Tuesday, September 30, 2008
But the reason I was warming to the Bailout, plan B, was because of the following three provisions:
1) The taxpayers would have gotten something in return; stock, warrants, some say in the companies they'd be helping. The potential to make some money back was there.
2) A provision to at some point pay for Bailout, plan B, if not in the rising future value of the "toxic debt" itself, then in the raising of taxes to cover the expenses. Plan B was not very specific about how not to leave a big gaping hole in the federal budget, but at least it required someone else 5 years in the future to have to deal with it.
3) The money would have been apportioned into three slices with some Congressional control over future dispensations. I'm more comfortable with taxpayer money being spent only if needed.
I hope all three of those provisions make it into Bailout, plan C.
But too bad. All moot. With Main Street's failure to give Wall Street a huge amount of money, Wall Street will be singing the blues on Beale Street because no one's partying on Bourbon Street or going to Broadway, and no one's shopping on Michigan Avenue, which reduces the number of advertising contracts from Madison Avenue. I'm glad I don't live on any of those metaphoric streets.
Monday, September 22, 2008
$700 billion. That's $2,295 if every single American contributed. If $700 billion of debt was a GDP, it would be ranked 17th in the world behind the Netherlands and ahead of Turkey. We would need at least 12 Bill Gates's selling off their entire holdings to make it up. $700 billion is equivalent to 1,750 bridges to nowhere. If you laid 700 billion dollar bills end to end, the chain would stretch from the earth to the sun. On the plus side, it only adds 7% to our astronomically high national debt.
And this goliath of a sum of money is going from the taxpayers' pockets directly to the vaults of huge banks who are now seeing the downside of risky lending. In other words, not to the people who defaulted on mortgages and were foreclosed upon, but to banks which transfer more money every hour than you and I make in a lifetime and which practically define capitalism. I'm all for socialism of some things, but socialism of capitalism is a little too red for me. Our constitution guarantees lots of things to lots of individuals, but the right not to go bankrupt is not one of them. I mean, these banks took on these bad mortgage-backed securities knowing that they would be worthless unless enough homeowners were able to make payments: in other words, they took on risk, an essential part of capitalism.
Which brings up two good points from the NY Times:
"How is it that the administration and Congress, which have not tried to find huge amounts of money to, say, improve the nation’s health insurance system or repair bridges and tunnels, can now be ready to come up with $700 billion to rescue the financial system?"
Yeah! About health care: banks made poor decisions that could have been avoided. Lots (not all) of medical bills stem from conditions that cannot be avoided (breast cancer, lupus, fractured arm, sinus infections, autism, etc.). But we're supposed to pony up for banks and not for patients? And the other quote:
“Treasury’s 840-word legislative bailout proposal comes to more than $830 million per word,” Stephen Ellis, the vice president of Taxpayers for Common Sense, a fiscal watchdog group, said in a statement on Monday, adding that “when they come up with a title, that will drive the average dollar per word down.”
Tuesday, September 09, 2008
Well, from my own selfish perspective, absolutely! One of my company's projects was scheduled to bid this month, and now it won't. But the reason for the shortage in federal monies is because revenue from the federal gas tax has decreased, but the need for road projects has not. In other words, people are driving more miles while buying less gas. This is an effect of good fuel efficiency! We've been wanting it for years, and we're finally seeing what the effects are on our economy.
So, should anything be done? Of course! The federal gas tax, unlike a sales tax, stays at a constant rate of 18.4 cents per gallon no matter how much that gallon of fuel costs. When gas was at about $1.30 per gallon, it resulted in a 14% de-facto sales tax. Now that gas costs somewhere around $3.40 per gallon, the de-facto sales tax has decreased to around 5%. Having a gas tax that stays at a constant rate makes sense in a very narrow and theoretical way: the physical damage to highways comes from the number of user-miles driven on them, and not by the price of the gas burned to drive on them. But with improving fuel economy, more user-miles can be driven on highways for the same cost. Plus the cost of materials for construction has risen dramatically, partially because the cost of fuel has gone up so much. It would make much more sense for the road-building business if the revenue from the gas tax could be tied to the cost of the fuel since the cost of new construction of roads is going to rise right along with the cost of fuel anyways. The way things work right now is that the government runs out of money, large numbers of private contractors run out of work, people lose construction jobs, and drivers are stuck in more traffic.
Now, the trouble is getting a politician to agree to an increase in the gas tax. It will never happen. But like so many things, what's best for our economy is also just about the least popular idea ever. As it happens, most economists see the gas tax as way too low and think the gas tax should raise dramatically (at least a dollar per gallon). But politicians want to suspend the gas tax because lowering taxes is always a popular idea. Unfortunately, popular ideas always trump smart ideas.
P.S. Expect to see more earmarks because of this too.