I don’t know what bothers me more: The fact that the President has made 4-5 appearances over the past couple of weeks to reassure the public and tell us that we’re going to solve our financial crisis, or the fact that the bailout package is an enormous point of contention within Congress, and they haven’t got anything done quite yet.
I think many Americans saw the financial crisis as simply a bunch of noise, until this week. Now we’re hearing daily about political argument, risks to the economy and the largest bank failure in the nation’s history.
Even tonight’s first Presidential debate has taken a back seat to the financial crisis. Which in my view is appropriate; I agree that McCain has his priorities in the right place by stepping outside campaigning and advertising and to help solve the financial crisis in whatever way he can. Many folks see it as a political stunt however, but that’s not McCain’s style. His motto of “Country First” is a heartfelt statement about who he is, and what he believes in. Right or wrong, his sense of honor and dedication to the nation means a lot, and I respect someone who risks his entire campaign and chance to become President by doing what he thinks is right. I’m not too naive to realize that politics are part of the game as well. But McCain has rolled up his sleeves to help work through this, and that seems appropriate. It may backfire on him especially by staying out of the debate. **Update: Based on bailout talks progress, McCain will now attend the scheduled debate.**
But what does the bailout itself really mean? Apparently the crux of the disagreement between Republicans and Democrats has to do with how much government regulation should be included in the package. But more important to the economy is how effective the bailout will be immediately, and then what are the longer term implications. We have a chance for this package to help the economy return the nation to a path of growth. The bailout package will not be a panacea that solves the nation’s economic problems. It will simply help us return to more normal financial market operations, and grow out of this situation more effectively than we would otherwise. But it’s an expensive way to grow the economy, and we need to make sure this does not happen again. Perhaps it’s a new economic paradigm, one that speaks to the government stepping in to save the economy from self-destruction by derivative-laced financial instruments.
CNNMoney explores What’s at Stake for the Bailout:
“Federal Reserve Chairman Ben Bernanke spelled out the implications of this credit crisis earlier this week in front of Congress. He talked of how small businesses would not be able to get the credit they need to operate, grow and hire workers. Consumers would have trouble getting mortgages to buy homes, further driving down prices. And tighter credit would mean lower sales of cars and other big ticket items, leading to more plant closings and layoffs.”
“Credit is the mother’s milk of the modern economy. The tighter the credit spigot closes, the worse the economy is going to be,” said Mark Zandi, chief economist of Moody’s Economy.com. “Businesses operate on credit. If they can’t raise money, then very soon they won’t be making payroll.”
“Economic pushback. Economists say that without a restoration of credit, unemployment would likely shoot up to over 10% from 6.1% today. And GDP could fall at an annual rate of between 2% and 4%.”
“Those unemployment and GDP readings would be the worst in more than 25 years. And many believe it would not be until at least 2010 before the economy starts to recover, which would make the current downturn the longest since the Great Depression.”
Most experts believe we won’t see anything like the Great Depression in terms of unemployment or credit problems. But a lingering economic recession can still have far-reaching negative effects on the nation. We need Congress to get their act together and figure this thing out. Get it started. After all they’re legislators- they can pass laws. If they don’t like something, change it. If you want to make it better, do it.
Today President Bush makes a lot of sense is showing real leadership saying that “Congress must rise to the occasion and approve a plan.”
“There are disagreements over aspects of the rescue plan,” said President Bush, “but there is no disagreement that something substantial must be done. We are going to get a package passed.”
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