This article was originally posted on October 1, 2008 on Huffington Post.

The last week has witnessed phenomenal political & economic events. Observers, including every pundit under the sun and businesses around the planet, have stood transfixed by a dramatic series of negotiations over a plan that would transform America's economy.

Henry Paulson, the Treasury Secretary and former Wall Street banker, initially proposed squandering even more than $700 billion of taxpayer money -- enough money to fund the Department of Education for the next 115 years -- to buy bad loans from failing banks.

The audacious proposal has inspired rampant criticism from all sides: ideological free market conservatives argue it represents socialism; progressives rail against its offensive distributive implications and its proponents' hypocrisy; the financial sector has argued it places too much power in the hands of the Treasury Secretary; and economists say it won't work. Each of these criticisms is fully justified.

Only one argument meaningfully favors the plan: its reported necessity. But in fact, the scheme can't possibly work without abusing taxpayers. At best, it could help ease the nation's eventual recovery from an increasingly inevitable depression - quite likely, one the likes of which few people alive can remember. But it won't keep our economic chickens from coming home to roost.

And while the bill's many economic injustices have faced criticism, one in particular has largely escaped notice: its complete disregard for, and financial abuse of, 100 million Americans who rent their homes.

Making it Up as They Go Along

In addition to writing his column for The New York Times, Paul Krugman is also a world-renowned economist who has taught at Yale, Stanford, MIT and Princeton, where he specializes in studying financial and currency crises. He noted when Paulson first introduced his plan that, "after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now," without delay. Dean Baker of the Center for Economic and Policy Research agrees that "Henry Paulson...totally missed [precursors to the current crisis], and has been wrong about almost everything."

Yet, roughly two weeks ago, "the realization...that American capitalism was going through something historic -- and not in a good way," prompted a plan that "may redefine Washington's role in the marketplace for years."

Paulson's initial proposal would have granted him unprecedented authority over a $700 billion revolving pool with which to purchase bad loans from failing banks -- at full price and without any equity for taxpayers.

According to Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee, Paulson would have gained the authority to "make any loan he wants under any terms to any entity or individual in America that he thinks is economically justified." Because the plan shielded Paulson's decisions from review by any court or administrative agency, Krugman interpreted it as a "sheer demand for authority: give us total discretion and a blank check....There was no explanation of...why we should believe the proposed intervention would work."

After the original plan was ultimately amended to accommodate various concerns raised by Democrats, a "revolt" by House Republicans on Thursday derailed the compromise between the White House and congressional leaders. In its place, House Minority Leader John A. Boehner (R-OH) proposed an alternative plan based on government insurance for failing mortgage-backed securities, rather than outright state ownership. On Friday, Rep. Eric Cantor (R-VA), the lead author of Boehner's plan, admitted that it was unworkable.

After lawmakers and the President got "back on track," marathon negotiations over the weekend culminated in a consensus that would reportedly find bipartisan support. But it was rejected on Monday by Republicans in the House of Representatives, inspiring a massive stock market crash in which over a trillion dollars evaporated and which continues to "ripple[] across the globe."

While markets around the world reeled from news of the House's vote, the unfortunate reality is that no economic stimulus plan can shelter the U.S. economy from failure.

A Discredited Administration's Latest Ruse

The $700 billion requested by the Administration for Paulson's bailout plan dwarfs even the cost of the Iraq War, which offers a host of eerie parallels. Back in 2002, the Administration fired Chief Economist Lawrence Lindsey for forecasting that the Iraq conflict would cost as much as $200 billion, instead promising that it would cost only $50 billion. The White House's error attained an order of magnitude, as the war has cost nearly $600 billion so far, not to mention over 4,000 American lives, those of nearly a million Iraqis, and an untold number of physical & psychological wounds suffered by survivors in both the U.S. and Iraq, as well as their families.

Paulson's equally half-baked bailout plan deserves the skepticism it has received.

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