Don't Just Do Something, Stand There!

So, the wise heads of Washington, the great and powerful wizards, have put 8 or 9 hundred billion dollars of U.S. taxpayer money on the line, ostensibly to prevent a financial meltdown, not just in the United States but around the globe. We are, after all, as Barack Obama likes to say, citizens of the world. So why shouldn't our income be used to prop up the credit markets in France, Britain, China, etc. It's only "fair."

The original
Meddler-in-Chief

It was said in the halls of our glorious Capitol, as the unprecedented bailout measure finally passed (once enough handouts to various special interests had been tacked on), that the Dow Jones Industrial Average's precipitous plunge during the first attempt at passage of a slightly cleaner bill had helped change many solons' minds toward action. They had watched the Dow plummet during last Monday's (Sept. 29) House vote as it became clear that the first bill would fail, and its further drop after the bill did fail, and had the proper fear instilled in them. And so, the story goes, properly motivated -- by fear and the added goodies -- these paragons of the public trust "did the right thing" the second time around, on Friday. They passed the bill, it was said, not just to bail out Wall Street, but to bail out Main Street.

And how did Wall Street react? Hmmm ... well, the Dow on Friday closed at 10,325, after the great good deed was done. That was 40 points lower than it closed on Sept, 29, the day of the great "failure" in the House of Representatives. OK, it could be said that the stock market had stabilized. Then today, Oct. 6, it closed at 9,955, down 370 points from Friday's close. Furthermore, the London stock exchange's main index suffered its biggest one-day loss since 1987. And George W. Bush was kind enough to tell us that the "fix" was going to take time.

Here's the thing: Defenders of the bailout are arguing that things would be much worse if not for this action. Perhaps. But that argument puts opponents in the position of trying to prove a negative: since something has been done, we will never know. What we do know is that things, right now, are worse than they were before the bailout passed, and that taxpayers are on the hook for the money. Will things eventually get better? Probably, but the same could be said if nothing, or something substantially different, had been done. It was the politicians' need to "do something," not thoughtful deliberation, that drove the policy, and that seldom has worked out well in the past. The needs of politicians are always short-term, sadly, while the economy needs a long-term view. The precedent now set very likely involves costs far beyond the hundreds of billions of dollars now at stake.