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Saturday, September 27, 2008

The case Barlett hasn't made

Bruce Bartlett attempts to justify the bailout ("The case Bush hasn't made") by explaining that the financial sector is different than other sectors, that a collapse in the financial sector reduces the money supply/money available for the rest of the economy, and that such a collapse will lead to another Great Depression. (Note: this piece could be satire, as it is rather absurd, and I wouldn't put it past Bartlett, but if so I missed it).

Bartlett doesn't note than in addition to the Fed restricting the money supply, the Great Depression was caused (or exacerbated) by increasing tariffs, increasing taxes, and by new government spending (i.e. the New Deal). 

Nor does he make the case that the US financial market is on the brink of collapse (indeed many question that assumption); his evidence is that "You can see the fear in Treasury Secretary Henry Paulson's eyes and in those of Federal Reserve Chairman Ben Bernanke." Really?  We are supposed to simply take the word (not even the word, just the look in the eyes) of a man seeking to control over a trillion dollars to help out his former Wall Street colleagues, and another whose policies as Fed chair (along his his predecessors) contributed to the current situation.  As I mentioned before, if Paulson and Bernanke have data not available to the US public, or even to economists who question this plan, why don't they share that data? Even the politburo was more forethcoming.

And Bartlett admittedly does not make the case that the bailout is the best solution - or even a solution at all: 

But now is not the time to come up with something better. There is no time. The program can be revised later, when the emergency is past.
Bartlett apparently dismisses Ronald Reagan's famous line, "The closest thing to imortality on this earth is a federal government program"

In contrast, Arnold Kling makes the point (in fact the entire EconLog blog is a good source for understanding this entire debate):
I really would like to see Ben lay his cards on the table, and not just issue vague threats of doom and destruction. A lot of people, not just from the far left or libertarian fringe, are drawing the analogy between the push for the bailout and the run-up to the Iraq war. Personally, I think that this is being unfair to the Iraq war, which by comparison was debated longer with more information provided to Congress and to the public.

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