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The Senate chose to panic yesterday and pass an unaffordable, unnecessary, unfair, bailout bill for Wall Street. Instead of taking its time, holding hearings, and being careful, the Senate has bowed to the fear mongering of leaders of both dominant parties and voted to spend hundreds of billions of dollars in the blink of an eye. The nation can ill afford such imprudent allocation of our precious and limited resources.
The debate was framed narrowly as a choice between quickly passing this bill with weak compromises that actually made it MORE EXPENSIVE or doing nothing. No thinking American can long accept this spurious dichotomy of choice. There is a third way: Congress must take its time, hold hearings to gain a better understanding of what is happening in our economy, and then act.
Credit is getting more expensive. This is a natural reaction to the fact that banks have made a bunch of bad loans. Now they are being more careful with their money. This is not all bad. As a country we need to come to grips with the fact that we are too dependent on borrowing in general. Banks cannot be overly cautious with their money forever since a bank that makes prudent loans will be more profitable than a bank that makes no loans.
In the meantime consider this: you don't need credit as much as you think you do. You don't need it to buy a car (save some money and buy a clunker, or take a bus). You don't need credit to buy groceries, or gasoline, or to pay your utility bills. The only thing most people really need credit for is buying real property and paying for college. In the former case it is clear that less credit should be available since so many mortgage loans went bust. In the latter case banks will continue to lend to students because this is a traditionally safe type of loan.
How will we pay for $700 billion + in corporate welfare? The argument that we will make our money back is not convincing: if the banks thought they would turn a profit on their toxic "assets" they would not be trying to get rid of them. More debt is the easiest (only in the short run) and least responsible way to pay for it. In the end it just means higher taxes or lower spending to pay down the debt (both of which put the brakes on economic growth, other things equal), and inflation in the mean time, as our dollar is worth less and less. Congress should have its credit line cut off. It would be tough for a while but we need to learn to live within our means. That's why we're in this crisis in the first place.
