Bailout Plan is Going to Fail to Pass

[angus]

I think my incumbent, Bruce Braley (D-IA) may have just won my vote.  He's still a bastard, but good for him for holding the line against this legislation.  I'd been undecided.  I don't particularly like Braley, but I really don't like the challenger, David Hartsuch.  The state's two Republicans voted against it as well.  The other two democrats from Iowa voted in favor.  

[angus]

I was down about ten percent overall, but have mostly recovered.  Well, that's my little stock market fun money.  I'm a small player on the open market, though.

I dread to look at my retirement account.  I have lost about three thousand dollars per quarter over the past several quarters, and that even counts the 1500 I put into it each month.  So basically I'm at a net loss for at least six months now.  But I have purposefully invested more aggressively.  My wife invests much, much more conservatively in her 403B plan, by mutual agreement.  

I have no idea what happened to mine today, because I didn't look, but I'd rather lose every single penny I have in it and have to start all over than see even one taxpayer dollar go to the banks in this manner.  And I expressed it in exactly those words in an email to Bruce Braley.  Apparently I wasn't the only one in my district who did so, thankfully.  Every vote counts.  Stay on your elected officials about this, because the house and senate might not let it go at one defeat.  They love to spend your money.

And as jmfcst said, it's really best not to panic.  Let this recession run its course.  We have ups and downs.  And, really, you still have your health and your smarts.  Money is a fleeting thing, after all, and it grows on trees anyway, so it's probably best not to give yourself a heart attack worrying about the stock market.

[angus]

I dread to look at my retirement account.  I have lost about three thousand dollars per quarter over the past several quarters, and that even counts the 1500 I put into it each month.  So basically I'm at a net loss for at least six months now.  But I have purposefully invested more aggressively.  My wife invests much, much more conservatively in her 403B plan, by mutual agreement. 

Just to make you feel better, I'm down about $40K this year.

Sorry to hear that.  It doesn't make me feel better that you lost money, obviously.

Preston, I may very well be naive as you suggested, but I simply find myself in agreement with those House members who say things like "if we eliminate risk, we also eliminate some potential success" and "if we reward risk, we set a bad precedent" and "ask yourself why you came here, if it was for limited government, and if you don't want to move toward a command economy, then vote with us" and I do understand that 700,000,000,000 divided by 300,000,000 equals a bit more money than I lost over the past twelve months.  (okay, that's fuzzy math.  I'm saying I lost about 10K and donated about 7800, and 10-7.8=2.2, and 2200 is a little less than 2333.)  In any case, saddling every taxpayer with 2300 dollars worth of debt isn't a step in the right direction.  I'm just not buying this.  Note that those congressmen and women to whom I referred are in a majority just now, and are coming from both parties.  So maybe we're all naive.  But then again, maybe you are.  You seem to be equating this to the Great Depression, as some posters have, but I have already painstakingly pointed out how different this recession is, or how different this depression is, if you prefer.  Hell, perhaps we're all naive.  After all, we have never been without food or clothes.  But, frankly, I don't think we will be.  I think you are panicking.  And I'm quite certain that if this comes to vote again I'll again write email messages to both my senators and to my congressman asking them to vote no.  I encourage you to do the same.

[angus]

You probably will.  You seem to be conservative about the right things, and aggressive when it matters.  I'm more all aggressive all the time, but actually, I have never sold a stock for less than what I have paid, and even with the recent losses I'm still ahead, in real dollars adjusted for CPI, than what I put.  So it's not all that bad.  And as I said, my wife is conservative by nature and so we have agreed that I'll be the gambler and she the by-the-book, near-future investor.

It's a tough time, no doubt.  Man, I can't imagine throwing 40K around like that.  My wife and I are both scientists/tenure-track faculty.  She works at Wartburg College, about 17 miles north of here, and I work at the University of Northern Iowa here in Cedar Falls, and we have a combined gross income of about three times that amount, so I have a tough time feeling sorry for those really rich folks we're supposed to be bailing.  They'd consider me poor, as opebo does, as do many of these posters, probably.  Maybe you too.  And that's fine.  I know what I need to survive in the post-65 years, and I don't expect the government to provide it for me.  Still, I'd rather lose 40K out of my retirement account than see this legislation pass in its present form.  I'm also sure I don't want this precedent set.

