Goodbye Universal Health Care, Energy Investments, Infrastructure Spending...

by: David Sirota

Sun Sep 28, 2008 at 22:00


Food for thought: $700 billion is about 5 percent of our entire economy. It is roughly enough to create a universal health care system for the next 5 to 10 years. It is also enough to fund the energy and infrastructure investments most economists say we need to build our economy in the 21st century. Handing that $700 billion over to Wall Street and putting it on the national credit card will make it almost impossible to finance these priorities.

Put another way, lawmakers who vote for this $700 billion bailout are potentially casting a vote to decapitate the progressive movement and the major tenets of its agenda  - at least for the next generation.

Discuss.

David Sirota :: Goodbye Universal Health Care, Energy Investments, Infrastructure Spending...

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Goodbye Universal Health Care, Energy Investments, Infrastructure Spending... | 49 comments
Exactly backwards (4.00 / 4)
So many of these other things are cheap compared to the buyout.  "If we can spend $700 bailing out Wall Street, we can afford..."
Good point (4.00 / 6)
isn't Obama's healthcare plan estimated to cost about 70 billion a year?

"They'll give Wall Street 700 billion dollars but won't give working class Americans a 10th of that to stay healthy?"

That would be a great, and powerful line of bargaining to use.

Now as I pointed out I don't think the bailout really going to lose us 700 million, but that's a whole different question.

John McCain: Beacuse lobbyists should have more power

[ Parent ]
Single payer costs less than what we are doing now (0.00 / 0)
[ Parent ]
where you gonna get the money? (0.00 / 0)
especially if the recession is longer than a year and a half or so?
[ Parent ]
Same place you got (4.00 / 2)
the money for the bailout. Debt. It's not like he'd suddenly have a surplus without this bailout.

It's called Keynesian economics.

John McCain: Beacuse lobbyists should have more power

[ Parent ]
debt (0.00 / 0)
this is what the historical debt looks like in terms of absolute value and value relative to GDP before the bailout.  So you have to establish that the borrowing will be feasible and what the price of it will be- I can't see how it will happen without coming at the cost of spending deferred or canceled altogether - i.e. potentially better uses for this money.

Even if you're correct about it's feasibility, this bailout, as far as I can see, isn't pumping capital into sectors of the economy that are going to increase productivity in the long run, which is what leads to growth with enough leftover for ordinary people in some places to improve their standard of living.  Exactly the kinds of stuff that David is talking about.

So if you're going to support it, I think you should know what you're getting in for.

[ Parent ]
As far as I understand (4.00 / 2)
it's actually only a 350 million buy in. After that the rest needs to be reauthorized to be used. And Iif Paulson is to be believed he'll spend only 50 million a month. So he'll probably spend the 350 by the last day of the Bush Administration. And if a better solution is found or things get better then it will be a 350 million deal.

Also, my understanding is that the bill will require a equity stake and thus it's possible we'll get back a few hundred million.

In the end I think it's quite possible we'll end up losing less then 100 million.

Still sucks and it could be used in much better ways. But I think your way overreacting to how much this will do to hurt a progressive agenda.

John McCain: Beacuse lobbyists should have more power

Billions not millions (4.00 / 1)
But other than that point, I agree with you.  This is just adding onto our debt and the taxpayer will probably end up taking a 100-200 billion hit in the end.  Ultimately, it really won't have much effect on whether or not progressive agendas are enacted going forward.  Its just more debt, which is certainly not a good thing but not some kind of debilitating catastrophe.


John McCain: Health insurance for low income children represents an "unfunded liability."
[ Parent ]
Whoops (4.00 / 1)
Yeah, billions, billions.

This will probably wind up adding about the same amount as the "stimulus" package earlier did.

John McCain: Beacuse lobbyists should have more power

[ Parent ]
at what point will the debt become a debilitating catastrophe (4.00 / 1)
and more to the point, who gets to determine that point? Once you're severly in debt (soon to be about 86% of GDP!), your creditors are the ones with power, to really oversimplify things.
[ Parent ]
pretty soon (4.00 / 1)
but when your in a recession you've got to invest money to get out of the recession so your economy improves and you've got the money to pay down the debt.  

