Wednesday, October 1, 2008

Of the People, By the People, For the People?

Our illustrious Congress has one again demonstrated that they are not for the people, but for themselves and for their party. Both Republicans and Democrats voted against the bail out bill, and most of those who voted against it did not do so as a matter of principle, conviction, or ideology.

Political analysts saw a pattern: those facing a close reelection race voted against the bill, while those who weren’t facing a tough race voted for it. Talk about self-serving. Now you might say that those who voted “no” were listening to their constituents, and voting the way the electorate wanted. You know, the will of the people.

However, typically they vote, not on behalf of the people they represent, but on behalf of the special interests who lobby them and give them money. Although in this case they seemed to be listening to the people, I believe the people are wrong. Most people don’t understand this economic crisis, and most people view this “bail out” as rewarding bad behavior. They don’t understand it for what it is: a move to stabilize financial markets and reduce the risk of an all-out depression.

Of course the bill is flawed, but we have to do something. Otherwise, the stock market will continue its roller coaster ride. If the government doesn’t do anything, then the free market will make its own adjustments. The result will be a severe lack of credit availability, hindering companies for doing business and resulting in an economic slowdown even worse than what we are facing. Unemployment will increase, more will default on their mortgages and other debt, and there will be a further decline in the stock market, the credit markets, and in business activity. This downward spiral could continue for some time. Remember, the Great Depression lasted for 12 years, and only World War II brought us out of it.

The situation is different today – we are in worse economic shape than we were in 1929. We have a huge budget deficit, we have exported the best jobs overseas, we are forced to export billions of dollars to buy foreign oil and Chinese-made goods, and we have financial markets that turned out to be a house of cards. There is huge consumer debt in the form of credit cards, car financing, and mortgages. Any significant downturn in the economy will result in further defaults in those areas, destabilizing even more our fragile financial institutions. That’s why something must be done by the government now.

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