Too often the taxpayers are put on the hook in this country to clean up the mistakes of others. This time, the excesses of Wall Street have plunged finances into a hole and Congress is considering unprecedented and uncertain action to clean up the mess. As usual, that means the taxpayers likely will pay.
The question is if Congress does not pass a rescue plan for Wall Street, can the economy weather the hit without severe circumstances?
Some have argued that the situation we now face is the beginning of a self-correcting period. Holding tight without supporting a massive $700-billion rescue plan or bailout plan will cause pain but ultimately benefit the country. Others argue not addressing the problem on a grand scale will bring on recession and perhaps worse.
No one knows for sure if the rescue plan Congress is considering will work as stated. Often Congress’ plans go awry. Certainly, the plan has grown too large and beyond its original goals. Government debt as a percentage of the GDP is 50% now, higher than at any point in recent memory, and will only worsen if the plan is passed.
However, there are signs that the economy is starting to shut down. Particularly affected are small businesses, which are the engine of the economy. Small businesses are being squeezed by the credit and liquidity crisis and many businesses are beginning to falter as described in this Los Angeles Times article.
In addition, the state of California is facing another severe financial test just weeks after the contentious budget was approved. Governor Arnold Schwarzenegger has informed Treasury Secretary Henry Paulson that the state might need an emergency federal loan because it cannot borrow from its usual sources to pay anticipated bills.
The counter argument to all this, which admittedly is hard to rebut, is that if an individual small business was struggling would government and taxpayers be there to rescue it? Most likely not.
But I believe the evidence indicates that many, many small businesses will suffer and close their doors if bold action is not taken to confront the credit crisis. If the plan is not passed the long term negative effect on the economy will be more difficult than whatever consequences the rescue plan brings. With trepidation, I would vote a reluctant YES on the rescue bill.