John McCain: Beacuse lobbyists should have more power
[ Parent ]
you're working on the argument that this bailout will shorten rather than lengthen a recession (0.00 / 0)
again, i think it addresses a short term liquidity crisis in finance capital.  there are a lot of people who don't think a bailout geared that way will address the broader problems with the economy.  But I've only seen parts of the House bill.
[ Parent ]
I have not seen (0.00 / 0)
 numbers as to the real cost.   David forgets in this piece that the Fed has already committed $900 Billion, so the true amount is $1.6 Trillion.

We will be getting assets for that money.  People I trust say in the end it may be a wash - though it will take several years to sell all the assets.

I must say over the weekend I changed my mind yet again about the bailout.  While watching the South Park Movie's song what would Brian Boitano do, I thought what would Keynes do?

He would be leading the bailout conversations.  

I still have no idea, though, how Paulson is keeping his job.

[ Parent ]
Obama was never pushing for UHC (0.00 / 0)
It was always up to the Senate to send him a UHC bill, which will likely not happen if this bailout passes.

Obama still wants to go ahead with his middle-class tax cuts, making money even more difficult to find.

future (4.00 / 2)
Your opinion is based on the assumption that we never get  back any of the 700 billion we are loaning. While it's possible we may not get all of it back, it's likely we will at least get some of it. In other words, saying that we are giving away 700 billion and will never see it again is a bit simplistic.
Even if we do get most of it back (4.00 / 1)
you just know Republicans are going to use it as an excuse to cut social programs anyway. And even though their party is responsible for wiping out the Clinton surplus and bringing in the Bush deficit, they're gonna try to pose as fiscally responsible crusaders anyway. And even though we all remember what happened after the '90's Gingrich revolution, if you think the that'll keep them from spouting off that crap, well... think again. I mean in the debate McCain was trying to blame the financial crisis on government programs and earmarks, fer chrissakes.

"I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that."
-Lawrence Summers
[ Parent ]
and look how well (4.00 / 1)
that played for McCain at the debate.

He got crushed so badly during the economic section that his slight win on the national security section was wiped away in most peoples minds.

Yes. The Republicans will do that, but they'll find a excuse to try to do that no matter what we do. Problem is that way has been rejected and Republicans will have close to no power in January if all goes well.  

John McCain: Beacuse lobbyists should have more power

[ Parent ]
They will try to pose (0.00 / 0)
as fiscally responsible, but no one will buy it.

That part of the GOP brand is dead and buried.  George Bush dug the hole, and his son put the corpse in and filled the hole back in.

[ Parent ]
I'll ask again (4.00 / 1)
Are there significant mass protest actions planned for tomorrow?

If not, why not?

because (4.00 / 1)
A lot of reasons.  They aren't effective, they are expensive, and people who organize them have lost credibility.
[ Parent ]
Really? (0.00 / 0)
None of this seems obvious in the present case.
[ Parent ]
well (4.00 / 1)
Organize a protest, see what happens.
[ Parent ]
I have in the past and I will again (4.00 / 1)
and my experience was exactly the opposite from that which you describe.

But we're not talking about individuals, rather the groups which did the organizing on Thursday-e.g. PDA, Jobs with Justice, Progressive Majority, some of the unions.

Why are they throwing in the towel now that it really matters?

[ Parent ]
I just got an email from J with J (4.00 / 1)
The Wall-Street blank check bail-out, driven by corporate greed, is still moving ahead in Congress, so far without the enforceable commitments that JwJ and allies have insisted are needed to Save The Economy, Pronto.  Several national groups and economists agree that we can and must push for a better deal for Main Street.

On September 30, Congress is scheduled to go home to face constituents, during their election cycle break.  JwJ is counting on YOU to hit the streets on Wednesday, October 1st to make sure Congress serves Main Street before Wall Street.  We will do this Day of Action whether the Wall Street Bail-out bill has passed by then or not!!

