I doubt that the actions of the Bush Administration, Treasury Secretary Paulson, the Senate, and the House in the past couple of weeks mark the death of American Capitalism. The capitalist drive is strong in Americans as a whole and individually.
I don't doubt that their actions have severely harmed that system, however. The fact that the Government has acquired a controlling interest in Fannie, Freddie, and insurance giant AIG and now is buying $250 billion dollars worth of a handful of U.S. banks amounts to repeated body blows to that system. As Joe Frazier said, speaking about body blows: “Kill the body and the head must follow.”Over time, these kind of actions contribute to the myth in the mind of the people that government intervention is the solution to the problem - whatever the problem is. If it is the solution to this problem, it must be the solution to the next problem that comes along. The typical reality is, however, what Ronald Reagan noted: "Government is not a solution to our problem, government is the problem."
The way these actions have been framed - how they've been presented in speeches, presidential addresses, and in the media - have made this a no-lose situation for proponents of big government. Whether these actions are successful and helpful or not, the unavoidable conclusion most people will draw was that these steps were necessary. That's what's been said over and over again by those in the know - Paulson, Bernanke, Bush, Pelosi, even Newt Gingrich and the likes of Warren Buffet. If these steps seem to have worked - if there's any improvement in the economy after doing this, the credit will go to these "decisive actions" that have been taken. If they don't seem to work, the perception will be that they didn't do enough rather than than a perception that they shouldn't have been done.
Regardless of what the end perception will be, I can't help but wonder if the latest of these steps (the $250 billion of our money being invested in a handful of banks) stands any chance of accomplishing what Paulson and company intend.
How did you spend your "economic stimulus" check? The purpose of those checks was to get Americans out and spending at the shopping malls. I used my check to pay down debt I had. For my personal situation that's what made the most sense... but it didn't help stimulate the economy at all.
Likewise, I wonder how many of these banks will take this money, but then not use it in the way that the Administration hopes they will. The purpose of this money, according to Paulson, is to "improve their access to funding, enabling them to increase financing of the consumption and business investment that drive U.S. economic growth" - in other words, to provide them with capital that we expect them to turn around and loan out. There are no provisions in the agreements with the banks to require them to use the money in this way, however. As minority shareholders in these institutions, the U.S. taxpayers will have no ability to compel them to lend this money out. It is conceivable that many of these banks could decide instead to use this money in a way that's similar to how I used my stimulus check: to improve their cash position and strengthen their balance sheet.
There is much to be concerned about as we watch our government taking a bigger and bigger role in managing the financial institutions as we weather this "crisis". As I said earlier, I don't think there have been enough body blows to bring down American capitalism - yet. I am concerned, however, that as we move closer to a "United Socialist States of America", that we are killing one other institution, and that is American Conservativism.
The conservative movement is the only body that can stand in the way of this march toward Big Government - and it is taking few steps to do so. I have been astounded to watch as leaders in the Republican Party (which should be conservative, but aren't in any uniform or consistent way) have supported the bailout and the other steps taken, seemingly with little more than lip service to the objectionable nature of these steps. This includes not only current office holders from Bush to Republican members of the House and Senate (including my own sad Senators, Lamar Alexander and Bob Corker), but also "conservative" leaders like Newt Gingrich and a large number of pundits in the "conservative" journals, magazines, and blogs.
With so few Republicans and so few Conservatives voicing objections to these steps toward Big Government, I fear that a whole new generation of voters will have no conception of what conservativism means. Already, I believe that those who have come of age since the Reagan years have an inadequate understanding of what it means to be a conservative. Certainly those that have watched the current President Bush and believe that he represents the conservative viewpoint have been misled (for example, as they have watched Bush push the Medicare prescription drug plan and the immigration bill). McCain is an even worse example of conservative values and behavior. That lack of understanding will breed more Republicans who don’t know what they stand for and thus stand for nothing. In the end, I wonder if the GOP and even real conservatives will have any relevance going forward.
As Secretary Paulson spoke yesterday about why he would be taking the extraordinary step of investing taxpayer dollars in private banks, he stated that those actions “are what we must do to restore confidence to our financial system”.
I’m wondering what steps, if any, can be done to restore confidence in our political system.
Cross-posted at http://johnsscott2.blogspot.com