Monday, September 22, 2008
Much in the same way the Bush Administration convinced us of the need to invade Iraq, once again it is asking us take emergency action to spend hundreds of billions of dollars to solve a problem that we have little more than its word to believe exists. Sound familiar?
We need to calm down, and demand that the Administration answer the following questions, among others, in detail and with hard evidence to prove their assertions:
1. Define the objective(s). What, specifically, can we reasonably expect to accomplish by spending the $700 billion dollars our Administration has requested?
2. Other than the understandable panic and tightening of credit associated with our government leaders predicting a worst case scenario for the economy, what specific evidence is there that our financial markets will not recover in due time, on their own? What proof is there, in other words, that the private sector will not recover, that there will be vast and horrendous repercussions for our citizens, without government assistance?
3. How does the government explain the resolution of problems at Merrill Lynch, Lehman Brothers and other corporations involved in trading (Constellation Engery, for example) without the need for government support? Please include in that list the pending merger of Wachovia with Morgan Stanley which was derailed when the Administration allowed Morgan Stanley and Goldman Sachs to become commercial banks.
4. Other than spending $700 billion to buy defaulted subprime mortgages, what other solutions might accomplish the same objectives, perhaps even more effectively? Alternatives to be considered might include: Guarantying the firms who hold these notes against losses resulting from their liquidation, including the sale of collateral real estate, to be paid when those losses are realized, and not before. Directing our resources to protect those ordinary citizens who may eventually suffer as a result of this bad debt – given that it’s not clear what these losses might be, if any. And my personal favorite, doing nothing at all.
5. Precisely how was the $700 billion calculated, within what margin of error? What assurances do we have that this $700 billion will accomplish the objective, rather than just being the down payment on a more expensive program with additional installments to come?
6. And finally, what specifically are the negative consequences of our incurring this gross amount of additional national debt, while interfering with the natural corrective measures and other competitive behavior of our economy?
For being asked to spend $700 billion dollars we don’t have, and to put control of that money in the hands of a single person without meaningful oversight, answering the questions I’ve posed would seem to be the least our government can do – which is ironic given that doing the least it can do is certainly a major explanation for how we got into this mess.