By Peter Bearse
The stock market reflects growing unhappiness. We're unhappy with the so-called "bailout" and with the Administration and Congress that passed its risks along to us. We now know for sure that we're in a recession but we don't know how deep and how long it may be. I'd like to say we've hit bottom but the economy isn't there yet. So, those who have money frantically look for safe havens - gold?, treasuries?, mattresses? Those who don't hunker down and struggle to make ends meet from day to day.
The situation would be a scene out of Saturday Night Live if it weren't so dreadful. Those in charge-those handling the tons of bailout bucks bequeathed to their charge by the Congress - are playing it safe, too. Haven't you heard? Hank Paulson is investing a significant portion of his $750 bailout budget in the nine largest "healthy" U.S. banks! Some of the leaders of these banks tried to say no -- that they didn't want government money nor did they need it. The Secretary of the Treasury twisted their arms, saying that allowing the U.S. Government to buy part-ownership in their companies would be "for the good of the U.S. economy." You could almost hear a backdrop of brass bands playing patriotic songs in the Secretary's big meeting room.
I'm unhappy, too, and not just because I lack money to buy stocks that are undervalued. I'm not happy with the piece that I wrote in support of a bailout just before the first draft of it was turned down by the Congress - one of the few smart moves that the 110th Congress has made! And I'm even more unhappy with a Congress that then proceeded to act like chickens - letting themselves be rolled by the Chicken Little calls coming from the President and his Secretary-- rather than continue their properly deliberative, Congressional role. In The Rose, Bette Midler said that women appreciate men who take their time. So do I, especially when far more than the satisfaction of a quickie is at stake. Unfortunately, looking for quickies has become a chronic fault of a Congress that lusts for media attention and big money. Another is a tendency not to pay attention to how well-intentioned legislation is implemented. How is the bailout to work out? To repeat two old cliché's: "The road to hell is paved with good intentions" and "The devil is in the details."
I'd love an opportunity to help Congress redeem itself with reforms, but that will have to wait. Now, let me simply (!) try to redeem myself and help provide you, the reader, with some better advice in light of further reflection and bad news. Consider two major recommendations:
1. The bailout program needs to be stood on its head - implemented from the bottom up rather than the top down. I was onto something in the direction of "down" in my earlier piece when I recommended a "decentralized" approach working through the regional Federal Reserve Banks.
2. The socialized risk we are taking to save our private enterprise economy should be devoted to the support of truly risky enterprises with substantial upside potential - the gung-ho, new technology-based, start-up or early stage enterprises that re-seed our economy in ways that generate substantial growth, job creation and new industries.
Lacking support that spreads the risks over thousands of such enterprises in many industries and locations, we will emerge from the recession more slowly, with little or no job creation, and find that we've created little in the way of new enterprise that exploits new technologies - enterprise that would enable us to rejuvenate our manufacturing sector and improve our international competitiveness!
If you think that the Federal government's "playing it safe" will do us much good in the way of new enterprise and job creation, think again! It's so well known that it's become a mantra of politicians: Small business, not big business, is responsible for the bulk of job creation. The big boys, on balance, destroy jobs. If they've mismanaged, let them fail. The Federal Deposit Insurance Corporation has long experience helping failed banks close down while protecting depositors.
Finally, the whole effort needs to be much more of a decentralized, public-private partnership sort of thing, not the product of dictation from an over-centralized government on high. Face it: The government only knows how to invest in public projects, not private enterprise. The Fed's would have to not only regionalize the bailout initiatives; they would also need to work with and through the venture capital community, which is highly competitive and decentralized.
Your comments? Let's interact on this until we get it right. It's not only our butts as writers and/or concerned citizens that are in a sling with the economy going into a tank.
PETER BEARSE, Ph.D., International Consulting Economist and Independent Write-in Candidate for Congress, NH CD 1