Paulson’s department was also engineering — separate and apart from the bailout — what The Washington Post described as “a quiet windfall for U.S. banks. ”
With virtually no public attention, and without the input of Congress, Treasury made a change in an obscure tax provision that benefited banks to the tune of well over $100 billion. Was this good policy? In the absence of proper scrutiny, how is it possible to know?
We’ve also learned that the government bailout of the giant insurer, the American International Group — already more than $100 billion — is apparently insufficient. Tens of billions more are needed.
When the Champagne and caviar crowd is in trouble, there is no conceivable limit to the amount of taxpayer money that can be found, and found quickly. But when it comes to ordinary citizens in dire situations — those being thrown out of work or forced from their homes by foreclosure or driven into bankruptcy because of illness and a lack of adequate health insurance — well, then we have to start pinching pennies. That’s when it’s time to become fiscally conservative. President Bush even vetoed a bill that would have expanded health insurance coverage for children.
We can find trillions for a foolish war and for pompous, self-righteous high-rollers who wrecked their companies and the economy. But what about the working poor and the young people who are being clobbered in this downturn, battered so badly that they’re all but destitute? Can we find any way to help them?
This is no ordinary recession. With brokerage houses, banks and a mammoth multinational insurance company depending on the Treasury for resuscitation, and with automakers like General Motors staring bankruptcy in the face, it has the feel of a monster downturn, a recession on steroids.
That kind of downturn buries people at the bottom of the economic ladder. We have an obligation to look out for them as well as for the banks and the A.I.G.’s of the world. If I could place a message on the desk of the incoming president, it would have just one word: Jobs.
With credit cards maxed out, the stock market in the tank, family savings depleted and home equity evaporating, that weekly or monthly paycheck has never been so important.
Congress and the new administration need to think big — bigger than the stimulus package of $100 billion or so, which is being kicked around. Now is the time for a coast-to-coast “Rebuild America” infrastructure program. Put people to work repairing and rebuilding roads and bridges, decrepit schools and ancient sewer systems. Get the construction industry back on its feet.
And now is the time to get going on candidate Obama’s promise to move the country as close as possible to a system of universal health insurance. Pump the money from that vast project into the economy and get those jobs up and running.
And let’s get some help, quickly, to the families who are suffering most from the housing crisis — the ones trembling and heartbroken in the dark shadow of foreclosure. The naysayers will claim that all of this is too expensive, that we can’t afford it. Where were they when we invaded Iraq? And how do they feel about the staggering amounts being funneled, with nothing like the proper oversight, to the banks and Wall Street?
Let’s try investing in America and its people for a change, rather than just hurling our billions into the abyss.
3 comments:
Hate to say it (perhaps I take a little joy in it), but I told you so! Yet, you mocked me as "completely out of touch with reality" when I raised these very points.
A) You are completely out of touch with reality :-)
B) I never said I was in touch with reality either :-)
C) Just because I print someone else's opinion doesnt mean I agree with all of it 100%
For starters, I didnt recommend the 700B bailout without reservation, I endorsed it but I had serious reservations and I continue to endorse it with serious reservations. I do think it was very, very important that the 700B package was passed and passed swiftly. I do believe that the world is not flat, we cant save Main Street without saving Wall Street.
Now, it turns out that some of these wall street firms cant be saved, their books are beyond salvation. But companies like AIG, really everything possible needs to be done to keep them from failing. If we do everything, and they still fail, and the economy crumbles around them and we spiral into a 10 year depressio, at least we tried. But if there is a chance to save some if these institutions and saving tens of thousands of people from losing their jobs, I personally think the responsible thing to do is to try. We throw them a lifeline, and if they still sink, the boat couldnt hold em anyway.
But, Herbert's point, which you missed in your "I told you so" glee, was that we MUST save Main Street ALSO. If we dont create a plan to save Main Street as well as the fat cats, then all is truly lost; the trickle down effect has to trickle both ways, and for the last 10 or so years it has only trickled upwards. That is the problem Bob Herbert is describing.
