Wednesday, October 1, 2008

The Defeat of Bad Logic about the 'Rescue' (Bailout) Plan

Colson usually has insightful things to say on the matters about which he comments. But today his commentary is weak, very weak. Because this matter is moving rather quickly, the details of this will probably be out of date very quickly. Nevertheless, find my comments interspersed in the article below.

What's in It for Me?
The Defeat of the Rescue Plan
[Breakpoint by Charles Colson]
October 1, 2008

On Monday, the House of Representatives surprised its leaders, the administration, and, most of all, the financial community by rejecting the agreed-upon financial rescue plan. The bill will be debated again tomorrow.

Two-thirds of all Republicans and two-fifths of all Democrats voted against the plan, with predictable results. The markets tanked around the world. We saw a record 777-point drop in the Dow Jones and the worst one-day loss in the S&P 500 since the 1930s. The market recovered somewhat yesterday, but the credit crisis remains.

I don’t want to minimize this one-day stock market drop, but this is a logical fallacy that Colson should know better than to employ. While it was the largest point drop of the Dow, it was no where near the largest percentage drop - not even close. This attempt to make a bad situation sound worse makes me wonder, right here at the beginning, about Colson’s whole approach to this matter.

The explanation of why 228 representatives risked a meltdown in financial markets could be expressed in another set of numbers: Phone calls and emails from their constituents opposed the measure by a 100-to-1 margin.

Now to be sure, some, like my friend Congressman Mike Pence of Indiana, opposed the rescue measure on principle. But many who voted against the bill merely reflected the will of their constituents, who wondered why their money should be used to take other people off the hook.

A very telling poll revealed that 25 percent of those polled favored the measure, 25 percent had no opinion, and the rest opposed it, largely on the grounds that it didn't affect them or wasn't their fault. And given what we saw on the television news, for once I believe the polls. The typical man-on-the-street interview went something like this: "The bailout won't help me! You bet I'm against it."

Those men-on-the-street are often not very articulate, and polls often depend upon how the question is asked. Colson does not cite the poll he has in mind, so I can’t comment about that. But it is not unreasonable for people to balk at paying - heavily - for problems they did not cause. Perhaps those men-on-the-street, and some of the rest of us not-on-the-street just now, are worried about the government creating an additional 700 thousand millions of money-credit. It is a legitimate concern. Why? Because when the government makes more money, the value of the money we have decreases.

Frankly, I was appalled. I can't help but think that these results illustrate how far we've gone down the path of viewing all politics and all of life as "what's in it for me."

As many have tried to explain, what is happening on Wall Street affects what happens on Main Street. As I record this, millions of Americans, living far from Manhattan, are measurably poorer as a result of what has been happening in financial markets.

So instead of asking "how is the common good best served?" we look to our own interest, even at the risk of a "decade of little or no economic growth" and a meltdown of the global financial system.

Frankly, I’m more appalled than Colson by his lack of depth here. This proposal before Congress is not the only approach to solving this problem. There are many others (for example, see the previous post on this blog) put forth by very knowledgeable people that just might be better. Without reviewing all those here, here are some alternative suggestions that have come from many quarters: cut government spending dramatically - very dramatically. Eliminate all corporate income taxes, and all taxes on interest, dividends, and capital gains. Allow financial firms to price the assets in ways that reflect underlying values - especially when connected to real estate - rather than just what it might bring on the market today.

These kinds of things would send the economy into a dramatic upward spiral starting the day after they became law.

The proposed bailout would not serve the “common good” - it would serve the good of the political class. The fact that Congress won’t seriously consider better solutions to this problem is no reason for the rest of us to succumb to their fifth-rate proposals. Shame on you, Chuck!

It isn't only our lack of concern of the common good that disturbs me. It's also our lack of accountability. I spoke with a very intelligent young banker recently who told me that he encounters it all the time. During his time in risk management, he never heard anybody in foreclosure say, "I made a mistake taking that mortgage. It was too big."

Instead of acknowledging their accountability—their responsibility to pay the debt—they just shrugged it off, merely mailing the key back to the mortgage holder. Contrast that with a biblical sense of responsibility, of paying your debts.

Yes, this is a problem. But remember that, in the name of social engineering, in the last few decades the government has insisted that people get loans whether they can afford them or not. Whose fault is it that people responded to that? (Hint - it begins with “g”.)

Consider a broader point. I am 56 years old. During most of my lifetime our government has been involved in a never-ending race to spend more - by borrowing - than it could ever repay. The U.S. government carries a “revolving balance” that makes all the credit card debit in the U.S. seem paltry by comparison. In other words, our government, for many decades now, has set a wonderful example for us all. That example screams, “You can borrow your way to prosperity.” People have just been following the example of their Uncle Sam. Should anyone be surprised?

Why does Mr. Colson fail to mention this?

And as for accountability: where is the accountability on the part of politicians - most of them of the modern ‘liberal’ (liberal with other people’s money, that is) stripe - who bear the real responsibility for this mess?

But this isn't just about finances. No great civilization has ever been built, or maintained, on the basis "what's in for me?" That idea cannot demand, much less inspire, the necessary sacrifices to keep a civilization great, or even healthy—there's nothing to aspire to apart from fleeting self-satisfaction.

As I said, I respect the principled opposition to the rescue plan by some members. But the fate of the economy is hanging in the balance. If the American people can't look beyond the "me" and see the "we" with this much at stake, then much more than our retirement funds and our bank accounts are at risk.

If the fate of the economy hangs in the balance, how stupid is it to do more of what got us here as a supposed answer to the problem? Yes, “we” need to look beyond retirement funds and bank accounts. “We” need to stop whining and insisting that the government take care of us. We need to demand that Congress stop spending money they can only take from us, and that we don’t have. We need to remember that government is usually the problem, not the solution.

I am very disappointed that Charles Colson would make such shallow comments. He doesn’t even attempt to answer that principled opposition to this bailout that he claims to know about. If the fate of the economy hangs in the balance, is it really wise to trust the first plan proposed in Congress - the very body that set the stage for this whole problem in the first place?

No comments: