But then why bail out banks -- or for that matter, even homeowners -- to the exclusion of renters also impacted by the economy's collapse? Many kinds of assets are deflating in the current environment, not just home prices. Homeowners may find themselves holding less and less equity in their homes as housing markets erode, but renters also bear costs. We endure losses in our retirement savings and other non-housing investments; compete for housing in an increasingly tight rental market "tough for those looking for housing...[but] great for landlords"; and as the credit crisis deepens, face dim prospects of getting mortgages to purchase homes in the future.
Like some homeowners who suffer foreclosure, renters impacted by the country's economic crisis will face a litany of their own. Some will lose their jobs, others will confront catastrophic medical bills, and some will end up on the streets, where they will face disproportionate risks of mental illness, addiction, crime and sickness - each of which entail economic externalities that affect all of us. For instance, emergency room visits stretch hospital budgets, and crowded jails & prisons force states to pump taxpayer dollars into corrections.
The Economic Emperor Has No Clothes
As American's banking system has visibly crumbled, so has the conservative ideological establishment. First went its principles, as the attachment to free markets was jettisoned by proponents of the Paulson plan. Then went its credibility, as the deregulation long championed by conservative ideologues emerged as a principal cause of the crisis. Then went its political power, as House Republicans who remained ideologically consistent obstructed a consensus (on however ineffective and unfair a solution) between a President of their own party and the bipartisan congressional leadership.
Laissez faire capitalism now appears as bankrupt as Lehman Brothers.
While a lot of Americans hammered by the meltdown will likely join them, the proposed bailout is no solution. It can't stop the crisis, and won't help homeowners. And even if it did, it would still throw 100 million Americans who rent their homes to the economic wolves.
