Category Archives: bailouts

Two Paths Diverged – Who’s Right?

Suppose we had never had a TARP bailout and a stimulus? What would our economy be like right now? What do economists have to say about this? Take a minute and go back to those times in 2008 when everything seemed to be crashing. Would it have been the brave path to just sit tight and let it happen? Follow that chain of events in your mind. I know it is difficult to imagine what our economy would be like if we followed that other path, but try. Would our recovery be further along now? Would unemployment numbers be down and employment up in such a scenario? I can’t do the math, but someone out there probably can. Perhaps the economists can write us a word picture of where we would probably be right now.
Apparently some feel that the economy would have been much worse for much longer; that these laws stopped the recession. These programs were not enough to grow the economy but they at least did no harm. Others feel that these programs were extremely harmful to America. Not only did they increase the debt and the deficit, they also did not allow the market to solve its own problems and get us out of this recession in the way that laissez-faire capitalism rebounds on its own (sort of organic economics?). Should we have let the big banks and investment companies fail? Should we have let GM go under? Should we have done nothing to help people who were facing foreclosure? Would the economy have gone into a true and deep depression if we did that or would we have been healthier when it was all sorted out? Were these financial groups too large to fail, or is that all wrong?
Can you guess why we are all confused by this? Apparently even economists do not agree about this? Our politicians are as divided as we are. It is clear that we can only choose one path to repair our economy at a time. We could have had three years to see if the Democrats had a good solution, but we could not because our House of Representatives was opposed to these approaches. Now we are asked to try the Republican solution, but we are unsure whether that is the approach that will give us the best economic results. So we will sit at the spot where the two paths diverge and do nothing and we will hope that the best solution is to do nothing new and let the knots in our economy work themselves out.
We really have little choice right now, but it is difficult for those of us who agree with the Democrats ideas about jump-starting the economy because it looks like the Republicans will get to try again with an approach that Democrats and I believe has already been tried and which has failed. And to Democrats it looks like Republicans have accomplished this by being “poor sports” and ideologues and by using extreme stonewalling tactics. There is a lot of anger behind all of this. Republicans are angry because of the “high-handed strategy” that Obama used to pass the Affordable Care Act. They are still so angry about this that they cannot be trusted to be objective about the plan. The Democrats are angry that the Republicans have used their “pit bulls” to scare people into believing that if they don’t vote Republican America will never be the America we know and love again.
We the people have lined up behind the party of our choice and we find that we are divided into almost totally equal camps. Are we going to let the Supreme Court decide our election once again? We are in the position of being damned if we do and damned if we don’t (in other words, neither party can really satisfy a majority.) We chose Obama in 2008 and then we got scared and sent the Tea Party to Washington to stop the Democrats cold. Chances are we will stop anyone who goes to Washington from going down either economic path, because we don’t know which plan is better. There are experts who attest to each path. We can’t really go down both paths, although we could perhaps choose a middle path.
Does anyone have an argument so compelling that it will help us make the most effective decision? Is it just a case of an economic cycle that will probably work itself out no matter which path we take? We are trying to solve global economic issues with kitchen table economics. Republicans are so passionate in their belief that they know what to do. Does their passion mean they are right? I just don’t think so. Whatever they are saying right now, they are the party that wanted to dismantle and/or privatize the social safety net. They don’t believe in climate change. They don’t believe that our planet is experiencing any environmental problems. It is difficult to believe that they have the correct answer on the economy when they seem so clueless in these other areas. Anyway, if you are an economist and you have been down that other path in your mind, please share the journey with us, the economically challenged.