Washington does not understand why taxpayers are so angry about the bailout. Some pundits are calling this ignorance, but I think to the extent *anybody* can predict things taxpayers know pretty much what is going on here, and realize there is major hardship ahead whether or not the bailout moves forward as proposed, as a modified bailout, or does not happen at all. Some of this is already reflected in the stagnant broader markets we’ve seen for the past few years, and some reflected today in the Dow’s drop of about 700 at the close. But this is not a meltdown, suggesting to me that the rumors of total market meltdowns have been at least somewhat exaggerated.
Paul Samuelson noted today in an excellent article that we are basically seeing the bankruptcy of modern economics:
Our leaders are making up their responses from day to day because old ideas of how the economy works have failed them. These ideas were not necessarily wrong, but they’re grievously inadequate at the moment
The American experiment was spawned in large part as a revolution against military-inspired spending taxation from Britain. Few today realize that the taxation levels of the 1770’s were so tiny by today’s standards that they would not raise a modern eyebrow, let alone spawn any kind of spending revolution.
Over the past 230 years times have changed and we now expect Government to tax us at what the founders would have seen as enormous and totally unacceptable rates, and spend *even more* than they take in, leading to a deficit so large it is in my view of greater economic concern – far greater – than the current recession (which will be getting a lot worse, bailout or not).
What would restore most taxpayer’s confidence? Massive Government spending *cuts*, not massive Government spending as proposed in the bailout.
For most of the modern era Washington’s response to problems has been massive debt spending, pushing problems forward to future generations who’ll have to pay down our debt. The Bailout was a similar response unless you accept the optimistic notion that all of that 700 billion will come back after the toxic assets were sold off by the Government. Most likely based on my take some but not all will come back.