As is now common knowledge, the topic du jour throughout America is the $700 billion Wall Street bailout originally proposed by Treasury Secretary Henry Paulson.
But, really, what's $700 billion among friends? After all, it took about $150 billion to finish the S&L bailout (thanks, Keating Five!). And we all recently "bought" shares in AIG, the nation's largest insurer. The price tag? A paltry $85 billion.
So, what's so tough about $700 billion? We can't be out of money - after all, our Mint still has paper and ink, right?
I'm not an economist, but I wanted to try and wrap my head around just how much money we're talking here. I decided to compare this bailout price tag with some other numbers. What I found floored me.
I'm not an economist, but I wanted to try and wrap my head around just how much money we're talking here. I decided to compare this bailout price tag with some other numbers. What I found floored me.
Remember, now, Paulson wants $700 billion dollars.
- $695.4 billion: Gross domestic product of Taiwan. (If the bailout were a country it would be the 21st largest GDP.)
- $580 billion: cost of Iraq war - to date
- $515.4 billion: proposed 2009 Pentagon budget
- $315 billion: John McCain's nuclear energy plan
- $295 billion: amount of Pentagon overspending on 2008 budget
- $150 billion: Barack Obama's energy plan cost
- $50-$65 billion: Obama's health care plan cost, per year
- $59.2 billion: proposed 2009 U.S. education budget
- $10 billion: McCain health care proposal cost, per year
- $42 million: Carly Fiorina's golden parachute when Hewlett-Packard fired her
- $38 million: Paulson's post-2004 salary as Chairman & CEO of Goldman Sachs
- $43,371: The 2004 median Ohio household income
- $32,000: The average national debt obligation of each American
Of course, you could always look at the bright side. The proposed bailout is only 7% of the $10 trillion that is expected to be the national debt around January 20, 2009.
Personally, the way I've come to see this is as follows. When my wife and I looked at moving into a new house in 2004, we had a particular number in mind, both for the cost of the house and the monthly mortgage payment. We knew we couldn't afford more, even though we were offered bigger mortgages. So, we stayed within our means.
I recognize that some borrowers were not intending to live beyond their means - rather, they were sold on overextending themselves by predatory lenders (here's looking at you, Ameriquest). However, the fact is that these borrowers did not do their own research. They should suffer the consequences. Yes, it's rough. But I cannot afford to help pay for my neighbor's foreclosure, lest I suffer a foreclosure of my own.
I have absolutely zero sympathy for those investment houses that are going down in the wake of the mortgage and credit crises. If the homeowners were irresponsible for borrowing excessively, these institutions have treble responsibility. It was their relaxed procedures - stoked by the greedy rush to grab big fistfuls of the subprime pie - that caused them to lend so much - in many cases, to people they would have rejected pro forma three years ago. Now, they want hundreds of billions of dollars - not to pay off debts and close their books, like the rotten S&Ls, but rather to remain operational and ultimately become profitable again.
This is analogous to me hiring a driver with two DUIs, a previously suspended license and five prior accidents...to drive my son's school bus. The reason? Well, the driver knows what went wrong before, and promises to not let it happen again.
To hell with that nonsense. No bailout. Let Darwinian economics run its course. I believe we'll survive a crash - if there is one; no one has projected exactly what would happen if we don't bail out Wall Street. Moreover, I think we would come out, long-term, in a much sounder position than if we keep bailing out these greedy firms and their greedy borrowers.
No corporate welfare for Wall Street's subprime crack addicts. No raising my debt obligation by $3,000 to help someone who decided to get a $300,000 mortgage while making $40,000 a year, just because it was there. And no cutting off the energy and health care plans we so desperately need, just so Maurice Greenberg and his pals can have their billion-dollar cakes and eat them too.
Yes, there will be suffering. I understand that letting those irresponsible investment houses crash will cause job loss and further-eroded confidence in our dollar. I don't dismiss any of that, and I know times will be hard.
But isn't it a major conservative fiscal talking point that the market can self-correct? And isn't letting a badly-managed business fail, snapping up the useful parts, and putting them to work in a better-managed business part of that self-correction?
These are only my opinions, formed after several days of researching this issue. I'm trying to apply common sense to this issue, but I'm not an economist. What do you folks think?
(Originally posted at Talking Points Memo. Minor edits made.)