October 03, 2008

The Senate’s Arrogant Ignorance

The Senate’s Arrogant Ignorance

By Julian Dunraven, J.D., M.P.A.

Dear friends,

Last night, I made the mistake of watching C-SPAN as the Senate voted for the woe begotten bailout plan. I find it amazing that we did not conduct a second American Revolution after C-SPAN was created and enabled Americans to see the staggering ignorance and incompetence of their elected officials on a daily basis. Senator Kay Baily Hutchison of Texas, unbelievably a Republican -- if that has any real meaning anymore, gave a speech saying that she and all her colleagues heard overwhelming opposition to the bailout plan from the people. However, she went on to say that she didn’t think the people understood all the improvements the Senate added to the bill and how vital it really was. What patronizingly insipid bloody rubbish! The U.S. Senate may have a difficult time understanding basic economics, but the people seem to be doing just fine.

The people understand that bailout plan remains extremely immoral and totally unworkable, no matter how many frivolities the Senate used to decorate it. Money Morning has an excellent analysis of just why the Senate touchups won’t come anywhere close to solving the problem, and actually make it far more difficult for us to recover.

Despite its alterations though, did the Senate change anything fundamental that the people would have difficulty understanding? No. The people still know that giving $700 billion of tax money we do not have to bail out the failures of private industry is immoral and stupid. Those who have been paying close attention also know that it is not nearly enough to even cover the bad mortgage debts, much less the countless other risky derivatives of unknown value, which are sitting out there on corporate books like ticking time bombs.

The people might be interested to know that this bill also allows the government to bail out not only our own banks and corporations, but also foreign firms. Apparently, Europe is no longer responsible for its own well being—they can wait for the American taxpayer to save them. After all, we have been printing more money so fast so often, it is probably easier for us to just keep the presses rolling.

Another thing that the people understand, but the Senate seems to have forgotten, is that controlled economies (i.e. communism and socialism) have proven to be astounding failures. Yet, now we hear senators saying that, while free markets are good in theory, we have to deal with reality right now. It seems that in the perverse world of the Senate, dealing with reality means falling back on known failures. The Financial Post has a good deal to say about that particular idiocy.

In a capitalist system, though, our markets are designed to quickly deal with failures. It allows us to purge ourselves of unworkable or poisoned assets and quickly refocus on good assets. If a company cannot do that effectively it will fail, and the viable parts of the market it formerly occupied will be quickly taken over by other, better run companies. This is what should happen. Indeed, as the Ludwig Von Mises Institute points out, this is exactly what has happened with the failure of Lehman Brothers and Merrill Lynch. There was no market catastrophe, there was simple readjustment. The Senate has failed miserably to understand these fundamentals. Worse, in their ignorance they have presumed to set themselves above the will and knowledge of the people. We should all remember that on election day—and we should be reminding the House members of that before they vote on this again on Friday.

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