In looking at the current financial situation, the most commonly posed question is: will the bailout work? This underscores the fallacies behind the “stimulus package.” While the politicians did a very skillful job of prognosticating doom if the bailout had not passed, they never took the time to examine the magnitude of their decisions. The fact of the matter is that $700 billion is a lot of money. This is more than has ever been spent on anything at one time, ever. The 1989 “deal of the century,” at that time the largest single purchase in history, which occurred when Nabisco was bought out, cost only $25 billion, $45 billion when adjusted for inflation1. Indeed, the buyout package is so big that it is still almost twice as expensive as the entirety of the German war reparations, which were valued at $32 billion dollars in 1921 and $394 billion in the present day2. The first question that we must address is, why so much?
If these companies have already made billions of dollars of risky investments, why should we trust them with a record sum? Aren’t they likely to just do it again? Most of all, why should the people that are victims of this greed, the middle and lower classes, be expected to pay for it? These thoughts never crossed the minds of the Washington politicians who were all too eager to yet again spend your money in furtherance of their own political livelihoods. While the vote did initially fail in the House, it was not due to true opposition to the bill, as many of the no voters quickly came around once enough earmarks and pet projects were inserted into the bill. The most outrageous of these was another $150 billion in tax breaks, which Jon Stewart quickly mocked, in an Italianate thug accent during his Daily Show segment entitled “Clusterfuck to the Poor House”: “Wait a minute, you want me to give away $700 billion dollars of taxpayer money to cover for Wall Street’s greed and incompetence? Well to do that, I’m going to need another 150 billion in taxpayer money.” Indeed, it is a sad state of affairs when a body that is democratically elected to “serve the people” can be swayed merely by money without showing any true conviction. It is doubly sad that the only people who were prescient enough to question this deal were the fringe members of both parties, most notably the far right Republicans.
This of course takes us to the effect of the bailout on the presidential election. While neither Barack Obama nor John McCain had the courage or the foresight to challenge the bailout, the latter showed far worse judgment. As McCain said recently on MSNBC’s Morning Joe, “This is a tourniquet. This isn’t a cure, okay. This is a tourniquet to stop the bleeding.” So basically, Senator, we just spent $850 billion dollars on a Band-Aid. We are not going to try and address the root of the problem and push for a complete overhaul of the banking industry, are we? But tell us Senator, what happens when the Band-Aid falls off? This is, of course, the great unanswered question in regards to the intended effects of the bailout. No one has as of yet addressed what will happen beyond vague statements about the money getting paid back and the potential profits that taxpayers will see.
While this sounds terribly optimistic, it is not as bad as the logic that John McCain employs, championing deregulation, something that led to increased corporate greed and the eventual subprime collapse. On October 6th, the Obama campaign released a video chronicling McCain’s involvement in the Keating Five Savings and Loan scandal, showing that McCain has a history of selling out taxpayers for “deregulation” and his own benefit. McCain’s response to this is that the scandal was a “political witch hunt,” utter nonsense as four of the five members of the Keating Five were Democrats. This is not surprising, however, considering that John McCain has, until very recently, repeated many times that the “fundamentals of our economy are strong.” The Obama campaign’s whole point is that John McCain cannot effectively govern as president if he gets bad information from his advisors. Indeed, McCain has one of the worst economic advisors possible in Phil Gramm, one of the greatest “deregulators” in American history, who has made the claims that we are in a “mental recession” and that we are “a nation of whiners.” If McCain cannot even find a surrogate that is incapable of offending large portions of the electorate, how can we expect him to lead on Iraq, healthcare, education, and the growing conflict in Sudan?
We cannot trust McCain on economics—that much is clear, especially since he by his own admission does not understand it. We must not, however, deify Barack Obama, who was himself considerably reckless in his unwavering support for the bailout. One thing that is certain, however, is that Mr. Obama understands the role that government should play (regulation of business to protect citizens) and the role that government should not play (regulation of contraception and abortion to satisfy fundamentalist voters). In this presidential election, the choice is between bad (Obama) and worse (McCain), and any reasonable person who has gone through the last eight years of worst (Bush) will take bad any day, although as they say, “Anything can happen in America.”