Where Herbert goes wrong is in failing to realize that companies like AIG arent made up 100% by people who earn $1M a year and more, its a huge company with 116,00 employees. So, maybe 500 of them are undeserving of their paycheck, but what about the other 115,500 who had no responsibility for the company's meltdown and did their jobs well? Do they deserve to lose their jobs? Do they deserve Herbert's scorn? Of course not.
Although I agree with Herbert that there was not enough oversight in the 700B bailout, and shockingly little in the changes to the tax code which benefited banks to the tune of 100B, I think his criticism is overwrought and hyperbolic. He is most certainly not an economist, although he does have a great feel for the American public and voices their opinion quite well. I realize that millions of Americans agree with Herberts characterization of our government's respoinse to this financial crisis, I just dont agree with it completely, and certainly dont agree with the language he uses to describe it.
But I understand that sentiment. I respect it. There is some truth to it. Certainly, the government has spent plenty of time and money trying to fix Wall Street, with mixed and undertermined results so far. However Herbert is most correct in asserting that the time has most certainly come to focus our efforts on rebuilding Main Street and flooding the economy with green jobs.
The purpose of the government is to protect the little guy. Herbert's point is that from the view of your average American, the government has been protecting corporate America and the rich, and I think there is a large degree of truth in that. But the reality which Herbert and millions of Americans refuse to acknowledge is that while banks and financial institutions losing money hurts the economy, having those institutions fail altogether would be an unmitigated economic collapse that affects every single person in the country.
Woot I successfully provoked you into arguing with me.
/stupid Cheshire grin
These criminals looted wall street and then got bailed out. In 2007 the big five firms paid out $39 Billion in bonuses while accruing $74 Billion in losses for their clients. This year's bonuses are expected to be only $16 Billion despite epic losses. This is where the scorn comes from.
This bailout has done nothing to stop main street from suffering dearly. The banks have not used any of the bailout money to lend to consumers. The credit crunch might have eased a tad, but only for interbank trading. Home, Auto and college loans are all becoming very difficult to secure. This is because our rushed bailout did not require the banks to unfreeze lending like the British bailout did. I never said we shouldn't try to help these companies, but we must be wise and deliberate in our approach.
We don't even know what the fed is really doing. They have refused to release any info on the $2 Trillion in loans (not part of the $750 Billion plan) they have approved to ease this crisis. They won't say who they gave the money to nor what they have taken as collateral.
We cannot allow the Bush admin to "starve the beast" to the point where Obama's hands are completely tied by a bankrupt government.
Reagan and Bush 1 were pretty good at that, but this administration is proving to, for the first time, outperform all expectations.
These same scare tactics are being used to drum up support for a rushed US auto industry bailout plan. Perhaps they will be smarter with these plans but I imagine it will be just as dumb. Unless the top three levels management are sacked at these companies they will continue to produce inferior products that no one wants and they will never repay our loans. Just this week GM announced plans to open a $300 million new plant in Russia to produce more SUVs. If that doesn't prove how clueless they are, I don't know what does.
GM executive pay
It is important to note that GM and Ford's trouble started long before this downturn. They were once again caught unprepared for an oil price spike, and we have to bail them out for it.
Toyota is still turning a profit albeit reduced by 70% to only $5.6 billion.
Yes I understand these companies represent approximately 1 in 10 American jobs totaling 3 million industry wide. This would be an unacceptable loss of production for our economy and I agree something must be done.
It is important that if one of these big three goes down, their assets are not sold off to a foreign company at bargain basement prices. We must retain these important assets. Our manufacturing base has already been decimated and should not be allowed to further deteriorate.
I believe/hope that we should be investing the money in new startup companies that can replace our aging dinosaurs. Companies like Tesla Motors, Aptera and Fisker. These are companies ready to lead the way and should be given the chance to succeed for they see the future.
Perhaps I don't have an MBA in econ, but I do have an MBA in entrepreneurship. Job creation has always come from new startup companies, old dinosaurs are usually a net loss for jobs. It might be time to put some these lumbering giants out to pasture.
ok enough ranting for the day. Thanks for giving me the opportunity to get that off my chest.
Off to get my Redman/Method Man tickets.
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