Building a Better Bailout

I'm honestly pretty disgusted with the attitudes surrounding the recently-passed bank bailout bill. Both Obama and McCain called for action now and blame later. The problem is that they are asking for us to get behind the solution before identifying the cause of the problem. I may not be an expert in economics, but I know bad logic when I see it. This is an attempt to replace the engine before even running a diagnostic. Worse yet, it ignores a way to truly fix the economy and take care of some badly-needed infrastructure to boot. That's right: we'd be better off with New Deal-style construction projects.

I know, it sounds crazy for any self-proclaimed conservative to give any amount of praise to FDR or his New Deal policies, the majority of which are why the US Government is on the verge of bankruptcy. That said, we definitely have critical infrastructure problems in the United States today. The freeway systems started during the Eisenhower administration have been seeing less and less federal funding for maintenance and expansion. Additionally, bridges all over the nation are coming due for very expensive repairs.

It's not just roads that need work either. Telecommunications systems are in a laughable state as the US slips down the list of broadband rankings year after year. There's a huge demand for energy and a lot of untapped wind, solar and geothermal energy potential that just needs capital. Airports are regularly over capacity and using technology much older than I am. We have such a huge demand for basic infrastructure that simply isn't being met.

Spending $700B on expanding and improving these systems would create a lot of jobs on the ground and a lasting economic impact. Fareed Zakaria makes a good point that projects like this last and cause a substantive amount of increased economic activity. (h/t: Phil Windley) So why, then, are we throwing away money on a plan to save the jobs of the financial sector morons that caused the problem in the first place? It's a mystery to me.

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3 Responses

  1. Bradley Ross says:

    That’s the frustrating thing about this whole financial crisis for me: I feel so clueless. I’m afraid the folks in Washington who are making the policy aren’t a whole lot more informed than I am.

    With respect to the 700 billion, we’re hearing that we should be able to recoup a lot of that money. Will we be able to recoup as much as we would see in increased tax revenues under your proposal? I don’t know. Do you know if anyone has made any estimates?

  2. Jesse says:

    As I understand it, the plan is to have the feds buy up the bad mortgages at anywhere from 40-75% of the original loan value and later sell the bad loans back for full face value. I don’t possibly see how that would work out.

  3. Bill Fox says:

    while I agree that construction projects would create jobs, construction projects cannot exist with out banks that have money to loan. Right now the banks are not able to do such.

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