Today we got to see some of the substance of Barack Obama’s plan for solving the current economic crisis. Both Reuters [1]and the Wall Street Journal [2] have good write-ups.
Obama’s approach includes:
- More power to the Federal Reserve over non-bank investment firms that borrow from the central bank
- A ‘financial oversight commission”
- $30 billion in aid for financially stressed borrowers
- A $1,000 tax credit for all working families
- Eliminate the income tax. But only if you are retired and making less then $50,000 a year
- $10 billion for refinancing home loans or to help see a house
He also made some noise about raising the capital gains tax. There’s a nice surprise.
We can agree with the first two items. Except the second item sounds an awful lot like part of the role of the Federal Reserve, so perhaps it’s a bit redundant.
But clearly there is a need to put some amount of accountability on investment firms that borrow from the central bank, and it makes sense for the Fed to have broadened powers in this area.
The rest is just throwing money at a problem that by its nature requires discipline and accountability. Obama’s comment:
“If we can extend a hand to banks on Wall Street when they get into trouble, we can extend a hand to Americans who are struggling through no fault of their own.”
is fine if you agree that banks should be able to get help when they falter and fail. We don’t. The more that is done to prop up poor decisions on Wall Street and on Main Street, the less self-reliant our country will be. It is unthinkable that there would be entitlements provided to big business, but that’s where we’re headed, and we already have that problem on the lower income levels of individuals, but the realm of entitlement continues to rise more and more each year as everyone wants a piece of the pie. Before too long, we’re all just pouring in money and taking it back out… the only ones benefiting are the IRS and lawyers.
Politicians, especially on the Left, tend to find that they can best build a strong base by promising money to voters, or promising to use money to solve our ills. This is almost always shortsighted and intended to one end… building a sustainable power base. Promises of money for the unemployed, low income or those that are retired, or promises of bail-outs to those that make bad choices, is like giving a gambler more money after he’s lost his home, his family and his life. It’s just digging a deeper hole until the walls of earth start caving in on you. It’s not truly sustainable. And it’s never in the best interest of the country or those that directly benefit. But people have become convinced that a society dependent on the government for all of its needs is a good way to survive.
Thankfully, though McCain has not taken a compelling position or proposed a substantive direction on this topic, said he was:
“committed to considering any and all proposals” to help homeowners but that he opposed a “multibillion-dollar bailout for big banks and speculators.”
We do like the idea of better accountability to the Fed on the part of investment firms. Despite the source, let’s see if that idea can be tied to an overall package makes sense, meets appropriate needs and yet does not put the wait of bad choices on the taxpayers.