I, personally, do not know if the bailout is a good idea or not. There is precedence for such a move. Back in the early 1990's when the S&L's (Savings and Loans) began to go bankrupt after the first real estate balloon popped, the government created a GSE (Government-Sponsored Enterprise) known as the Resolution Trust Corporation whose job was to buy bad investments from the S&L's to get them off the books of those S&L's to make them solvent again and to get the credit markets going again. Sounding familiar, anyone?
In the end, the RTC held those investments for several years until the markets stabilized and began to heal at which point, the RTC began to slowly sell off its investments. By the time the RTC had dissolved itself, the government had actually realized a significant profit, so the S&L bailout didn't cost taxpayers a dime.
Normally, my free market senses tell me this idea is a really bad one, but the fact that the RTC did exactly what it was intended to do and solved the S&L crisis at no cost to taxpayers and then dissolved itself tells me that this bailout may not be such a bad idea after all. What I would strongly oppose is if the government kept its shares in the bailed-out banks after the new RTC dissolved since the government has no business owning commercial banks or investment banking companies. For example, as a condition for bailing out AIG, the government took an 80% equity stake in the company. That is socialism, which I will oppose with every fiber of my being. Seeing as the government caused this whole crisis to begin with because of the interference in the banking industry through the Janet Reno Justice Department's attempts to eliminate red-lining through its enforcement of the Community Reinvestment Act and the involvement of Fannie Mae and Freddie Mac in creating and encouraging the sub-prime mortgage market, government's future involvement should be kept at a minimum to keep this from happening again.
Yes, it'll cost taxpayers potentially up to $700 billion up front that will have to be borrowed and will go straight into the national debt. But if all goes according to plan, and there's no reason to think it won't with the precedent set by the RTC, in the end the taxpayers will wind up with a profit which will go towards retiring that $700 billion debt and then some. Does anyone doubt that the real estate market will eventually recover? As President Bush said in his address to the nation, government is the one entity that can afford to wait for the market to recover while sitting on these bad properties, at which point we will begin recovering all of the $700 billion and then some.
One of the arguments House Republicans had with the original bill was that Democrats wanted to divert half the proceeds into government housing trusts instead of 100% of the proceeds going to retiring the debt. That was where the whole ACORN discussion came from. One of the chief beneficiaries of the housing trust funds is ACORN, a far-left entity best known for conducting massive voter fraud, but which also participates in the low-income housing market.
There are certainly a lot of outrageous riders that went into the final bill that should never have been there. Instead of a three-page bill, it turned into a 450+ page novel full of special interest provisions as is typical of Congress. I'm rather upset that John McCain didn't come out and name names of those who added those ridiculous riders as he promised to do when he is president. Why not start now with such a great example? Another outrageous provision is that judges will decide in bankruptcy court how to renegotiate interest rates AND PRINCIPAL owed on defaulted loans. What bank will loan money when they can't even be guaranteed principal when a judge can just wave his hand and make the whole loan disappear?
By the way, Ann, you're still falling back on the old canard that lowering taxes somehow always reduces revenue when it's not the case. Revenue is directly tied to the health of the economy, which always swamps changes in rates. So if the economy is healthy, tax revenues rise at a dramatic rate while tax revenues fall dramatically when the economy is not healthy. Both McCain and Obama propose tax cuts for the simple reason that it stimulates growth in the economy. Once the economy starts to grow, the deficit will begin falling again. Up until this current economic slowdown, the deficit had been falling very rapidly despite a tax cut, only to reverse the trend when the economy began to slow due to the real estate crash. Remember that Kerry and Bush had both proposed in 2004 halving the deficit by 2010? The deficit had been cut in half by 2006, far ahead of schedule, because of the health of the economy which at that point was growing at about 4% annually. People seemed to have forgotten that during the entire middle of the Bush Administration, we've had a pretty good economy with very low unemployment dropping all the way down to 5.1%. We had the lousy economy at the beginning due to the dot com bust and 9/11, and again near the end of the administration when the real estate bubble burst.
If you want to cut the deficit, you have to get the economy going again as the only way to raise revenue. Even a socialist like John Maynard Keynes would agree with tax cuts at this point. Keynesian economics says to cut taxes during an economic slowdown and to raise taxes during an economic expansion. So at this point in time, socialist Keynes and supply-sider Arthur Laffer would agree with each other. Note that neither Obama nor McCain are supply-siders. McCain opposed most of the Bush tax cuts.
As for whether the supply of borrowed money will eventually dry up, that is always a risk. It has never happened, though, so the likeliness of it happening now is slim unless the credit markets seize up entirely as banks fear further collapse of other fellow banks. That's what the bailout plan is intended to solve. It's to prevent the seizing up of the credit markets.
One of the most important things we can do is to get ourselves more towards energy independence. The main reason the administration supported a weak dollar was because that boosts exports while holding down imports. It didn't work to reduce the trade deficit for the simple matter that oil quadrupled in price. The largest component of our trade deficit is oil, costing us more than $500 billion a year. While the US is setting records every month for exports, our imports continue to increase in price because of oil, leading to even larger trade deficits. If we were energy independent, our trade deficits would have nearly disappeared over the last few years. Granted, that's a big "if."
One of the largest untapped supply of oil in the world is actually sitting right smack dab in the middle of the United States, though it's locked up in shale. When oil was costing $20/barrel, it was unreasonable to tap those energy supplies. With oil at $95/barrel, it becomes profitable for companies to do so. Yet, it's Harry Reid who snuck in a provision into the last energy bill that would prevent any exploration of shale. And even with the lapse in the ban on off-shore drilling, Democrats are relying on their allies in the environmentalist lobby to use the courts to stop any actual drilling. So while the American people are clamoring for more oil supplies from our own territories, Democrats are doing their best to make sure we get nothing at all. No off-shore, no shale, no ANWR.
It's also ridiculous whenever Democrats say it'll be five years before we ever see a drop of oil from these new oil fields. Well, Republicans have been trying for decades to allow for drilling in those areas, only to be stopped every single time. Now if they hadn't opposed drilling for twenty years, we'd have been producing oil from our own supplies for decades. Each time they say no, that five year time frame moves out even further. If they had only said yes, five, ten, fifteen, twenty years ago, those fields would be producing now.
They clamor for alternative energy. Well, nobody opposes alternative energy. To rely on it, though, is sheer folly. It may take ten, twenty, thirty years before we produce even a small amount of energy from those alternative sources to make them worthwhile. So what's the problem with allowing real oil that we know WILL give us energy to be produced until such time that alternative energy becomes useful?
Because of this resistance to drilling, we've gone from 40% dependence on foreign oil to over 60% now. Without additional domestic supplies, that figure will continue to creep even higher, continuing to balloon our foreign trade deficit as well as making the Middle East even more prominent than it is today.
