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Maybe it's time for another New Deal

I do have some thoughts on this Palin email hacking debacle, as well as a growing concern that legislative subpoenas (e.g., Rove, Palin's husband) have absolutely zero power, which seems troubling. In the meantime, however, I will simply comment on the recent financial whiplash experienced by our economy. I wrote this after the second 400-point crash on Wednesday, so it's a little dated at this point given that the SEC has finally stepped up and started to regulate short selling, which I remain convinced is part of this mess. I'm just glad I have a job and hopefully I still will have one in six months.

Two points merit brief discussion. The first is this Wall Street mess. The second is the government's intervention to fix it. Like Ben Stein, I agree that taxes are going to have to be raised (likely against those who make the most money) now is not the time to cut corporate taxes. See Ben Stein, How to Ruin the United States of America. Cf. McCain on Financial Markets (stating at a Sept. 19 press conference that "Business taxes will be cut from the second highest in the world at 35 percent to 25 percent"). I disagree that the economy will be stimulated by tax cuts for 95% of Americans because while 95% may see some sort of tax relief, much less than that will actually notice any difference, assuming it passes. See Fact Check: Obama Wants to Raise Taxes; Obama and Taxes. Cf. ObamaTaxCut.com (unexplained and quick and dirty method of estimating taxable income; not sure I would put any stock in this one, but it's something).

Thus, with a lot of talk and no real substance, we are left with a nearly trillion dollar deficit and nobody wanting to contribute toward it. Wake up. Taxes are going up regardless of who the president is. The only question is how far down the small business chain those tax increases will travel (which I would guess, not very far). Once we cut out the puffery, the question is whether there is any candidate who is simply going to tell the country that things are bad, people are going to have to suck it up for a little while, and together with our economic allies, the federal government (and state governments) are going to turn this economy around, and then explain how they are going to do it. Unlikely, but one can hope.

Really, I would like to see one of the candidates step up and simply say that they are going to hold Wall Street accountable for any criminal actions that may have led to this historic collapse and people are going to go to jail. That's what I want to hear. Whether it happens or not is besides the point. I just want some reassurance that the economy is not going to fold up into a new great depression. The last thing we need is hyperinflation. In the end, it's really President Bush's job to announce via a national address, but that's probably not going to happen. Hopefully one of the candidates will do so instead.

Second, this concept of government bailout of private business is appalling. Granted, perhaps government intervention is the only way that this problem could have been alleviated, and that is a good thing. See Jim Cramer, The AIG Save Puts Us on Better Footing. With our national debt through the roof, how many other business (e.g., auto industry, airline industry) going to turn to the government to bail them out of their failed business strategy? To this, I would like the candidates to address how the federal government plans on restructioning these newly acquired assets in order for them to be successful.

Granted, the government seems to on the verge of resurrecting a parallel to the taxpayer-funded bailout of the savings and loan crisis, and this may help. See Paulson, Bernanke Seek Support for an Agency to Buy Bad Debt. So will help from foreign investors. While the markets may have rebounded, there remains questions of whether this is just temporary or have we actually hit the bottom? Time will tell. If only one of the candidates to step up and say it's time for a New Deal.

Full post as published by The Once and Future Lawyer on September 18, 2008 (boomark / email).

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