By Alan Caruba
Congress reminds me a lot of the Wizard of Oz these days. They keep telling us to ignore the man behind the curtain, but they are the man behind the curtain.
We have now reached the point where we can hope that the children we elected to Congress will get passed finger-pointing and blaming each other for the mess we are in. For whatever reasons they individually had, the decision to defeat the “bailout” or “rescue” plan signaled that the gravity of the problem had finally begun to penetrate the minds of our nation’s legislators.
Wall Street predictably took a nosedive. A lot of what constitutes the buying and selling of stocks is purely emotional. In good times everyone wants to get into the market and at the first hint of trouble, everyone wants to get out. There are signs, though, that even Wall Street thinks Congress will step in soon and assume a big chunk of the bad debt.
Politics is fluid, but there are real laws of economics that are well known, if often ignored. Money has to flow. There has to be “liquidity” and a consumer society requires a measure of constant, prudent lending to grease the wheels.
Grownups get nervous when there is too much debt on the books. Children think that debt is an illusion. Whoever tells you that having a huge national debt and bad balance of payments is not a problem is blowing smoke up your skirt.
Whoever tells you that it's a good idea to lend money to people whose chances of paying it back are slim to none is lying. That is the cause of the current problem; a lot of bad debt and it can all be traced back to Democrat-inspired programs, loosely labeled “social justice”, to justify the odd notion that poor people should live like the Middle Class. If they weren’t poor, they would be Middle Class. They’re not.
Moreover, a lot of the Middle Class assumed too much personal debt. Too many offers in the mail for credit cards. Too many inducements to purchase homes at inflated prices. Too many advertisements for vacations that probably should be spent closer to home. When you add in the jolt of rising energy prices and rising taxes, you get the perfect storm.
Republicans, for all intents and purposes, went along. Republicans, in case you haven’t noticed, abandoned all caution and prudence once they took control of Congress in 1994, helped to run up a huge national deficit, expanded some entitlement programs, expanded the federal government, and generally acted like Democrats.
The result is the present crisis. It is a crisis of confidence. The extraordinary low ratings that reflect the public’s regard for Congress and the President are entirely justified. The difference is that a huge Internet-informed public now has the capacity to flood Congress with messages warning against further foolishness.
Fixated on little more than raising money to get reelected, Congress critters will listen when they have to. They have to listen now.
What Americans want is a plan that will address the mortgage loan debt problem by finding means to deal with the bad paper, holding it until the housing market regains its value, and doing so in a transparent, carefully monitored, and rational manner. That will require a revised bailout/rescue bill; possibly one that has an insurance element to it, rather than a massive buy-up. Sticking the taxpayers with the bill is a very bad idea.
The last people who should be in charge of resolving the mess are those running Fannie Mae or Freddie Mac. Those two agencies need to be put out of business.
Bad politics, pandering for votes among the poor and minorities while fostering class warfare, produced the present crisis of confidence in the banking and investment system. The financial system must be protected. This isn’t about “greed.” Banks were put at risk because Fannie Mae, a semi-governmental entity, required bad loans be made.
The federal government must get out of the mortgage business. The government must get out of the provision of health and medical care. The government must get out of the nation’s educational system. The government must stop distorting agricultural decisions about what to plant. The government has to end its war on the oil industry.
What has not helped is the palpable sense of panic one could read on the face and in the words of Secretary of the Treasury, Henry Paulson, who failed to articulate the problem in other than apocalyptic terms. What has not helped has been the President’s flaccid response that suggests just how tired he is at the end of eight turbulent years spent trying to mobilize the public to realize we are in a long-term life or death struggle with Islamic fascists.
Here are three cheers for John McCain’s effort to bring Republicans to a point where they can forge a reasonable compromise with the Democrats who created this problem.
The distance Barack Obama wants to put between himself and the problem is an indicator of how he would lead. Obama’s agenda of more government programs and more government spending is nothing less than suicidal.