Thursday, November 13, 2008
bail-out-a-palooza
I'm not yet informed enough to have a definitive opinion on whether it's for good or ill to expand the bailout to the Big 3 or to the credit card companies or to Circuit City for that matter (ah, screw Circuit City). What makes me queasy (well, most queasy) about it isn't the general concept, it's the way the decisions on what's needed seem to be some seat-of-the-pants flying. I understand that the Fed and everyone else is forced to respond to changing conditions or improved information, and I understand that you're not going to hear about every contingency at a press conference or in a news report. BUT, I can't shake the feeling (maybe based on 8 years of recent history) that nobody's looking more than two minutes ahead. I'd feel a lot better if I thought there was a long term plan behind any of this rather than just sprinting from leak to leak jamming fingers in the dike.
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James, I understand your queasiness, and I share it a little. But if it eases your mind a little: in this case some of the rapidity is by design. Paulson's PhD was not about how we got into the recession of 1928, but how we didn't get out of it before 1929.
His conclusion, and one that most people believe is the best current thinking about it, was that the single worst thing the government didn't do was move quickly. The policies all were sound, at least as far as theory can take you toward a conclusion, but getting to the point of action was just too delayed. His conclusions also supported the idea that getting something started would have been better than waiting for a perfect solution.
So it's somewhat by design. And an additional point to be made is that, as George Will put it, policy in this case is psychotherapy--if we act soon and with a big stick, people may act as if things are already better than they are, and when people in the economy act as if things are better, that makes things better.
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