Monday, September 29, 2008
Holy Crap! What a mess!
The House Republicans stood up against the President of the United States and defeated the President’s plan to shore up the credit markets in the United States. As a result, the stock market’s Dow Jones average went down 777 points, resulting in a trillion dollar loss for investors, including average Americans who have their retirements staked in mutual funds and 401(k)s.
While I understand the reasons why the Republicans did what they did, I wonder if they understand exactly how much money they will eventually cost the taxpayers they are so fond of saying they protect. If the market continues to fall as some predict, the taxpayers will lose more than twice the amount of the bailout plan in lost retirement savings. Further, with credit frozen, the economy will eventually freeze.
I will admit that I was no fan of bailouts when this all started a few weeks ago. I believe strongly in the freedom to fail. However, I educated myself on the American credit market and what we are up against.
Plainly put, the American credit market is heavily tied to international interests. International investors who are concerned about the American market will simply pull their money out of the United States and place it elsewhere. That is happening on a large scale. For example, the United Kingdom moved to shore up its banking industry on Monday, leaving its banks a safer place for international investors than most American banks.
The United States has integrated itself into the world marketplace. The rules of that world marketplace are different from the free market principles we conservatives embrace. China, the United Kingdom, France, Russia, etc., will act to intervene to shore up their credit markets and thus encourage a shift of investment towards them away from the United States.
Forget for a moment who is to blame for the situation. It is here. I compare the current situation in the United States to a house fire. Suppose the fire department arrived, and before they expended manpower and resources to put out the fire, they launched an investigation to see how the fire started and who to blame for it. Some would say hooray. If the fire department found out that some drunken guy passed out with a cigarette still lit and that started the fire, let it burn to the ground and teach him a lesson. Never mind that his wife and kids are innocent and the public will have to spend money to house them. Suppose the investigation showed that the fire was a real accident but by the time it was concluded, life and property has already been lost. The taxpayers are saved the money of using the fire truck, but they pay higher insurance rates as the insurance company takes losses in claims paid out.
In the abstract world of absolute principles, having the fire department find out the root cause of the fire is logical before expending public resources to fight the fire. However, in the reality of life, not fighting the fire ends up costing the people more money. It is not easy to grasp, but emergency situations are usually the exceptions to the normal rules.
The current United States credit crisis is an emergency. The hundreds of billions of dollars lost in the markets on Monday afternoon proved that. Add to that the international players who stand ready to pummel the United States for their own interests over the next few days.
It was said by one of the Republican House leaders on Monday that 12 members whose votes could have shifted the result of the bill voted no because they were upset at the allegedly medicated Nancy Pelosi. Gee, I hope that was not the case. I would hope ignoring an economic emergency and launching the nation in to a potential depression was not done just because someone had hurt feelings over a speech by a woman whose elevator rarely reaches the top floor.
If so, then as a lifelong Republican, I regretfully inform you readers, that the Republican Party will be in deep trouble for years to come. If nothing is done, and people lose large amounts of their retirement savings, and the frozen credit market results in a deep recession, then, frankly, the Republicans will be blamed in conventional wisdom. The same American people who balked at the bailout will cry out about why it did not happen. They will elect Barack Obama President and return Democrats to power in Congress. There is just enough time between now and election day for Americans to start feeling the real pain of the credit crisis.
As a side note, perhaps that is why Pelosi gave such a hot speech. She knew she could push the buttons of twenty or so Republicans, kill the deal, and set her party up nicely.
What a mess!