Congress Appears to Vote “Nay” on Bailout

You have a nice weekend? Yeah, me too. Weather was nice, football was watched, fun was had. Oh, one small thing I should also mention: our entire economic structure is swirling in a giant (bleep)storm.

So in "Other than that Mrs. Lincoln, how was the play?" news, we’d like to discuss the bailout. (And as I write this, it appears the current proposal is on the verge of defeat in the House.)

According to John Berlau of the Competitive Enterprise Institute, defeat today would be ideal, as the proposed $700 billion could actually have had a net negative impact on the economy. He writes in The American Spectator:

"The government has to do something to keep markets from falling and the economy from getting worse." How many times have you heard that mantra this past week from President Bush, Treasury Secretary Hank Paulson, Democrat leaders, the news media, and even some ostensibly conservative periodicals?

But what if the bailout, as originally proposed and in its latest incarnation, would spend $700 billion of taxpayers’ money and actually make the economy worse? Believe it or not, there is good evidence this may happen. The inflationary prospects of the bailout price tag may lead to spikes in oil and crop prices that could hit ordinary Americans in their cars and on their kitchen tables. And government purchases of financial assets could ironically further constrain credit through causing write-downs on even the balance sheets of financial firms not participating in the bailout by worsening the effects of mark-to-market accounting rules.

But not everyone is so bearish on the matter. Obviously, Treasurer Paulson and many members of Congress didn’t think it was such an economic downer.  

Also of note, Ball State economist Michael Hicks is now on record saying the ultimate proposal could cost much less — $100 billion over five or six years.

Just $100 billion? Oh, see, and here I thought this was going to impact me financially.