Sunday, September 28, 2008

Reflections on the bailout

Earlier I posted an article concerning my views on the proposed Bailout.

Several of my Gentle Readers commented upon that article, including several comments that the 'Bailout' wasn't really going to cost us anything, and that we might actually make some dosh off of it.

I find that assertion that the 'Bailout' wouldn't cost us anything to be rather interesting.

Check my logic here.

The money that Congress throws around like confetti mainly comes from taxes. Indeed, that seems to be the explanation as to why the Federal Government takes money out of each and every one of my paychecks.

At gunpoint, I might add, but that is a rant for another time.

So. If the proposed 700 billion dollars is coming out of the money held by Congress; and if most of them money held by Congress comes from taxpayers ...

Is this 700 billion dollars being donated by a foreign government? Is this 700 billion dollars a generous gift from space aliens? Is God going to dump 700 billion dollars on the Capitol steps?

Because -- near as I can tell -- unless that 700 billion dollars is coming free from an outside source, seems to me like that 700 billion dollars is coming out of the pockets of taxpayers.

In which case 700 billion dollars costs the taxpayers about, oh, let's see here ... 700 billion dollars.

It has been gently suggested that actually what is meant is that the 700 billion dollars will, indeed, come out of taxpayer funds, but that over some time that 700 billion dollars will be recouped through investments in the "revitalized financial market".

Hmph.

Okay, then, when can I expect my cheque?

My "fair share" of that 700 billion dollars is either coming out of the taxes I have already paid, or taxes that I will be paying. I don't have a choice in that. The Federal Government WILL take my money.

I don't have a mortgage to be saved. I don't have any loans -- I was a responsible adult and paid them all off -- I don't have any US investments, my credit card balance is zero, and my retirement is through the County government.

So when do I get my "fair share" of that 700 billion dollars back? When should I expect that cheque in the mail?

LawDog

19 comments:

Tim Covington said...

You don't. For one reason, the government is already having to borrow the money to do this. At best, it will be used to pay that back. We are already running massive deficits, I doubt it will be paid back in our lifetimes.

Anonymous said...

Don't hold your breath, odds are long that this is just the beginning of funds Fedco is going to be giving to people that don't deserve them.

The market is self correcting, until the government steps in and tries to help.

Gmac

RoaVaPD said...

BOHICA.

Bend Over Here It Comes Again.

I'm from the government, I'm here to help.

easily lost said...

I vote for the aliens loaning it to us, I don't see a foreign Gov't doing it.
I am of the belief that if I have loans and credit cards I am responsible for paying them off, surely the gov't won't step in and do it for me. I am also of the belief that the companies that are now on the list for the bailout should suffer and do it themselves, without anyones help. They made the choice to loan to people who they realy shouldn't have, they changed the rules, it's their own dayem fault.
Irresponsibility should not be rewarded, I don't care what kind of minor strings they claim are attached.
Sorry I had to put in my 2 cents.

TBeck said...

We'll get it from the Chinese and the Arabs, just like normal. Think of it as national security; the Chi-coms won't dare attack for fear that we will default on a few trillion dollars of their hard-earned cash.

Nobody, including myself and Secretary Paulson, thinks that this is a good idea. It's just the least bad option that we have.

This isn't a handout. It's more like a fire sale, except that the entire economy is burning down to the waterline.

wolfwalker said...

So when do I get my "fair share" of that 700 billion dollars back? When should I expect that cheque in the mail?

Probably never. I agree that viewed in this way, the "bailout" plan does indeed cost taxpayers a lot of money. However, I don't agree this is the right way to view the plan.

The federal government is already running deep in the red. It faces some gigantic debts coming due in the next twenty years, primarily from the retirement of the Baby Boom generation. If things continue as they are now and the federal government doesn't find some new sources of revenue, the US will collapse anyway somewhere between 2015 and 2020, either from massive economy-strangling debt or from massive economy-strangling tax increases. If the income from the Paulson plan can fund some of those payouts, we might just make it through that crush. I don't think the odds of the USA surviving are very good even with the Paulson plan ... but without it, the odds are nil.

In other words, IF everything works the way Paulson wants it to, you'll get your share of the income from the Paulson plan in the form of tax increases that won't happen over the next ten years. I agree that's a crummy and clumsy and egghead-y way to look at it. I wish I had something better for you. But I don't.

Anthony said...

Those who say we will basically have to pay nothing are damned fools.

Congress is already trillions in debt and anyone who knows how to balance a check book knows that when you are in debt you can not get any more money from that account...so if you want money you borrow.

If the government does borrow the money that means the money made will go to pay for the money borrowed. Not to mention the fact that we are charged interest for every dollar printed (oh the joys of having a private organization print our money).

And since it is not congresses money to use (I am pretty sure bailing out private companies with taxpayer dollars is not one of the powers listed in the Constitution) we the taxpayer are becoming the proud new owners of failing companies....debt and all.

No checks for us.

Hey with something like 92% of American's opposing a bailout Congress surely will not vote for this right?.....right???? Oh yeah they work for the companies now.

James E. Griffin said...

Hate to tell you, your county has pension funds invested, and generally hedged somewhere. In what, and where with whom? Pension funds are often underfunded, which means localities may make use of credit lines to float the difference.

World runs now not on cash, but on credit. Not our kind of credit - it's inter-bank numbers kind of credit. And, of course, confidence of investors. Note, we're not allowing short selling of stock of about 799 companies - and for a reason.

What we're trying to do is keep investors from running around making decisions like they're chickens with their heads cut off.

