Can Happy Days Be Here Again?

Now that Congress has rejected the terrible Wall Street bailout, we have two options: enact a good bill or do nothing. Either of these options would be better than trying to pass the bill that was rejected by Republicans and even some Democrats.

If we are going to try to do something before the election, here are some provisions that a new bill must include if Republicans are going to support it:

1. The worst provision of the bailout bill was the cap on executive compensation. Many of these executives are already underpaid and they are suffering terribly as their stock options become worthless. One reason why some companies have not performed as well as they should have was that their executives were too distracted trying to make ends meet to focus on their jobs and they were worried about what will happen to them if they become unemployed. They are no doubt chilled by what happened to AIG CEO Martin J Sullivan when he resigned in July after AIG wrote down $20 billion in losses on assets linked to subprime mortgages. He got a measly severance package that only amounted to $47 million, which will be worth even less in 2009 dollars if the economy continues in the direction it’s headed. What incentive are executives going to have to work hard and pull their companies out of debt if we cap their compensation and how are we going to convince some poorly performing executives to resign if we don’t promise them hefty golden parachutes?

2. Even worse, the bailout bill contained no provisions guaranteeing Christmas bonuses for Wall Street workers. Doesn’t anyone in Congress understand how Wall Street works? Telling Wall Street workers that Santa Claus might not come this year would be devastating for our economy, which depends on the infusion of cash it gets each Christmas as investment bankers spend their bonus checks buying condominiums and boats and indulging in lavish meals in luxury restaurants. How can we hope to get out of this economic slump if we do not guarantee the Christmas bonuses that keep our economy going?

3. As Larry Kudlow pointed out the bailout bill went “beyond France into pure socialism” and we all know that socialism (not to mention anything French) is just about the worst thing there is. “If the U.S. government is going to start to own all of our financial institutions,” wrote Kudlow, “all these markets will sink like stones.” So how can the government buy up all of these assets but avoid owning financial institutions? There is a very simple solution. The government could immediately privatize these assets by giving them away to outgoing members of the Bush Administration, who will be losing their jobs in January and forced to fend for themselves in an uncertain economy. That would kill two birds with one stone: America would be saved from socialism and former members of the Bush Administration would be spared the indignity of having to take jobs as lobbyists or beg their friends for seats on corporate boards.

4. If Democrats expect Republicans to vote for any bailout bill, it must include a gag rule that prevents Democrats from saying nasty things about them. According to House Minority Leader John Boehner, Nancy Pelosi’s very mean and partisan speech “poisoned” the debate and “caused a number of members we thought we could get to go south.” Although Barney Frank promised to talk “uncharacteristically nice” to Republicans who decided not to vote for the bill because of Pelosi’s statements, that will not be enough. Republicans are not fools. They need a guarantee in writing that Democrats will not ridicule Republicans in the days leading up to the election and try to blame them for the financial crisis. “Now is not the time to fix the blame," said John McCain, blaming "Senator Obama and his allies in Congress" for infusing "unnecessary partisanship into the process."

5. The bill must include anti-illegal immigrant provisions. As Rep. Tom Tancredo pointed out, this economic crisis is mostly the fault of illegal aliens. Although he didn’t have exact figures on the number of illegal aliens who fraudulently purchased homes, he is certain that illegal aliens are somehow to blame. “We need to ensure that the ‘American Dream’ remains within reach of American families – and that means enacting some long overdue safeguards that prevent illegal aliens and their unscrupulous allies in the financial industry from undermining its integrity,” said Tancredo in a press release. Although he promised to oppose any bill that did not include safeguards forcing illegal aliens to live on the streets (with an exception, of course, for any “wealthy foreign real estate investor or financier of a vacation home”) and then voted for the bill anyway and deleted this press release from his website, I’m sure he won’t make that mistake again. If Democrats expect Tancredo and other Republicans to vote for the next bill, it must include these safeguards and a statement blaming illegal immigrants for our financial woes, written in English only.

6. The bill must include a cut in the capital gains tax. Why? Because Republicans will not vote for any finance bill that does not include a cut in the capital gains tax, which will eventually trickle down and help average Americans.

If a bill does not include all of these provisions then Republicans should vote against it, which brings us to Option 2: doing nothing. Some economists believe that doing nothing could result in another Great Depression, but is that such a bad thing? There is a reason it was called the Great Depression and not, say, the Terrible Depression. According to economist J. Bradford Delong, members of the Hoover Administration, influenced by the theories of Austrian economists like Friedrich von Hayek and Joesph Schumpeter, believed “that in the long run the Great Depression would turn out to have been ‘good medicine’ for the economy.” Unfortunately, Hoover was swept out of office before this theory could be tested and Franklin Roosevelt enacted all kinds of socialistic policies that bedevil us to this day. So perhaps the best thing we could do is do nothing and bring on another Great Depression, but let’s do it right this time. Sure, there would be some temporary pain, and some people might be forced to wait in bread lines and sell apples in the street, but in the long run it would be better for our economy to shake out the weak links. Some Republicans might be reluctant to come out in support of triggering a new Great Depression in an election year so John McCain is going to have to show some leadership, the kind of leadership he showed in scuttling the first bill, to bring Republicans in Congress around. Coming out in favor of a Great Depression would show voters that John McCain really is a new kind of leader and it might just be the Hail Mary pass that wins him the election.

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