George Bush let Treasury Secretary Paulson talk him into believing that he had to destroy capitalism in order to save it. The plan was to borrow massively against future American generations’ paychecks to solve problems caused by previous massive borrowing.
Last fall’s $700 billion TARP bailout (assembled secretly in panic by Ted Geithner and others) was sold as crucial to save the economy from a cascade of bank failures and the elimination of credit. The original idea was to back up debt securities that were failing because of the real estate bust – debt securities that were largely owned by foreigners with a big chunk owned by the Chinese.
The panic was caused by the thoroughly predictable inability of over-leveraged homeowners to pay “liar loan” mortgages that had been obtained using phony appraisals. Laws requiring banks to continue to loan mortgage money to un-credit-worthy people to expand the “American dream” of homeownership are still on the books and still being enforced. It’s not a mystery why credit was drying up last fall when more and more banks refused to participate in this government-mandated Ponzi scheme without having the resultant bad debt guaranteed by the taxpayers.
Worse yet, passage of the Bush bailout caused other entities seeking their own bailout to form a line. American Express sought to change its legal status to “banking” to qualify for a handout, and the auto industry didn’t even bother with any such fig leaf justification when its executives came begging for a handout just because they needed the money.
Even worse yet, the Bush bailout has failed. The banks have plenty of money but are using it to pay off their own debts and improve their balance sheets. In many cases banks flush with taxpayers money are using it to buy competitors, making sources of needed credit even scarcer. For example, Bank of America got $25 billion from the Bush bailout and promptly bought Merrill Lynch and a stake in the Bank of China, while cutting off or limiting credit to even its most credit-worthy customers.
President Obama’s proposed $825 billion “stimulus” bill will make matters much worse.
While the Bush plan was a bailout of the private sector, the Obama plan is a bailout of government and a transparent plan to transform government into the dominant entity of American life and the Democratic Party as the permanent ruling class.
Under the Obama plan, hundreds of billions of dollars would go to cash-strapped local and state governments with the most irresponsible of those getting the most aid.
California, for example, has committed to spending $42 billion more than the state has over the next 12 months. The Democrat-controlled legislature has repeatedly stymied spending cuts, arguing for tax increases, while California’s unemployment rate is poised to break into double digits. Look for California to seek the $42 billion from national taxpayers under the Obama public sector rescue plan.
Under the Obama plan, tens of billions of dollars will go to special interest groups within the Democratic Party coalition. ACORN, for example, will be eligible for more millions of taxpayer dollars than it already has to continue voter registration (voter fraud?) activities to help cement Democrat majorities across the country. Planned Parenthood, environmental organizations and even trial lawyers have all been in Washington to make sure they get a piece of the “bailout” as well.
Finally, the Obama plan provides for “tax cuts.” The bulk of these “cuts” would be direct grants to Americans who already pay no income taxes.
The pursuit of “tax fairness” has prompted both Republican and Democratic institutions to raise the threshold of income earned before any income tax is paid. And, in a bipartisan consensus, the Earned Income Tax Credit has provided “refunds” to taxpayers who paid no tax in the first place.
The result to date is that more than a third of income-earning Americans pay no income tax, and many of these receive an annual subsidy in the form of EITC “refund.” The Obama plan would expand the number of income-earning Americans who pay no income tax to more than 50 percent, thus providing a permanent base of majority vote to “tax the rich” and a permanent majority of votes to re-elect Democrats to office.
It’s now evident that the Obama-Reid-Pelosi Democratic Party has been handed the ultimate opportunity by George Bush to make government the dominant institution in American life. Which banks succeed and which fail will now be determined by Barney Frank and Chris Dodd. Which car manufacturers survive will now depend on whether their car designs meet with Nancy Pelosi’s approval.
Endless bailouts will provide trillions of dollars to ensure that every block in every neighborhood is organized by and for the Democratic Party. They will ensure that a permanent majority of voters will be mobilized to soak the rich to pay for “free” health care, and mortgage bailouts for the irresponsible paid for by the fools still making mortgage payments.
Most Americans cannot fathom the illogic of going into even deeper debt to correct problems caused by reckless borrowing. This just does not make sense. But beneath the propaganda that tries to justify this illogic lies the reality that these “bailouts” represent the financing of a radical reconstruction of American society. This is the real reason (in addition to a flaccid Republican opposition) why despite overwhelming public disapproval, the serial bailouts will continue.