OK, so the fix is apparently in on the bailout bill, and it is, as Jon Stewart noted last night, surely worth pausing at this moment in history to note that there are apparently members of the U.S. Congress who can’t be talked into spending $700 billion we haven’t got unless they also get to lower tax revenues by $150 billion. But before we can even digest the bailout, or even last night’s debate between the Vice-Presidential candidates, we now have news that California needs federal financial assistance as well — a $7 billion loan. CNBC reports that banks are unwilling to lend to the state.
Now, it may be unfair to compare this to $700 billion for Wall Street because, as I’m sometimes reminded here, credit is the lifeblood of our economy. But there is still the auto subsidy precedent; if the auto industry can ask for $25 billion all on its own, it would be downright disrespectful to tell the entire state of California that we can’t spare $7 billion. Still, I have some questions about this, which perhaps my pro-bailout friends can answer. Here are just a few:
- What does this do to the theory that our problem is caused by “greed and corruption” on Wall Street, as opposed to an overtly inflationary monetary policy and a complete breakdown of fiscal discipline?
- In the Wall Street bailouts, we have (at least sometimes) made provision for the Treasury to take equity positions in the institutions that benefit. Can we take an equity position in California? Would we want to?
- If banks are unwilling to lend to California at any rate of interest, is there any way to spin this as some sort of terrific investment opportunity for federal taxpayers?
- If the federal government became a stakeholder in California’s fiscal health, would it be more likely to enforce current immigration laws?
- Does anyone have any hope — any at all — that our elected representatives will shake their addiction to spending money we don’t have for things we don’t need?
- Is there any sufficiently large business or political entity in this country to which we would deny federal financial assistance right now?