Bailouts, bank nationalization: debting our way to freedom

Written by Wiley Combs

Tuesday, 24 February 2009 17:30

Though largely a repeat of Bush’s bailout, Obama’s “American Recovery and Reinvestment Act” is an even more heinous appropriation of tax dollars for tangentially economic items; GOP.gov’s Legislative Digest asseverates “a total cost of $1.1 trillion for the bill ($792 billion for the legislation plus at least $300 billion in debt service to pay for it) amounts to a per-family cost of at least $9,418 in new spending/debt.” The Republican Web site cites the Congressional Budget Office in their appraisal that “under current law, the federal deficit will rise to a record $1.2 trillion, or 8.3% of GDP, in 2009,” stating that “even without this massive spending bill, the deficit will be by far the highest on record in both nominal terms and as a percentage of GDP during peacetime.” The report goes on to characterize the bill’s “ten year cost” as “a staggering $1.13 trillion,” with the later addition of “$3.2 trillion if the major House spending provisions are extended.”

Future spending aside, the “largest spending bill ever,” occuring in the midst of a rapidly deepening recession, “is almost as much as all the money currently in circulation in the U.S. ($829 billion)”; summarily, “if the ‘stimulus’ legislation were a nation’s GDP, it would be the 16th largest economy in the world.” Predictably, the GOP’s Digest mentions nothing of the near-identical measure that passed in November under the Republican/Bush flag, the “Emergency Economic Stabilization Act of 2008,” which apparently did not “stabilize” the economy enough to prevent the purported need for more unnecessary, unproductive and redundant deficit spending by the Obama administration—Secretary Geithner is, after all, responsible for the disbursement of $350 billion from the first bailout bill.

The unceasing expansion of bureaucracy continues, and it appears that soon the process will reach a head; federal spending is soaring while the economy is crashing. According to Reuters, the former Treasury Secretary (among others) has publicly suggested “temporarily” nationalizing “some banks.” Without a doubt, even the tiniest amount of Republican support in Congress guarantees the approval of any such action, likely to be suggested by the current Treasury Secretary. Reuters confidently declares “investors and academics are debating not whether to nationalize but when and how,” a shocking pronouncement considering how much money has been poured into the banking system.

Questions of “whether to nationalize” are irrelevant when nobody has yet established a reason “why” we should nationalize the banks. It goes mostly unsaid, in political circles, that our current economic “crisis” is merely a trough in the up-and-down wavelength of our economic history. “You win some, you lose some.” Investment requires risk, in any circumstance; some businesses fail, some succeed. However, in a “globalized” trade environment, fluctuations in foreign supply, manufacture, competition, etc. render the outcome of any major investment a gamble. An additional complication is increasing “de-regulation” of industries domestically (reducing their risks and costs), which allows them more freedom to “go all in” on risky investments.

By this point, it is widely accepted (at least in the media) that the American taxpayer and the national debt are expected to finance corporate outlays when corporations are proven insolvent. In a “free market,” companies who did not profit would fail, opening the market for new opportunities. In our heavily industrialized, oligopolized state capitalism, however, monolithic corporations are said to make up a “large part of the economy,” in which case their perpetual existence is guaranteed by the federal government. Corporate welfarism is intolerable in a “democratic capitalism,” where dollars may indeed equate to votes, and the culmination of the process can only be the domination of all markets by state-subsidized “businesses.” Moreover, this “consolidation of financial authority” feeds itself, by perpetuating a stagnant, noncompetitive economic framework. Bailouts and nationalization do not signal a “new era” for our economy, but rather its demise as it is subsumed within the general purview of our government’s operations.

Half-hearted nationalization will do nothing to change the course if we’re dead in the water. Funding highway construction projects and “other infrastructure” with billions of taxpayer dollars may sound like a “New Deal,” but economists will be more concerned with the consistent depreciation of consumer purchasing power and our overall lack of competitiveness in any global market—a situation likely to get worse if we continue to support non-competitive business. We are trying to “bail out” a sinking boat, without thinking to plug the hole. In fact, it may be foolish to put all our eggs in a government-funded basket. We should not forget that the federal government is farther in debt than anyone else in this country. Record spending during a recession seems counter-intuitive, and doing nothing makes too much sense. Nonetheless, Obama’s first steps in office symbolize a commitment to restricting the free market, subsidizing industry, and possibly breaking the bank. The administration’s earlier demands for “change” take on new meaning; not change into a new order, but change from our pockets to pay the bills—which keep going up.

Email the This e-mail address is being protected from spambots, you need JavaScript enabled to view it

Add this page to your favorite Social Bookmarking websites