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Everything But the Kitchen Sink

October 1, 2008 · 10 comments

Why is it that Congress can’t pass a bill without a bunch of add-ons? As it turns out, the bailout of the economy will be no different.

This evening, the Senate passed a version of the bailout bill by a vote of 74 to 25 (in case you’re wondering, both McCain and Obama voted yes).

The centerpiece of the bill remains an asset purchase of nearly $700 billion of worthless at risk assets from failing troubled banks. The idea is that relieving the banks of these credit burdens will allow lenders to begin making loans again.

That, on its own, is not going to be enough to woo more votes in the House, especially among the GOP; nearly 2/3 of the House GOP voted against the plan two days ago. So, the Senate packed on more stuff. And yes, that means that the bill will end up costing more than $700 billion – perhaps as much as $810 billion (since apparently we can just print more money).

As expected, the bill increases the FDIC insurance cap to $250,000 from $100,000, but only temporarily. Both McCain and Obama went on record in support of the higher cap. The bill also allows the FDIC to borrow from the Treasury to cover any losses from the increase.

Those energy credits that weren’t going to be discussed before the elections? They’re included.

Research and development credit for businesses? Included.

A credit that allows taxpayers to deduct state and local sales taxes on their federal returns? Also included.

Heck, the Senate even added another patch to the AMT – this time in October (can’t you feel the excitement?).

Now, I’m not saying that any of these provisions aren’t worthwhile or important – that’s another post for another day. I just can’t understand how such a controversial bill to begin with – the largest bailout in American history – became a magnet for all kinds of legislation. And we haven’t even seen what the House might tack on…

Sen. Richard Shelby (Rep – AL) may agree. He felt that the Senate rushed into this latest version of the bill. He said:

I agree we need to do something. … [But] we haven’t spent any time figuring out whether we’ve picked the best choice.

Will it pass? I’m not sure. In between the partisan bickering, the worries about a disgruntled public (the site at www.house.gov crashed earlier in the week because of all of the traffic) and the calls from conservative leaders to let the free market play out, it will not be an easy vote. And the added tax cuts may sway some Democrats who initially voted “yes” since there is no offsetting revenue for the cuts.

The bottom line? Don’t expect an easy debate in the House.

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{ 8 comments… read them below or add one }

1 Bruce October 2, 2008 at 7:22 am

The part that gets me, the original 3 page bill wasn’t changed. Now with over 400 pages, can we expect it to pass? If so, why? The original simple bailout has nothing different and is still flawed.

Has any one seen the new bill? One of the “new provisions” provides a 6 million tax break for companies that make children’s arrows. Somebody please tell me how that is going to help this countries economic issues.

2 Lori October 2, 2008 at 7:59 am

Here’s what we do – going forward CEOs of failing companies no longer get a golden parachute. They get an exit package directly related to the success or failure of the company under their watch. If the company fails while they’re heading it, they go down with the ship. No cash. Why are they being paid either way? Makes no sense.

Oh, and in order to ensure that boards will begin to hold CEOs accountable – they too will have penalties assessed them should their bright new star not have checks and balances in place to guarantee his/her efforts will be focused on growing the company, not growing his/her personal bank account.

3 Urbie October 2, 2008 at 8:31 am

Ya — 440 pages is a lot to slog through. Reading ANY piece of legislation is a pain, because so much of it usually consists of amendments to existing sections of statutes. (I tried to read the Patriot Act once, and it proved fruitless — sure, the text of the Act is on-line, but it’s mostly a bunch of amendments, and the laws that it amends are not hyperlinked. Who’s got the time to go and look through each one, to take a look at the third sentence of the 11th paragraph, which is being amended by the addition of a comma and the words “as far as is practicable?” Sarbanes-Oxley was just as bad. But hey, I’m not a lawyer.)

But something has to be done here, or we’re looking at Great Depression II. I’m unemployed — despite two desirable skill sets and a resume with lot of stuff people usually need — and am watching the job market dry up, day by day, while the headlines read “Fed Mulls Rate Cut Amid Recession Fears.” I ask you, exactly what kind of “Fears” are we talking about? The unemployment rate here in Rhode Island is 8.5% and climbing fast — how high does it have to go before they face the fact that we’re IN a recession?

So ya, this bill is ugly, it’s not a good thing to have to do, and so on. From the point of view of a tenured economics prof, it would be better to just let the free market do what it’s going to do. But from the vantage point of a leaky lifeboat, we need some help out here.

Urb

4 WAYNE pHILLIPS October 2, 2008 at 8:55 am

Taxgirl, you mentioned the following:
“As expected, the bill increases the FDIC insurance cap to $250,000 from $100,000, but only temporarily”.
How temporary? Like the ever looming ATM?

Wayne Phillips

5 Suz October 2, 2008 at 9:27 am

Once again I find myself asking the question…is this really a well thought out plan or really will it be as effective as a band aid applied to a severed arm? Why must our ELECTED officials always add on to bills in order to get the passed? Why can’t they look at the will of their constituents and vote their conscience? If it was good enough today…why wasn’t it good enough a few days ago? I’m frustrated with the lack of leadership from both party leaders. When will there be an understanding that they are working FOR the US voters and not the US voters working for them….

6 Melody Platz October 2, 2008 at 12:42 pm

Did you see the interview with Warren Buffett last night on Charlie Rose? He is enthusiastically for the rescue package.

I thought it was an interesting conversation, no matter which way you lean.

7 Teri Evans October 2, 2008 at 10:17 pm

If you would like to know who really stands to gain from this bail out, you should go to OPENSECRETS.ORG. Check out who has a vested interest in all of this.

It doesn’t matter how many provisions are added or subtracted, it doesn’t matter if they stand on their heads and write this bill. If
we tax payers have to pay for this bail out, WE DO NOT WANT IT.

You are right, they know how we feel. We have made it very clear.

I am praying that the House will have more sense in their vote.

Makes me wonder if they remember that we will be voting soon too.

8 Pat October 8, 2008 at 9:08 pm

Anyone wonder why they called Bush’s bailout bill a “bailout”?

Since Wall Street is mostly made of scads of men all too willing to take the high risk road, once again America is willing to subsidize bad behavior and bail “them” out.

I’ve yet to hear that it is a bailout bill for consumers; we’ve been bailed in – like reeling fish in on a hook to feed the flocks in NY.

Does anyone see a problem here with vision that respects what consumers are entitled to, as well as what they are entitled not to do?

Taxation without representation is obviously outdated by this audacious outrage.

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