Senate Bill No Silver Bullet, Not Even Close

Today the Senate passed the 700 billion dollar bailout bill that just last week failed to pass in the House of Representatives. President Bush was quick to praise passage of the bill, saying this is a plan, not just for Wall Street, but for Main Street as well. Indeed, even the media seems to be warming to the plan. News organizations across the country suddenly stopped calling the plan a 'bailout' (which sounds like a sweet deal only for Wall Street firms), preferring now to call it a 'rescue' plan (which sounds much more like it's designed to help average Americans).

So what about this bill has changed over the last few days? In two words, not much. Even some supporters of the bill admit that the House and Senate versions are fairly similar.

So, why all the optimism in Washington that this version will pass in the House? Proponents are hoping that news circulating around the country of the credit woes that car dealerships and other small businesses are having will sway their constituents back home to give the bill their support. How low.

To be sure, a few small portions of pork here and there were added in order to make passing the bill more palatable to both the public and to members of the House who are on the fence. But those little additions make up a small percentage of the bill's total cost. The main thing that differentiates the Senate bill from the House version is the provision to increase the limit for federally insured bank deposits to $250,000 from the current $100,000. That and a measure that lifts the burden of the alternative minimum tax off the shoulders of many American households. Together, all these supplementary 'sweeteners' add about $105 billion dollars to the bill's price tag.

But what do any of these additional measures have to do with the sub-prime mortgages that are the very centerpiece of this economic meltdown? If bankruptcies and sub prime mortgages are the reason our economic outlook is so uncertain, wouldn't it just make good old-fashioned common sense to expend all of our combined energies into proposing and passing legislation that directly addresses those issues? But that's just not the Washington way.

Congress is much more concerned with appearances. The premise that this bailout is built upon (and make no mistake, it is a bailout) is that the only way we can get ourselves out of this mess is to convince the world to have faith in the long term strength and stability of the U.S. economy. And that is vitally important, to be sure. But how much faith can we expect to engender when all we are demonstrating is that we are willing to throw a whole lot of money at the problem and hope that something good will come of it? In order to gain true confidence within the market, we have to address the fundamental problems that have brought us to this point. The bill passed by the Senate simply does not do that.

In a petition to Congress, hundreds of US economists expressed their concern about the proposed economic bailout plan being considered. In that petition, they listed three major problems they saw with the proposal; its fairness, its ambiguity, and its long-term effects. The economists ended their petition saying, "For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come." Sound advice indeed.

The proponents of this measure are trying desperately to convince us that doing something right now is better than doing nothing. If the House of Representatives is pressured into going along with this bill, we may all soon realize that doing nothing is probably a better proposition than doing something that's just plain wrong.