NEW YORK – It doesn’t take a genius to figure out that the United States’ financial system – indeed, global finance – is in a mess. And now, with the US House of Representatives having rejected the Bush administration’s proposed $700 billion bailout plan, it is also obvious that there is no consensus on how to fix it.
The problems in the US economy and financial system have been apparent for years. But that didn’t prevent America’s leaders from turning to the same people who helped create the mess, who didn’t see the problems until they brought us to the brink of another Great Depression, and who have been veering from one bail-out to another, to rescue us.
As global markets plummet, some version of the rescue plan will almost certainly be put to another vote in Congress. Unless the plan is markedly different from the current one, while it may help Wall Street, what about the economy? What about taxpayers, already beleaguered by unprecedented deficits, and with bills still to pay for decaying infrastructure and two wars? In such circumstances, is there any bailout plan that can work?
To be sure, the rescue plan that was just defeated was far better than what the Bush administration originally proposed. But its basic approach remained critically flawed. First, it relied – once again – on trickle-down economics: somehow, throwing enough money at Wall Street would trickle down to Main Street, helping ordinary workers and homeowners. Trickle-down economics almost never works, and it is no more likely to work this time.