A Flawed But Necessary Rescue

By INVESTOR’S BUSINESS DAILY | Posted Friday, October 03, 2008 4:20 PM PT

Like the metastasizing federal tax code, the rescue bill swelled from three pages and $700 billion in its first incarnation to more than $800 billion and 451 pages in just a matter of days.

Special interests that have nothing to do with the rescuing of the financial system are today’s happy beneficiaries of more than $100 billion in tax breaks — or “sweeteners,” as the plan’s negotiators called them.

But, in the end, we agreed even with House Democratic Rep. John Lewis of Georgia, who decided that “the cost of doing nothing is greater than the cost of doing something.”

And just what did this rescue package contain — in addition to money for our distressed financial system, that is?

Well, the makers of wooden arrows for children came out as big winners in the larger package, as that small industry got $2 million in tax benefits.

Meanwhile, auto racetrack owners sucked a $100 million tax break into their intake manifold and domestic wool fabric producers spun $148 million in tax relief.

As should be expected, companies developing politically correct solar and wind power were heavy favorites. They will get roughly $15 billion in tax breaks, 10 times as much as businesses dealing in fossil fuels — even though the simplest way to ease our current energy crisis is by drilling for the billions of barrels of oil we have here in the U.S. but which Congress has kept out of bounds.

An additional $8 billion in relief will go to the victims of natural disasters.

It’s a shame that the recovery legislation was weighted down with extras, particularly that $10 million credit that is intended to help businesses defray the costs of storing the bicycles their employees pedal to work, and the nearly $500 million in tax breaks for movie companies that produce films here in the U.S.

Congress should have had the courage to pass a quick and clean package, not a bill that includes an obscure and unnecessary provision for controlling carbon emissions.

It essentially required bribery to get some House members turned around (though others no doubt changed their votes to “yea” because they felt it was better to approve it before Capitol Hill “leaders” came back with an even worse bill laden with more pork).

The disgraceful way this legislation weaved its way through the process is a measure of how corrupt U.S. lawmakers have become. This Congress has earned its all-time low approval rating.

All that said, in the end Congress did what it had to do in the main part of the plan. The Senate approved the regrettably imperfect bill by a 74-25 vote Wednesday night, with the House following Friday afternoon, 263-171. Americans’ confidence in the financial system needed to be restored, and this is where that starts.

It would have been dangerous for Washington to allow the flow of capital, threatened by the troubles of America’s financial giants, to shut down and slam the brakes on the U.S. economy.

There’s roughly $70 trillion or so in total global investment capital available, by some estimates, but it does nothing if it is not put to use and simply sits idly. If global capital markets had frozen up, we would, at best, have been trapped in economic stagnation; at worst, we would have been consumed by a deep downturn.

Sclerotic capital markets send negative waves across an economy like water ripples away from a rock tossed into a lake.

Companies across the land, many of them large enterprises with thousands of employees, would wither without access to the money market, where they go to finance their daily operations, including inventories and payrolls.

Lenders needed to be assured that the market they operate in isn’t collapsing — and that the loans they routinely make wouldn’t go bad.

Sometimes in policymaking, a half loaf is better than none. That may be the case now. Americans got the half loaf they needed but with a lot of moldy rolls thrown in that will be hard to chew.

We’re grateful the rescue package was passed on Friday — before Congress could come back for another vote cluttered with even more rubbish.

 

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