Jobs with Justice members know that Congress needs to act strongly (but not in a panic) to address the immediate financial crisis, but we also need a deeper, long-term restructuring of our economy so it works for everyone.

Our Demands:
Make the people that got rich while creating the crisis pay for the clean-up
Restructure the banking system:
Short-term:  public ownership for public assistance (i.e. equity stake for public cash)
Long-term:  re-regulate private finance and expand public and community-owned alternatives
Solve the housing and foreclosure crisis
Commit to fast-tracking a true recovery plan that addresses jobs, infrastructure, pensions, etc.

It continues from there.  I'll be going on Wed if they have something going on in my area.

[ Parent ]
the ones in los angeles and chicago and elsewhere (4.00 / 1)
at least provided the potential for an immigrant rights movement, even if it was coopted.  Certainly stopped the Sensenbrenner bill.  Protests are also not expensive if they're movement-driven, rather than professionally organized.  The question, I think, is whether they're disrupting power at all or are mostly expression/performance.
[ Parent ]
different issue altogether (0.00 / 0)
Try getting 100,000 people in cites across the nation to protest this bill. It won't happen.

The bigoted Sensenbrenner bill was seen as a direct attack against the fasted growing segment of the population in our country. That galvanized people. Also Eddie Sotelo used his hugely popular radio show to push the rallies hard. There isn't any anti-bailout radio show host with that kind of listenership who is pushing that hard.

There is not a powerful enough organized constituency who could pull off rallies of that scale and that's what it would take to make anti-bailout rallies effective.

John McCain: Beacuse lobbyists should have more power

[ Parent ]
yeah i agree with you (0.00 / 0)
but to  me the more important question is why this is the case and making sure that mass protest isn't rejected as a tactic altogether when it's feasible.
[ Parent ]
But everybody's talking about it (0.00 / 0)
It's a big issue. Everybody's worried. There are a vast crowd of older, socially conservative voters who nevertheless oppose this bailout to the hilt.

Mobilise them in ones and twos around the office water cooler and you may have a protest that matters. If it's just the standard protest crowd, it gets ignored, but if you bring out the Perot voters, you've got a chance.

Forgotten Countries - a foreign policy-focused blog

[ Parent ]
Because most people still believe a bailout is necessary (0.00 / 0)
At least, that's my take.
[ Parent ]
disagree (4.00 / 2)
i think most people feel powerless to stop it.  as a result they do nothing, because political depression produces inaction.  that's how i felt before i saw the anger that this bailout produced.
[ Parent ]
From Brad DeLong's blog: (0.00 / 0)
"How Much Will This Cost? How Does This Constrain the Policy of an Obama-Biden Administration?"

Larry Summers's answers are "not much" and "not at all." I agree...

Here's a link. What think ye?

And Andrew Natsios Said Iraq Would Cost less than $2 billion (0.00 / 0)
How many times do we have to get fooled?
[ Parent ]
Once said (4.00 / 1)
Some very different person used the same words about something very different.  Yea, that's an important point to remember.

And this point was made all the time before the Iraq war:

[T]he usual concern about government budget deficits is that the need for government bonds to be held by investors will crowd out other, more productive, investments.... To the extent that the government purchases assets such as mortgage-backed securities with increased issuance of government debt, there is no such effect.

Deja Vu all over again.

.
.
.

or not

[ Parent ]
The operative phrase here is (0.00 / 0)
"over time", as De Long is referring to government's ability recoup its investments some years down the road. Even if that were true (which I think is optimistic, but I will defer to a real economist in De Long), it still doesn't take away the basic point that DS is making: that funds for progressive legislation may dry up for some time.
[ Parent ]
They would also presumably dry up (0.00 / 0)
[ Parent ]
given what looks like the sketch of the final deal and that it was passed in a week (0.00 / 0)
do you have any evidence that the currently political configuration would allow the credit system to collapse?  On the other hand, I have plenty of evidence that without pressure, they will let poor and vulnerable people die.
[ Parent ]
And I third that (4.00 / 1)
I think something like the "Green Recovery" plan is called for when Obama takes office and I think Summers makes the case well for a option like that.

