Bolder Beats Bigger

Reining in rescue.

By Jonah Goldberg
Friday, November 28, 2008

The costs of Washington’s bailout fiesta are now so huge, you can see them from space.

The latest number, which includes the Citigroup rescue, is $7.7 trillion. That’s roughly half of America’s GDP.

In fairness, it’s impossible at this point to know the full costs of the various financial rescue efforts because, for example, some of them involve mere loan guarantees, which may cost nothing.

Still, any way you slice it, we are talking about really, really large amounts of money here. Barry Ritholtz, a financial blogger and Wall Street analyst, offers some perspective. Adjusting for inflation, the Marshall Plan cost $115.3 billion. The Louisiana Purchase: $217 billion. The race to the moon: $237 billion. The New Deal: $500 billion (estimated). The Korean War: $454 billion. The Iraq war: $597 billion.

You can add all of these things together and still not come close to what taxpayers are on the hook for already. You could even throw in the Savings and Loan bailout ($256 billion), the Vietnam War ($698 billion) and all of NASA ($851 billion) and still come up short.

Why the fire hose of cash? One reason is that Federal Reserve Chair Ben Bernanke is a serious student of the Great Depression, and it’s his belief that the federal government should have thrown piles of money at the deflationary crisis of the 1930s. That’s in effect what he’s doing now.

But when you look at the pickle we’re in, a host of conclusions — never mind gripes, grievances and grumbles — come to mind. The first is that pretty much no one in Washington or on Wall Street can truly claim to deserve their job anymore. That goes for the Bush team, nearly everyone in Congress — particularly Barney Frank, Christopher Dodd and the rest of that motley crew — and also the Clinton-era all-stars Barack Obama is tapping for his administration.

George Will famously wrote of the 1988 Baltimore Orioles, who lost 107 games that season, “They were somewhat like today’s Congress — expensive and incompetent.” So, Will wrote, “Orioles’ management had a thought: Hey, we can lose 107 games with inexpensive rookies.”

One needn’t be a populist to think a similar principle applies now.

Indeed, one of the most astounding aspects of the gelling Obama administration is how completely it’s relying on the same old people Obama once said he was going to ignore in his pursuit of cosmic “change.”

As a conservative, I’m grateful that Obama isn’t picking the sorts of people I feared he would. Some of us half expected Che Guevara T-shirts to be the unofficial dress code of the Obama Cabinet. Yet, so far, with all of the Wall Street cronies, Clinton retreads, and Bush holdovers, it appears Obama’s far more of an agent of the status quo than an agent of change. That’s a relief compared with how bad it might have been, but it’s also a shame considering what could be.

For example, Obama says he doesn’t want spending as usual when it comes to formulating his impending mother of all stimulus packages. (Estimates vary from $500 billion to $700 billion, but who knows how high that number will go?)

So far, all we know for sure is that he wants massive increases in infrastructure “investment.” That’s fine with me, so long as it’s the infrastructure we need (though history shows such expenditures usually come on-line well after a recession is already over).

But rather than blow money on a lavish reenactment of the New Deal, or continue bailing out undeserving corporations, why not really think outside the box? Rep. Louie Gohmert (R., Texas) suggests an across-the-board reprieve on paying 2008 income taxes. This would leave an extra $1.2 trillion in the hands of Americans, who are the best stewards of their own money. Nobel Prize-winning economist Robert Mundell proposes a one-year moratorium on corporate income taxes in order to stimulate investment, job creation and the like. That wouldn’t be as popular, for understandable reasons.

The details can be negotiated, but this sort of approach would certainly create more jobs and spur more consumer demand than paying for a lot of asphalt. It would buy a lot more prosperity than any corporate bailout. Politically, it could buy Obama and Congress a year to formulate a serious tax-reform proposal. And — here’s the amazing part — it would be much cheaper than what we’ve spent already.