Your state and locality are where you're vulnerable here. If investors panic, credit lines lock up, the county and state budgets get wacked. That means cutting something - spending , services, etc.. Lay-offs, tax increases are all possible.

Lastly, it's also your friends and loved ones in this. How are they affected?

Fortunately, people are resourceful. It's gonna be a bumpy ride, but people have lived through worse.

wolfwalker said...

Yeah, Congress is supposed to work for us. Most of the time, that means they're supposed to do what public opinion says they should. Most of the time, they don't give a damn about that and do whatever they want for whoever pays them the most.

But once in a very long while, the president and Congress face a situation where it must do what's necessary to ensure the public good, regardless of what the public wants. FDR and Congress manipulated the US into getting involved in WW2, despite the fact that a majority of the public was isolationist until the evening of 7 December 1941. Abraham Lincoln turned the Civil War into a war to free the slaves despite the fact that most of the Union wanted no such thing. President Bush stuck it out in Iraq, and Congress voted the money to do so, even though a majority of the public was against it.

And now, President Bush and Congress have to pass some kind of aid bill for the financial industry. It sucks. It will suck much worse if the damn Democrats get their hands on the profits from the Paulson plan. But it's necessary.

bogie said...

Don't worry... They'll just print another 700 billion greenbacks... Er... Make that 800 bill... nope... 900 bil... will you guys quit that!

Derius Thoran said...

The voices of the people should count for something. If popular vote opposes a bailout, then no bailout should occur.

The Gubmint is supposed to be subject to the will of the people, not the other way around. Isn't that why this country was founded in the first place?

The Gubmint has become all powerful, and the people, WE THE PEOPLE, no longer matter.

If the Founding Fathers were alive today, they'd start the war for Independence all over again.....

Orion said...

Works out to roughly $2,500 additional taxes for every man, woman, and child.

I don't have it...Can someone bail ME out?

As Arlo Guthrie put it:

"But if you're a corporate Titanic, and your failure is gigantic...down in Washington, there's a safety-net for you!"

Orion

masterfrederick said...

Pro- is the opposite of Con-, and therefore Congress is the opposite of Progress.

In this case, prove me wrong, though I doubt anyone who reads this would disagree.

wolfwalker said...

Derius Thoran wrote: The Gubmint is supposed to be subject to the will of the people, not the other way around. Isn't that why this country was founded in the first place?

No, actually, it isn't. Wise men that they were, our Founders went to great lengths to prevent the United States from being a pure "government always does what the mob demands" democracy. Instead, the Constitution created a representative republic. The people elected one house of legislators. State governments appointed a second house of legislators. Those legislators applied their own beliefs, knowledge, experience, and wisdom to represent the best interests of their constituents as they debated and passed such laws as they believed were necessary for the good of the country and its people. That's the essence of a representative republic: you elect legislators and then you trust them to do what's right. Sometimes, "what's right" is not what the public says it wants at the moment.

Unfortunately, we really can't trust Congress to do what's right anymore. And yes, I think if the Founders came forward in time to today and saw what they'd wrought, they would go back to their own time and rewrite the Constitution to prevent it from happening this way. I support the buyout bill because as I understand the situation, it's a necessary evil. But a necessary evil is still an evil. I don't like it. I wish there was a better answer. But no one has suggested one yet, and we need some kind of answer NOW.

Anonymous said...

Beg to differ, sir. Since the gummint is not fiscally transparent, it will cost the taxpayers closer to $1.5 trillion to spend the $700 billion they're proposing.
MichigammeDave

Smoke said...

The capitalist in me says let Wall St. sink. The realist in me says the economy and more importantly public confidence needs a shot in the arm. The bailout will have it's price tag, but it is not $700 Billion. Look at it as an investment by the government. They by these crappy mortgages at 50 or even 20 cents on the dollar. The Wall street firms get the cash infusion and write off the loss. The government then works the loan and collects the payments, or forecloses and sells the property, now at a profit since the WS firm has already taken the loss.

The best way to handle this would not be with a Government Bailout but with a private sector investor bailout. There are plenty of folks with ready cash that would love a piece of this deal, it would just take too long to organize it. I'd surely like a chuck of those loans myself at a discounted rate. I also don't trust the government to handle the portfolio better than the Wall Street types did.


IF it makes you sleep easier, the government has never lost money on the other "bailouts" of the past. All the money was repaid with interest. Immediately there is a price tag, as with any investment. The returns however are something entirely different. And where they will fund this bailout from is the question I can't find an answer to....

Larry said...

Let's do the math.
Nothing, divided by nothing, carry the nothing...

Jenny said...

The realist in me says the economy and more importantly public confidence needs a shot in the arm.

... Assuming seeing our already rickety federal budget continue to pay out for financial irresponsibility would *improve* public confidence. It's not helping mine, I'll tell ya. Anyone who's been in debt knows the longer you put off paying the piper, the bigger problem you make.

If there's anything valuable there, private folks will buy it and our tax dollars aren't needed. If there's not anything valuable there, we're wasting our money on junk. Lose-lose.

Finally, if time *really* was of the essence, the House wouldn't have played the same old political games trying to cover each other's backs before going away on vacation. Again.

Yeah, I believe not passing it will have horrid consequences. I can easily see losing my job in the fallout. It's worth it to stop the cycle of ever-bigger Federal bailouts. At some point the moneytrough needs turned off.

Better late than never.

Kelly(Mom of 6) said...

Remember the "stimulus checks"? That was it, baby.