John McCain: Beacuse lobbyists should have more power
[ Parent ]
That May Be True (0.00 / 0)
that the Dems, by agreeing to the Bail-Out, may be foregoing progressive legislation for a decade. That would probably be a relief to the great majority of Dems that came in to Congress in the '90s, and have amounted to little more than dead weight (see: Patty Murray). In this scenario, they might as let go of most of their staff, and vacation in Bermuda until the next election.

But I would make two points.

The first is that some of the most progessive legislation imaginable requires relatively little funding. A constitutional amendment mandating public financing of elections is fairly cheap, and would have a massive impact on the viability of all future progressive legislation. Employee Councils for all companies with greater than 50 employees wouldn't cost the government a dime, yet it would be the biggest step toward economic democracy in American history. A rule change that combined rail funds and highway funds into one bucket would immediately make tens and tens of billions of dollars available to rail projects nationwide, and combined with a HUD that taught localities how to zone for transit, would literally change the way we live our everyday lives. All of this is fairly cheap.

The second point is that the economic crisis may actually force Congress into progressive legislation they normally wouldn't have the stomach for. (That's certainly what happened with the Tory's in the early '30s...its long forgotten, but it was the Conservatives that founded the welfare state in Britain). No more small-scale programs like Midnight Basketball or the EFTA, no more "Tipping Point" legislation, no more Clinton B.S. The problems now are too broad, too deep, too ingrained, too intertwined...and too many of them are already at crisis levels for them to be ignored or disguised for the public through mis-direction.

I've felt for awhile that a big Dem win in November would not result in large-scale substantive change for three or four years, until the Dems ran into a brick wall with their milquetoast policies of the '90s. The current economic crisis may shorten that time considerably.

It's up to them individually...some Dems may morph into progressive leaders; I suspect many will simply retire, because boldness and leadership is not something they know or signed up for, and they will find the new zeitgeist incomprehensible. I realize that sounds very snide, but when I think of the Murrays and Hoyers and Lieberman's et al., it would seem to be clearly true.

I like a lot of what you say (0.00 / 0)
But your point about the Tories in the 1930s is gibberish.

The foundations of the British welfare state date back to the Liberal government of 1906, which passed National Insurance, relaxed labour law, took some tentative steps towards ameliorating poverty and improving healthcare and made a few other reforms.

Then after WW1 and in the 1920s there was some progress from a couple of fairly unimpressive Labour governments, and more progress forced by industrial action and the Poplar rates strike.

But in the 1930s? There was a 'National' government led by a renegade Labour Prime Minister and mostly made up of Tories, which tended to follow conventional right-wing advice, was ineffective in dealing with the Depression and remained defiantly anti-worker.

The establishment of the British welfare state was almost all the product of the Atlee government, which brought in the National Health Service, nationalisation and a host of other integral parts of the system. Churchill's Tories, meanwhile, declared that this would be the end of British parliamentary democracy.

Nevertheless, grassroots pressure forcing a move to the left is definitely the key thing.

Forgotten Countries - a foreign policy-focused blog

[ Parent ]
Neville Chamberlin made great strides (0.00 / 0)
in instituting the welfare state, no? But you're absolutely right about Ramsey McDonald being flacid.

I wasn't aware of the LibDem contribution...thanks for the education!

[ Parent ]
Best of a bad situation? (4.00 / 2)
It's easy to rail against a bailout.  We should be harder on the crooks behind this. But that includes Phil Gramm and the other rethuglicans who deregulated much of the finance industry, allowing unregulated derivatives to spiral out of control.

But by now, the damage is done.  They built a house of cards in order to extract profits from a bubble that they created, and the broader economy is at risk of its collapse.  Many non-rethuglican economists recognize that a credit squeeze could cost a lot of jobs, and not just among the overpaid suits at the investment banks.

Henry Paulson's bailout plan was horrible; it gave his friends their money and had neither an upside for the taxpayers nor any oversight whatsoever.  But that's not the plan that has emerged.  It's far from perfect, but at least there is some oversight, and if the economy recovers, the Treasury can get something back, not just the yacht dealers.

