Matthew Yglesias makes a quick point that deserves elaboration, particularly in the current financial climate. His basic argument (and I’m adding some of my own as well) is that if we think of the “economy” consisting only of the stock market, then sure, the bailout seems like on OK idea. But there’s also measures of job security, unemployment, equality, health care, quality of life, etc. And if we consider other options on which we could be spending that money, the bailout makes a lot less sense.
The first thing we have to acknowledge is that $700 billion is a ton of money. As in it would automatically be the largest line item in the 2008-9 budget. It’s more than we spent last year on Social Security ($608 billion), Medicare ($386 billion), or Defense ($481 billion). The bailout would cost about 65% of our total discretionary budget last year.
$700 billion will increase our national debt by 7 percent at the drop of a hat.
It’s amazing how quickly consensus arrives when a financial crisis emerges. What could we do with $700 billion instead? Simple arithmetic tells us that every man, woman, and child could get a tax cut of $2,300 (if we limited it to taxpayers only it would rise to almost $4,000). If we wanted to be a little more selective, we could pick and choose from any number of good ideas that pump a ton of money into needed areas. We could try to actually solve some root problems too, either by addressing the housing issue head-on or using incentive programs to increase the savings rate. Anything progressive instead of reactive. I can’t quickly retrieve the figures for repairing all our bridges and roads, cleaning up our waterways, or investing in alternative fuels, but here in the ed world, a $700 billion investment in the nation’s human capital would go a long way. Heck, implement all the proposals of this week’s College Board Rethinking Student Aid report for the bargain basement price of $60 billion. Or start with Education Sector’s Eight Education Ideas for 2008 for a total cost of about $18 billion.
The point is there are a lot of good ways to invest $700 billion in the United States. Spending it all to rescue bad mortgages seems like one of the worst.
