What started out about this time last year as a $168 Billion attempt to revive us from a recession that at the time didn’t even exist (according to Washington and the media) has grown into a mammoth rescue which to date commits US taxpayers and future generations to nearly 58 times that original amount.
This amount is enough to pay off nearly 90% of US mortgages according to Bloomberg. Has anyone ever thought that it might not be a bad idea to do exactly that? Since we’re going to spend this money on consumption anyway, it makes sense to maybe relieve the average American of a little financial strife.
Let’s extend that for a second to all the bad debt floating around the financial system. Debt that the government is frantically trying to figure out what do with. Did it ever occur to anyone to ask why some of those debts are bad? Sure, a good portion of it is due to derivatives and other bets, but at the very least some of it is consumer debts that cannot be paid because of job losses, irresponsibility, variable rates, etc. Helping the consumer would help the system by making at least some of these debts manageable.
It becomes important to understand the differences between consumption and an economy. Anyone can consume. Demand is virtually unlimited. Given someone a boatload of money and they’ll probably end up buying much more than a boat. Even under the best of conditions this would be foolish because it incentivizes laziness. However, in our current model, it does virtually nothing since a good majority of our products are manufactured overseas anyway. So borrowing and spending a trillion dollars might cause a bit of temporary consumption, but do little to sustain an economy.
If we’re going to do a bailout anyway, again, why not start with consumers and rebuilding our productive capacity.