Can George Bush and Congress Fix the Economy?

Note: All of President Bush’s quotations are from his address to the Nation on 9/24/08

President Bush: “Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand their worry and their frustration.”

Barry: President Bush, while it is true that you don’t have to walk in someone’s shoes to feel their intensity of emotion, no one believes that you understand. Last night you were simply repeating words that you read on a teleprompter.

President Bush: “My administration is working with Congress to address the root cause behind much of the instability in our markets.”

Barry: You and Congress are doing nothing about the real root causes. In fact, you are not even talking about them. The root causes include the Fed’s reckless credit expansion, fractional reserve banking, reckless Congressional spending, and the “something for nothing” attitude that pervades America.

President Bush: “This rescue effort is not aimed at preserving any individual company or industry. It is aimed at preserving America’s overall economy.”

Barry: This is absurd on the face of it. Money will be given to specific corporations and financial institutions and not given to others. It will throw good money after bad and will help to further destroy the economy.

President Bush: “For more than a decade, a massive amount of money flowed into the United States from investors abroad because our country is an attractive and secure place to do business. This large influx of money to U.S. banks and financial institutions, along with low interest rates, made it easier for Americans to get credit.”

Barry: Yes, let’s blame foreigners and ignore the role of the Fed in recklessly pursuing a policy of extreme credit expansion.

President Bush: “Easy credit, combined with the faulty assumption that home values would continue to rise, led to excesses and bad decisions.”

Barry: Only a charlatan or someone whose good sense had left them during the housing mania, would have believed that home values would continue to rise forever. Yes, there are many charlatans and among them are the very people that you are relying on to solve the crisis.

President Bush: “Investment banks, such as Bear Stearns and Lehman Brothers, found themselves saddled with large amounts of assets they could not sell. They ran out of money needed to meet their immediate obligations, and they faced imminent collapse.”

Barry: They are not victims; they made terrible business decisions over and over again. In the process, they enriched themselves. Now, they and others who did the same should bear the consequences.

President Bush: “I’m a strong believer in free enterprise, so my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business.

Barry: Nothing you have done during your eight years as President would demonstrate that there is one iota of truth in that statement.

President Bush: “I also understand the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street. But given the situation we are facing, not passing a bill now would cost these Americans much more later.”

Barry: The opposite is the truth. There are terrible times ahead, and the bailout of Wall Street will only increase the severity of our suffering.

President Bush: “Any rescue plan… should make certain that failed executives do not receive a windfall from your tax dollars.”

Barry: This is impossible. These executives have already collectively earned billions, and our tax dollars will cement their ill-gotten gains.

President Bush: “The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. And when that happens, money will flow back to the Treasury as these assets are sold, and we expect that much, if not all, of the tax dollars we invest will be paid back.”

Barry: Again, this is absurd. If these assets were good buys, free-market institutions would be snapping them up. Wall Street will unload the biggest dogs in their portfolio to the taxpayer.

President Bush: “Despite corrections in the marketplace and instances of abuse, democratic capitalism is the best system ever devised. It has unleashed the talents and the productivity and entrepreneurial spirit of our citizens. It has made this country the best place in the world to invest and do business. And it gives our economy the flexibility and resilience to absorb shocks, adjust, and bounce back.”

Barry: I have no idea what you mean by “democratic capitalism”? Does that mean that some are free to steal the money of others under the cover of a Congressional vote? In any case, what you and Congress are doing will ensure that America does not bounce back for many years.

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9 Responses to Can George Bush and Congress Fix the Economy?

  1. The New York Times and other sources have been reporting a huge public backlash against the bill.

    In the file under the category of don’t let politicians tell you that all “responsible experts” support this rushed bailout. A group that lists many of the most distinguished economists has sent this letter:

    To the Speaker of the House of Representatives and the President pro tempore of the Senate:

    As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

    1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

    2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

    3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America’s dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

    For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

  2. Lila Rajiva says:

    Nice site.
    What are you hearing from academic economists?
    Lila

  3. Lila,

    Thank you. I appreciate you coming by.

    I’m staying away from academic economists :-). Seriously, I’m on sabbatical, physically far removed from the University and focusing on a book project. I was surprised though by how many signed the petition.

    Everyone: Lila’s excellent book Mob, Messiahs and Markets is well worth your time as is her blog The Mind-Body Politic.

  4. frankvv says:

    Barry,
    Excellent commentary and right on the mark! I can envision your comments as balloon icons over top of the President’s head as he speaks. By the way, every time our President does say something which is a miss-truth or an out right lie, his eyes twitch! Hmmm.

    So far I am pleased that a deal has not been signed yet. This is one time I truly hope that partisan politics interferes with trying to slam dunk this unbelievable bailout through Congress. By the way, once the financial markets are fixed, how many other businesses are going to line up at the trough and try to get their share of “free” money? So far we have said “no” to the auto industry. But once this precedent is set, how can the government say “no” to anyone else who asks?

  5. Frank,

    Amidst all the headlines about the $700 billion bailout, it is has been overlooked that the car industry will be getting a $25 billion bailout. It passed the House of Representatives on Wednesday by a huge majority of 370-58 and the bill is now is in the Senate. The auto makers are already planning to ask for more!

  6. frankvv says:

    Barry,
    That is INSANE!!! I am now going to take another blood pressure pill. How the heck did that slip by the general public? I don’t recall seeing any mention of that in the Wall Street Journal. Was I asleep at the switch?
    v2

  7. Frank,

    This just in: “Washington Mutual (WM) chief executive officer Alan Fishman could walk away with more than $18 million in salary, bonuses and severance after less than three weeks on the job, according to the terms of his employment agreement.”

    Pop another pill or better yet go for a walk in the woods.

  8. Bob G. says:

    Dr. Brownstein,

    Yur last three commentaries collectively point to the fact that we are now in a defining moment in the history of this country.

    The cascading impact of the unintended consequences of many poorly conceived polcies and actions across many segments of industry, individual actions based on the false belief that there would be no day of reckonong and the continual illusion that the answer to this “perfect storm” is more authority, power and protection to the policy makers and “experts” who created the conditions for this to occur is driven by both fear and ignorance.

    As you correctly stated, and histoty vaildates time and again, the exploitation of ignorance by fear is the perfect platform for tyranny disguised as patriotism.

    The market confidence factor seems to be the primary reason used by certain experts to justify the need for socialist intervention, i.e. the $700b bailout. It is amazing to me that the same folks who brought us this mess expect people to continue drinking their kool-aid!!

    There is an absurd sense of deja vu to now observe the professed concern for taxpayer money by those in congress who have recklessy spent it for decades and who are now attemting to engineer this socialist intervention.

    As Bagger Vance, the spiritual gold caddy would say, “There is a perfect economy out there that belongs to you! It will find you if you would only get of the way and let it.”

    Bob G.

  9. Bob,

    These are bleak times indeed but you put a smile on my face with your Bagger Vance allusion!

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