[angus]

by January 1st ... we're guaranteed to be at 10%

Everybody's an expert all of the sudden.  Honestly, I only took two graduate-level courses in economics.  Easy As, too.  No kidding.  I was flabbergasted at all those BBA folks who were struggling with the courses.  This is not to pick on them, but I thought going in that I'd be at a disadvantage never having taken an undergrad course in the business department.  Seriously, after all those physics and math and chemistry courses, the economics courses were like a vacation.  Still, I liked the class, I have to admit.  It influenced me in ways I wouldn't have thought they would.  My parents were 70's mainstream democrats.  Anti-capital punishment, anti-war, pro-union, and when I voted for the first time for president, in 1988, I voted for Dukakis mostly because I didn't know any better.  I had been raised a democrat.  But those courses, even though each were an easy A, did awaken me to a realization of how the private sector works.  And yes, we did go over both Hayekian and Keynesian economics.  I guess your teachers have books that come with crystal balls.  The ones I bought for those courses didn't.  But that was in the very early 90's.  We didn't have iPods then, either.  Wish we had those crystal balls, though, like your economics profs do.

Well, anyway, everybody on this thread is suddenly an expert in economics.  Funny, none of you had any good investment advice during the multitude of threads asking for it.  None of you had any good advice.  Now, every goddamned one of you is an expert.  George Bush says jump and 70% of all Democrats and 33% of all Republicans are suddenly asking, "how high?"  I know that when I wake up in the morning, the earth will still be spinning on its axis, at a rate of one revolution per 24 hours, and whether or not the stock market crashes, I'll get up and send my child to day care, and show up in class.  And I know that if the congress once again starts to talk about burdening every man, woman, and child in America with the debt of foolish aristocrats, I'll again do whatever I can to convince my elected officials to spend that money more wisely.  We should invest in our future.  Plant trees and educate our children and eat right.  But we don't need to spend another 700 billion on one of George Bush's "we need to get this done now because it's imperative for our national security" schemes. 

Fool me once, shame on you.  Fool me twice, shame on me.

okay, end of rant. 

Ah, well, at least this has been a fun thread.  You don't often get eleven pages unless it involves sex, drugs, homosexuality, or creationism.

[angus]

Don't count on any bill to jump start stock prices. I doubt that will happen.

These things go in cycles.  You could probably expect a bear market generally until about 2015 or so.  I was counting on something like that, more or less, even before this latest round of failures.  With a 700 billion dollar tax burden, we'll probably still have the normal bear market cycle, but we'll also have the 700 billion dollar burden.  Plus the 700 billion dollar burden from the war.  George Bush has turned out not to be such a cheap date after all.  And, because the congress chose to bail out the financial industry, instead of letting this painful teaching moment teach us the lessons of excess and greed that it ought to teach, no lessons will be learned.  So we'll soon go back to being an indebted, obese, shallow, consumer nation, but owing an extra seven hundred billion probably ultimately to foreign investors that we could easily avoid.

It's not a fait accompli, by any stretch.  I'm doing my part.  I wrote my congressman again today.  I still urge you and others to do the same.  We have the power to defeat this, collectively, and it only takes each individual a few minutes to fire off an email or make a quick phone call. 

[angus]

They're presenting the economic argument...  which the American people still aren't buying.

Do we know that?  I'd hope that this is the case, but I have no way of knowing that without looking at some record of congressional emails or phone records.  Or perhaps polling data, but any polling data on this subject would have been done hastily and is therefore suspicious. 

[angus]

yes, opebo, we're all working class except you.  we have been over this before.  such a stilted, victorian term, and it probably includes so many of us (about 98%), that it's meaningless.  We generally divide that great working class by education (blue-collar worker versus white-collar worker), or by income (lower, middle, and upper class workers), at least for purposes of discussions, rather than lumping 98% of us together as working class compared to the 2% who are leisure class.  It may have made sense to talk about "working class" versus "leisure class" in Victoria's England, because at that time if you ran into a fellow traveler in the far corners of the globe, it probably would be another aristocrat.  But times and technology have changed.  Nowadays, when you encounter a fellow westerner in the far corners of the globe, it's much more likely to be one of us from lower 98%, and so if you want to make meaningful demographic comparisons you might subdivide us along logical demographic lines.  But we have been over this so many times before that I begin to wonder whether you're just being obnoxious.


