Monday, January 12, 2009

Why Didn't They Listen?

It has been announced today that Obama, by way of President Bush, has asked for Congress to release the second half of the TARP fund. The institution of this requirement may have been the only sensible thing to come out of the TARP plan. If it had not been instituted, all the 700 billion would have already been given away to Wall Street institutions and banks, never to be seen by taxpayers again.

The Democrats now say that they have a plan to use this money to help Main Street instead of Wall Street because the original TARP plan produced so much “unhappiness”, according to Barney Frank (who, by the way, has received millions in donations from Wall Street firms over the years). The question then becomes, in light of the hundreds of thousands of emails, letters and phone calls from voters telling politicians not to vote for the TARP plan: why didn’t they listen?

Economics is not as difficult an issue as some make it seem. Most of what it’s about is pluses and minuses. The public rightly understood that the original TARP plan was a huge cry for help by Wall Street firms that were about to go under. Simply giving them money without strings attached would not achieve anything. The public understood this too. What the public did not understand was the concept of “Voodoo economics”, where money magically appears if you leave financial markets alone. The reason that the public didn’t understand this was that it makes no sense. It makes no sense because it doesn’t work. End of story.

Politicians, however, strongly believed that they had mastered the art of Voodoo economics. They listened to who they referred to as “the smartest people in the room” (Wall Street executives), in addition to taking millions in donations from those same people. “The smartest people in the room” had for years told them that the free market can provide all the security Americans need, so taxes could be kept low and the government would not have to take responsibility for the well-being of Americans. It’s a pretty sweet deal if you think about it: in your job you get to:

1. have less responsibility (by not insuring pensions, wages, affordable education and more)

2. get millions in donations

3. not have to take any tough decisions that will anger and disappoint people (raising taxes)

The politicians were able to outsource their own jobs, while also keeping them and receiving millions of dollars in donations from the ones they outsourced to. Sweet deal! That is why they didn’t listen.

Question: what possible upside could there be to allowing large-scale campaign donations, for instance by Wall Street firms? The argument that it is essential for freedom of speech is a pretty weak one...

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