On the Economy and Government Bail-outs

In this taxpayer-financed bail-out of Wall Street, the government will be buying up mortgage-backed securities and other toxic assets from the companies that are failing. Perhaps I can explain in plain language what it is that the government is doing---what they are purchasing. For example, what are mortgage-backed securities? Security is just another word for investment. You make an investment in a company that lends out money to other people for mortgages. These companies lend the money that you invest, and, when a person pays back their mortgage payment, there is a certain 7-8% interest charged. So, your money (your investment) in the mortgage company grows by 7-8%. Used to, most people would pay their mortgages---unlike car payments, which are more often defaulted on---and so mortgage-backed securities are looked upon as a safer investment. They might not pay as well as perhaps the Stock Market would, but they have been looked upon as a safer investment. But, now that there are all of these economic problems and people can't pay their mortgages on their homes, these mortgage-backed securities in these big companies have been failing, crashing, and burning. And so, the government is buying and taking possession of these mortgage-backed securities and other toxic assets like them from these failing companies, in the hopes that this measure will at least temporarily save these companies and stop them from failing utterly.

The problem is, you don't know exactly how much all of these purchases will cost until you make them. Unfortunately, there's not a price tag like you would see on a television at a store. The government has set the number of about $700 billion for these bail-outs, though there is no real certainty that that is indeed what these assets are worth. According to some business sources, such as New York Times Business Columnist Joe Nocera, the actual price-tag for these bail-outs could be over a trillion dollars. If this proposal of the Bush Administration and others is approved by Congress, then they will have once again handed the U.S. Government a blank check to spend as much as they please to bail out these corporate entities. We can't even afford this kind of opulence, but this wouldn't be all right even if we could. The government will have to print more money in order to buy these mortage-backed securities and bail out these companies. Printing more money will decrease the value of the money already in circulation, and, as a result, the dollar will further weaken. This bail-out will just continue the destructive nature of our debt-based economy, and it won't increase regulation of speculation or solve any long-term problems regarding our financial system.

The fact of the matter is that bail-outs are not the magical solution, the panacea, like President Bush and other proponents make this out to be. In their view, if bail-outs are not approved, then the economy will collapse, and, if they are approved, the economy will be saved. President Bush got onto the television (somehow) the other night and put the fear into everyone that the economy will collapse if these bail-outs are not approved. Fear is a very powerful thing which has been used for centuries to rob people of their powers of logic and reason, throwing them into a wild panic which is blind to everything but their consuming fear. This tactic has worked before, and it will likely work again.

In opposing such a Wall Street bail-out plan, Democratic Representative Dennis Kucinich has been working on an alternative, comprehensive plan for a “Main Street economic recovery”, in which, it is stated, both the economy will be stimulated and a fair deal will be provided to the American people. Kucinich’s plan decidedly is made up of a different kind of more long-term thinking than what is currently convention and policy at the White House and on Capitol Hill. Aspects of Kucinich's plan, viewable at kucinich.us, includes: numerous public works programs to provide jobs to citizens of the United States, a plan for a single-payer healthcare system, a plan for a prescription drug benefit to pay for the prescriptions of all seniors, and an affirmation of the need to re-evaluate our monetary policy and our debt-based economic system. I think that it is a brilliant alternative plan, and I give it my full and whole-hearted support. All of the components of Representative Dennis Kucinich’s plan are aimed at helping those working on Main Street rather than those speculating on Wall Street. The plan introduced by the Bush Administration to bail-out Wall Street is aimed at doing exactly the opposite, and does not re-evaluate our debt-based economic system (which is likely the root of this financial decline) or provide a long-term solution to our country’s problems.