Another day, another bailout

It was probably necessary, but yesterday's announcement of a $500 billion bailout of the financial system was troubling because apparently no one in the Bush administration saw it coming. Bush's comment to NBC's Bob Costas just last month ("First of all, I don't see America having problems") doesn't sound much like yesterday's statement that "America's economy is facing unprecedented challenges...the gears of our financial system ... were at risk of grinding to a halt."

Add in the previously announced bailouts of Bear Stearns, Fannie/Freddie, AIG, and other banks and we have about a trillion dollars. For good laugh, take a look at the Mid-Session Review, Budget of the United States Government, Fiscal Year 2009 released by the Office of Management and Budget less than two months ago. In a masterpiece of fiction based on unrealistic assumptions, it actually forecasts a budget surplus in just a few years.

Thanks to the miracle of government accounting, we won't need to "pay" for the bailouts right away, and they won't even show up in the National Debt (at least not immediately). Still, I think we can give President Bush credit for a stand-up double in increasing the national debt from $5.7 trillion to just under $10 trillion. If you add in future costs of the bailout and costs of the war in Iraq we haven't yet paid for, this will bring the national debt to over $12 trillion in just a few years. Not the triple achieved during the Reagan years, but a good solid Republican effort nonetheless.

This seems to be the pattern in Republican administrations; tax cuts for the wealthy, deregulation of financial institutions, a soaring national debt, followed by a collapse in financial markets, and a taxpayer bailout. In the late 1980's it was the savings and loan crisis leading to creation of the Resolution Trust Corporation (RTC). The cost of the RTC bailout in today's dollars would be over $200 billion. Small change by today's standards, but it was big news back when we at least pretended to try to balance the federal budget.

It took a few years (and a recession) before we faced the fact that a strong economy depends on tax policy that's in line with spending. The Deficit Reduction Act of 1993 (formally known as the Omnibus Budget Reconciliation Act of 1993) was tough medicine and unpopular (even with some Democrats), but it paved the way for budget surpluses and economic prosperity in the 1990's. As a footnote, I should add that John "Maverick" McCain voted right along with every other Republican Senator against the bill.

As things stands today, the national debt is soaring and we haven't even started to come to grips with Social Security. We just keep building debt and passing it along to future generations. And McCain's pledge of "no new taxes" sounds more like denial than a real solution.

Anyone know where I can get one of those "No Child Left a Dime" bumper stickers?