Reforming the Bailout

The current economic rescue for the United States focuses primarily on ensuring the solvency of corporations and providing tax incentives for spending. The problem with this model of economic status is simple: all of the benefits are reaped by corporations, rather than people. If the Obama Administration is trying to distance itself from the non-sensical supply-side economic policies that dominated the Bush Administration, they are doing a piss-poor job.

Economic stimulus that is focused on the financial well-being of corporations has significant risk. This risk has been realized: the payment of patently-unreasonable wages to executives; the reticence in expanding operations and production; and the inability to actually coerce private industry to do anything that isn't in the financial interests of a company. Just because a company is in good condition financially does not mean it will produce over demand; companies are not hiring just because they are solvent -- there has to be some demand for their goods or services for jobs to be created. The best way to create the long-term demand that will encourage the private sector to expand is to create long-term jobs.

Tax incentives for purchasing houses only benefits two groups of people: those who work in the construction, manufacturing, or selling of homes; and those who can afford homes. By freeing up capital for the first, it is true that the housing industry has reached a "floor" for job losses; however, by building new homes, the housing industry is aggravating the problem of overabundance of stock. Old homes aren't getting sold; neighborhoods are still losing housing value; and the nation simply does not need more homes. Plus, lending has not opened up again, and only well-qualified borrowers can secure the loans necessary to purchase the new homes.

As many economists have stated, the best long-term solution is to use stimulus funds to create jobs. This is best accomplished by direct expenditures: the government pays for goods and services for public infrastructure or other projects. The public reaps two benefits: there is the benefit of an increase in the amount of or quality of services, and the benefit of the money for such projects creating jobs or maintaining employment in the labor sector.

By continuing to focus economic efforts on reforming corporate and private industry, the government has failed to realize the potential of the public sector. The money that was funnelled to the banks to bail them out could have been used to hire teachers or educational aides. The money that was used to provide a tax credit for new homebuyers could have been used to improve the delivery of social services for those Americans barely making ends meet. This is the sort of reform that is both conservative and liberal: it ensures that the money is directly applied to the people to aid them. Instead, the government continues to entertain the "supply-side" economic theories that brought the government to where it is today.

Work on making jobs. After that, work on reforming businesses.