“”A mud sandwich.”” That’s how Republican minority leader John Boehner characterized the $700 billion bailout bill that died an infamous death on the House floor on Monday. He then went on to say that support for this mud sandwich should stem not from its merits, but rather from the high stakes riding on it. Quite simply, he was urging our representatives to support this measure not because it was particularly good, but because they had zero alternatives. Fortunately for us, the majority of our representatives don’t suffer from pica – that is, they don’t eat mud – and the bill failed 228-205.
The bailout bill failed precisely because it is a mud sandwich, one crippled by many flaws, a rushed conception and yes, even partisanship. As senior lecturer in economics at Harvard University Jeffrey A. Miron puts it, “”The bailout was a terrible idea.”” Sadly enough, however, this defeat of the bailout bill is unlikely to kill it entirely. In fact, George Stephanopoulos of ABC News reports that there are four options in dealing with this defeat: muscle the bill through the House, pass it in the Senate first, make minor tweaks to the bill or tack on a major stimulus package to pass the bailout bill with a simple Democratic majority. All of these scenarios have the failed bailout bill in a central role, meaning that now Congress will try to dress up this mud sandwich in order to swallow it more readily.
However, the solution to the economic crisis is not a taxpayer-funded bailout. Miron asserts that a bailout “”transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending”” and “”encourages companies to take large, imprudent risks and count on getting bailed out by government.”” In many ways, a government bailout only reinforces and affirms the failed policies that landed us in this bind in the first place. Miron explicitly warns us not “”to fix bad government with more government.”” To fix the current economic mess, we must abandon these failed policies of the past. We should not apply a bailout Band-Aid to the gaping gunshot wound that is Wall Street, for a Band-Aid will not stop the hemorrhaging from reaching Main Street.
Miron argues, “”The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.”” This, it seems, is a major sticking point in selling the bailout bill to the American people. They simply don’t want to foot the bill for the errant ways of big corporations.
Thus bailout bill is terrible by most accounts. Its supporters and its opponents agree on that much. George Stephanopoulos says, “”No one wants to vote for this,”” and Paul Krugman of the New York Times writes, “”If the plan looks not-awful enough, I’ll be pro. But I won’t be cheering – I’ll be holding my nose.”” It’s bizarre that most people agree on the awfulness of the bailout bill, and yet no alternative solutions are gaining substantial ground. Is this bailout a necessary evil? Or are we just too panicked to craft a better solution?
Many of our elected officials are so dead-set on a bailout solution that they have failed to consider seriously viable alternatives. For example, good old-fashioned bankruptcy is one alternative way to plug this wound. Miron, who advocates this bankruptcy approach, explains, “”Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses (sic) that remain profitable.”” Bankruptcy, however, is unlikely to stabilize the falling economy in the short term.
Still, there are other options on the table, and many ease or eliminate the cost to the taxpayer. Time Magazine reports: “”Rep. Darrell Issa pushed a plan that he has advocated since the beginning of the meltdown to issue recovery bonds. And other ideas were also being touted again, such as loaning the money to Wall Street firms rather than buying their toxic mortgage-backed assets, or an insurance scheme whereby Wall Street firms would pay to have the securities insured rather than taken off their hands.”” Instead of finger pointing, name-calling and taking leave for the Jewish holiday, perhaps our leaders should debate the merits of the alternative solutions. Maybe then we will have a palatable solution to the ongoing financial crisis.
However, since our ineffectual leaders have only bailout on their minds, we may all be eating mud – with grimaces on our faces, of course – in order to avert an economic meltdown. Dig in.
– Justin Huggins is a senior majoring in ecology and evolutionary biology. He can be reached at letters@wildcat.arizona.edu.
