Sunday, October 5, 2008

$700B Bailout Doesn't Solve Our Real Problems

I’ve been trying to figure out what to write about the current economic turmoil. I’ve stated in several past appends that the economy was in deep trouble in the near future, and we are as a nation technically bankrupt by any reasonable accounting standard. Now it appears that this view was not far off the mark.

The $700 billion bailout package passed by Congress last week was certainly much better than the original plan which actually prohibited any oversight on how that money was to be spent. Given some time, I expect an even better plan could have been created than the one that was passed. How much better, and would the delay have caused more harm than good? These are questions I am not qualified to answer. But there is a key concern that I do have about the package – namely that it won’t fix the problem.

The fundamental basis for the current problem is that too many people have mortgages larger than they can afford. The package does nothing to resolve that problem in any way. We also have a major problem with the federal deficit. Not only is that not resolved, but it is potentially made much worse. We have a global military operation that is vastly overstretched and financially unsustainable. Again, nothing is done to address that portion of the problem. But given that this is the middle of a heated election campaign season, that shouldn’t surprise anyone.

The one bright spot is that the economic tax incentives for some renewable energy will be renewed by the new plan. They were set to expire at the end of this year. This is a really important issue for our long term economic health, so it’s at least a small bright spot in a plan that otherwise falls far short of addressing the real problems in the economy.

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