Just for fun, I tried to find a US household income distribution chart.  I found many from the 2000 census, but here's a more recent one.  From 2005.  It's large so I'll just post the URL here.

http://www.visualizingeconomics.com/wp-content/uploads/2005_income_distribution.gif

As you can see the mean is about 63K.  The middle 60% runs from about 19K to about 92K, with the upper and lower 20% outside that range.  We could define "middle class" as the middle 90%, in which case "middle class" household incomes range from about 15K to about 167K. 

Much of this depends on how you define the middle of the working class.  MSNBC reports that "Data aside, being “middle class” in America today appears to be mostly a state of mind. And there are very real sources of anxiety for those who aspire to a comfortable middle-class life in America."  I kind of like that angle.  Mirriam-Webster online defines the middle class as "characterized by a high material standard of living, sexual morality, and respect for property" and Free Money says it consists of "those who have attained a degree of economic independence but not much social influence or power."

Seems to be a fuzzy definition.  There's no official government one.  I certainly consider myself middle class, or "white-collar working class," if you prefer.


And, just for fun, here's a bar graph showing some CEO pay in 2006:



And here's a barchart for some celebrities, also from 2006:



(Lest we think our Corporate execs really are that overpaid) 


As for the relevant portion of your post, I do appreciate your attempt to educate.  I think we understand that there are those who want to encourage easy lending.  For example, there are programs that let you make small business loans to folks in the developing world without even meeting with them.  Those have been largely successful.  But I think we can also see that credit is far too easy to get.  When I was a 21-year-old college student I already had so many credit cards I couldn't fit them all into my wallet.  And stores are still constantly offering me fifteen percent off my purchases if I "apply today."  I have several old wallets full of credit cards.  Too many to use.  It's ridiculous.  No one needs that much credit.  And now we have a "crisis" manufactured by exactly the mentality you espouse.  Easy money.  Adjustable rates.  Bundlers.  Predatory lending.  Folks with little or no understanding of the terms of their loans or ability to meet the terms when those terms change.  Bad loans bundled and packaged for holding companies who didn't do their own homework.  This isn't something we want to encourage. 

I agree that some Keynesianism may be in order.  We saved capitalism through socialism once before.  Through good deeds and public works.  If you want to spend 700 billion dollars, why not spend it on something useful?  Infrastructure, maybe.  We have bridges falling down, potholed roads.  New Yorkers are being served water with two century-old aqueducts, neither of them tested for fear that if the hundred-year-old valves are closed, the city workers may not be able to get them to open again.  A third one is being built, but it is expected to take 30 years to complete.  Thirty years?!  The first Ming Emperor built his 4000-mile Wall in half that time.  And he didn't have jackhammers and front-end loaders!  I'm not totally adverse to some elements of socialism.  Like most voters, I am neither a Libertarian nor a Socialist, but somewhere in between.  The unemployment rate is just a little above the natural rate now.  If it goes into double-digits, then sure, let's use some revenue to create jobs.  Those roads and dams from the 30's are still around, by the way.  And getting in touch with your inner Hank Hill is a great way to remind yourself that building stuff, real tangible metalworks and woodworks and mortarworks, is worth more to the people than all the paper printouts in all the banks.  There are public measures that most voters can stomach.  But the panic and expenditure of 700 billion dollars (in order to encourage the consumerist, debtor lifestyle that got us into the trouble in the first place) isn't one of those pills that voters should have to swallow. 

This bailout is an incredibly bad idea.  I'm astonished that every talking head on TV is pushing it.  It's foolish.  It treats symptoms, but it doesn't treat underlying problems.  So if this bill becomes law, we'll only end up with the same underlying cultural problems, but we'll also have huge budget deficits even bigger than the unsustainable ones we already have.  This bill will only turn one big problem into two bigger problems.