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ECONOMIC ANALYSIS:

Just Thinking Aloud Here

by Dave Lindorff
Tue, 09/23/2008
I'm thinking about what that same indescribably vast amount of federal money could do if it were applied to more important things than rescuing a bunch of crooked banks.
When the bankers and investment bankers and insurance execs blew it, and were facing the prospect of losing their bonuses and their companies, the Bush administration rushed in as though they were a bunch of victims of a hurricane facing flooding and imminent death (no, wait a minute, Bush and his gang didn't do squat when that situation arose in New Orleans), or rather, as though they were a bevy of oil industry "lobbyists" offering night service.

Bush's Treasury Secretary, former Goldman Sachs investment banker Hank Paulson, and Federal Reserve Bank Chairman Ben Bernanke, are calling for a no-strings-attached handout to rescue these screw-ups and con men which is in the range of $700 billion to $1 trillion.

Now I'm thinking about what that same indescribably vast amount of federal money could do if it were applied to more important things than rescuing a bunch of crooked banks.

Let's see...

The entire federal budget for America's decrepit, overcrowded and underfunded educational system is $56 billion. That could be doubled for just $56 billion--enough to dramatically reduce class sizes, replace collapsing buildings, and pay teachers a living wage across America.

The Department of Justice budget is $20.2 billion, most of which goes for locking up hundreds of thousands of people, to little effect other than destroying families and creating more criminals. Another $20 billion, spent on job training and education for non-violent offenders, young offenders and people whose crimes are less serious than, say, murder, could have a huge impact on getting or keeping people out of jail, on rescuing communities and on reducing the crime rate.

The Department of energy spends $24.3 billion, primarily for making and storing nuclear weapons, running nuclear plants and waste sites, and operating the strategic oil reserve. Tripling that budget by adding $50 billion for a crash program to fund massive R&D into non-carbon energy sources like waves, wind, solar, geothermal, etc., and to subsidize home conversions to geothermal heating and other major energy-saving technologies could significantly push back the looming catastrophe of global over-heating.

Supposedly there are about 5 million families who are stuck with deceptively marketed so-called sub-prime mortgages that had hidden clauses like balloon payments or interest resets which make it impossible for them to pay and put them at risk of default and eviction. Given that most of the victims are living in low-income neighborhoods, the actual value of their homes is probably well below the average US home price of $200,000. If the government or Congress were to mandate rewriting of their policies to accurately reflect the value of those homes, and then established a fund to back those renegotiated mortgages, it could all probably be done for under $50 billion.

The existing public transit system across the US is in desperate shape. Right now, virtually all of the federal transportation budget of $12.1 billion goes towards airports and the highway system. The former is largely a luxury serving the rich, and the latter is contributing to the destruction of the planet by encouraging auto use which nobody can afford any longer anyhow. If the government were to quadruple that budget by adding another $50 billion for building and subsidizing the fares on inter-city and urban mass transit systems, we'd be on the way to solving both our national oil addiction, and global warming.

Looking over this list, I see we're still only about a third of the way to $700 million, or a quarter of the way to $1 trillion.

I guess if we want to spend the rest of this easy money, maybe we could kick in $200 billion which would be more than enough to provide full health insurance coverage to every family in America. Since it would take a while to get that system up and running, maybe it would be a good idea to set aside the other $3-400 billion in a fund to pay for the next two years of the program until it could start being funded through taxes (which people would be happy to pay since they'd no longer be paying the much higher health insurance premiums and medical bills they currently pay, and because they'd be getting fatter paychecks since their employers would be off the hook for their insurance).

Seems to me this would all make a lot more sense than bailing out the bankers.

And here's an added benefit. As of today, 26 percent of the national jobs payroll goes to people employed in the bloated financial services sector, to people who for the most part perform no productive activity at all. If the financial services sector is not bailed out, and is instead left to crash and burn, many of those people will be forced to go out and get an honest job. We'll still have banks, of course, and even investment banks, but if they perpetrators of the past two decades of casinomics get seriously burned, it will be a while before they return to such practices. Put a few million bankers and investment bankers on the unemployment line and in the food stamp office, and force them to rely on Medicaid for their health care, and we'll start to see some real pressure for improvements in those perennially underfunded programs!

Don't cry for the displaced banker and former "masters of the universe," as they were fond of calling themselves. There will, in this brave new world, be lots of new jobs as streetcar conductors, nurses aides, teachers and geothermal heating system installers, that they can retrain for.


Lindorff speakingAbout the author: Philadelphia journalist Dave Lindorff is a 34-year veteran, an award-winning journalist, a former New York Times contributor, a graduate of the Columbia University Graduate School of Journalism, a two-time Journalism Fulbright Scholar, and the co-author, with Barbara Olshansky, of a well-regarded book on impeachment, The Case for Impeachment. His work is available at www.thiscantbehappening.net.


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This story was published on September 24, 2008.