Wednesday, September 24, 2008

Bailout: holding the bag

Heavy handed metaphor
Democratic presidential nominee Barack Obama said on Tuesday a $700 billion Wall Street rescue plan would likely delay some campaign spending promises, as the reality sank in of the costs of the mammoth bailout. Obama said if elected he might have to phase in some of his plans such as an overhaul of the U.S. health care system. (...) The Wall Street bailout proposed by the Bush administration would cost almost as much as Washington has spent fighting the wars in Iraq and Afghanistan since late 2001. The estimated cost of those wars so far is around $800 billion, with about two-thirds of that for combat in Iraq. Together, the wars and the bailout could add about $1.5 trillion to a national debt quickly approaching $10 trillion. Reuters

Still seeking to gain entrance into Troy, clever Odysseus (Ulysses) ordered a large wooden horse to be built. Its insides were to be hollow so that soldiers could hide within it. Once the statue had been built by the artist Epeius, a number of the Greek warriors, along with Odysseus, climbed inside. The rest of the Greek fleet sailed away, so as to deceive the Trojans. One man, Sinon, was left behind. When the Trojans came to marvel at the huge creation, Sinon pretended to be angry with the Greeks, stating that they had deserted him. He assured the Trojans that the wooden horse was safe and would bring luck to the Trojans. Only two people, Laocoon and Cassandra, spoke out against the horse, but they were ignored. The Trojans celebrated what they thought was their victory, and dragged the wooden horse into Troy. That night, after most of Troy was asleep or in a drunken stupor, Sinon let the Greek warriors out from the horse, and they slaughtered the Trojans.
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I found this wonderful photograph/metaphor for the Bush/Paulson/Bernanke bailout .

In it, there is an elephant, who represents the Republicans, and a lady who represents the Democrats.

The elephant, having thoroughly enjoyed his meal, is happily filling the lady's bag with its excrement. The lady is left holding the bag.

Get it (nudge, nudge)?

The bailout will probably not keep America from sliding into recession, but it will certainly keep the next president and congress, if they be Democrats, from creating a public health system or anything like it. If the Democrats are left overseeing a deep recession without any money to spend on welfare, the Republicans will retake congress and the White House in 2012 and then take credit for the next cyclical upswing. Thus, the American people will never get socialized medicine or money to pay off their mortgages or anything else that would justify the Democratic brand. With the bailout, the Republicans would win, even if they lost the White House and both houses of Congress.

This is why I think that, if the Democrats get their fingerprints on Paulson's plan, it would be better if they lost this year, something that, happily, they seem trying their best to do.

The Democrats would be fools to sanction this scheme for crippling them.

This bailout is obviously the Republican's "Trojan Horse": and I, alas, am left the role of Laocoon, the priest who warned his fellow Trojans:
‘O wretched countrymen! What fury reigns?
What more than madness has possess'd your brains?
Think you the Grecians from your coasts are gone?
And are Ulysses' arts no better known?
This hollow fabric either must inclose,
Within its blind recess, our secret foes;
Or 't is an engine rais'd above the town,
T' o'erlook the walls, and then to batter down.
Somewhat is sure design' d, by fraud or force:
Trust not their presents, nor admit the horse.’
Aeneid - Virgil

1 comment:

forensic economist said...

The bailout is not popular in academia:

This is a letter from 190 academic economists asking for a no vote. Even the scaled back bailout is bad.