Its a dark day.A few days ago I heard economist Paul Krugman say that he was beginning to experience Stockholm Syndrome around this issue. I guess the same could be said about our elected officials in Washington.
We just allowed Congress to pass a bill that yet again gives unprecedented authority to the Executive branch. We just increased our national debt by 10%. We have no plan but to borrow money on the government's good credit just to give it to banks that make bad investments. Start working extra hard because we are going to have to pay for this at some point.
If it's any consolation, here is what Krugman wrote about the bailout in yesterday's Times:
... the Paulson plan, then the Paulson-Dodd-Frank plan, and now, I guess, the Paulson-Dodd-Frank-Pork plan (it’s been larded up since the House rejected it on Monday). I hope that it passes, simply because we’re in the middle of a financial panic, and another no vote would make the panic even worse. But that’s just another way of saying that the economy is now hostage to the Treasury Department’s blunders.
For the fact is that the plan on offer is a stinker — and inexcusably so. The financial system has been under severe stress for more than a year, and there should have been carefully thought-out contingency plans ready to roll out in case the markets melted down. Obviously, there weren’t: the Paulson plan was clearly drawn up in haste and confusion. And Treasury officials have yet to offer any clear explanation of how the plan is supposed to work, probably because they themselves have no idea what they’re doing.
Despite this, as I said, I hope the plan passes, because otherwise we’ll probably see even worse panic in the markets. But at best, the plan will buy some time to seek a real solution to the crisis.
One thing’s for sure: The next administration’s economic team had better be ready to hit the ground running, because from day one it will find itself dealing with the worst financial and economic crisis since the Great Depression.