I did see some comments on this site implying that Barney Frank wasn't on our side.  I dispute that; he wanted a lot of changes to the Paulson plan, and got what he could.  He's no dummy and knows a hell of a lot about banking.  So in this case I defer to his judgment.

The risk of not doing anything is serious.  Indeed the cost of doing nothing is probably higher than the cost of the bailout.  (The boat's already taking on water; that's why the bailout metaphor.)  The goal should be to bail out the economy as cheaply as possible and then, once we regain the White House and serious control of Congress, tweak the tax code to get the money back, and reregulate the finance system to be more supportive of ordinary folks and domestic production, less a tool of the UAE and China.  Emotional reactions against it may be counterproductive.

Paulson is a good negotiator (4.00 / 1)
He started with the moon and came down. Excellent tactics.
[ Parent ]
"ndeed the cost of doing nothing is probably higher than the cost of the bailout." (4.00 / 1)
Well this is a highly controversial statement :)  It also begs questions like "cost to whom?" "how did you arrive at this conclusion?" "why is it too late to make it better?" "what will be the future consequences?"  At a certain point,  metaphors have to be replaced by rigour, particularly if you're going to say that other people are being "emotional."

Personally, I don't think the social force is there to make this bailout a real bailout for ordinary people that will address the fundamentals of the liquidity problem or the economy as a whole Roubani and Jobs with Justice and many others have pointed to in part or in full.  But the conditions on paulsen/bush are pretty weak and he pretty much got a lot of what he wanted.  namely a really large amount of discretionary spending.

The goal should be to bail out the economy as cheaply as possible and then, once we regain the White House and serious control of Congress, tweak the tax code to get the money back, and reregulate the finance system to be more supportive of ordinary folks and domestic production, less a tool of the UAE and China.

I never understand this logic.  Why is this an either/or?  You put as much pressure as you can to maximize your leverage in both situations to get as many of your outcomes as possible.  Certainly progressives/radicals/etc. are going to have to given the Democratic Congressional leadership we're stuck with for the time being.

[ Parent ]
Tax Revenue (4.00 / 3)
If the economy is stagnant for years to come, we lose tax base, which costs money also, it's just a hidden cost as opposed to an explicit one.

People who were right about Iraq, who think we should pass the bailout: Obama, Pelosi, Krugman, DeLong off the top of my head.  David, don't you think that your point is a bit off base since many of the people who are allegedly fooling us "again" weren't fooling the first time?

There's also Kevin Drum, who is no GOP Daddy saying "pass the damn thing already" and I think he has a point.  This thing sucks, the whole thing sucks, and they should have negotiated for more.  I agree with all of those sentiments, and the Democrats suck for not getting a tax increase and a stimulus out of this, but I don't think the Iraq comparisons work.

This I just don't understand (0.00 / 0)
"These people who were right on an entirely different issue support this, and because they are like unto gods amongst men I support it too."

It doesn't matter who supports it. It matters what arguments and reasons they have for doing so.

Forgotten Countries - a foreign policy-focused blog

[ Parent ]
Compared to what if we do nothing? (4.00 / 1)
Yeah, it's about 5% of GDP.  But if we do nothing, it's my understanding that a banking crisis can eat a lot more than that -- typically 16% of GDP.  And going into a full-blown Depression even more than that.
It hasn't been carefully discussed (4.00 / 1)
The experts haven't weighed in on different approaches. None of us know much but we could learn and maybe even congress could learn. Doubt it tho.
At bottom it is the system they are saving (0.00 / 0)
All that loan money going around and around, sloshing in the bucket to grease the skids.

Do we want to preserve it? It certainly has its advantages. Our way of life and lifestyle depend on it. But oil is going to force changes anyway. We could start now.

Pension funds would tank.  Gulp.

Its called deficit spending man (0.00 / 0)
Come on, we're Democrats. Surely we can remember how to spend money we don't have.

After all, things like health care reform don't actually cost money. In the long run they save it.

Goodbye Universal Health Care, Energy Investments, Infrastructure Spending... | 49 comments
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