Adjusted for inflation

“A million trillion here, a million trillion there; pretty soon you’re talking about real money.”
— Everett Dirksen

White House’s $2.5 trillion plan draws criticism over lack of details.


WASHINGTON – The White House plan to rescue the nation’s financial system, announced Tuesday by Treasury Secretary Timothy Geithner, is far bigger than anyone predicted and envisions a far greater government role in markets and banks than at any time since the 1930s.

Administration officials committed to flood the financial system with as much as $2.5 trillion — $350 billion of that coming from the bailout fund and the rest from private investors and the Federal Reserve, making use of its ability to print money.

But the initial assessment from the markets, lawmakers and economists was brutally negative, in large part because they expected more details.

Basic questions about how the various parts of the program would work — especially those involving the unsellable mortgages that banks are holding and preventing home foreclosures — were left for another day. Some Wall Street experts criticized the plan for relying too heavily on the same vague solutions proposed by the Bush administration.

The stock market, propped up for weeks on the expectation that Washington would finally deliver a comprehensive rescue plan, dipped almost as soon as Geithner began speaking in the morning.

A beast of a burden

Megan McArdle writing in The Atlantic

It seems to me that the burden of proof ought naturally to be on the stimulus proponents to satisfy the public that their highly theoretical models are basically sound, especially for the parts of the bill that aren’t tax cuts or transfer payments. Let’s recall that the evidence for this kind of stimulus working in this kind of situation basically rests on a single instance (World War II)–the other two times it was tried (Japan in the 1990s and America in the 1930s) the economy basically rolled along in the doldrums for the rest of the decade.

Proponents say that that’s because there wasn’t enough stimulus, which is possibly true, but not really satisfying, because first, how do we know this package is enough, and second, that leaves us with a belief in the virtues of stimulus that is essentially non-falsifiable. We might as well move macroeconomic policy to the Office of Faith-Based Initiatives.

Atlas shrugged, and smiled a knowing smile

I was talking to my sister-in-law the other day and she said her husband, who’s been at his job for more than 20 years, has been bumped back to the night shift by someone with even more seniority. “I’m trying to keep a good attitude about it,” she said, “because, after all, at least it’s a job.”

“You’re right,” I replied. “Jobs are important; only 9 out of 10 Americans have one.”

All right, I can be an incorrigible smart ass, especially around family, and that’s a trait that has barely mellowed over the years. Even I’ll acknowledge, however, the gathering economic storm building overhead as if the country were one large trailer park. My sense is that things are going to get worse before they get better and that this is no mere hiccup but more like a full-on bulimic purge. To keep mixing my metaphors, Dylan once said “You don’t have to be a weatherman to know which way the wind blows,” and my “forecast” doesn’t require a special degree or even a Doppler. In fact, if you’d spent time in college reading “Atlas Shrugged” by Ayn Rand you could probably do the same. As the current winds increase it might be interesting, if not all that helpful at this point, to head for the basement with a copy of her book.

Stephen Moore made a similar point last week in an opinion piece in the Wall Street Journal entitled “Atlas Shrugged: From Fiction to Fact in 52 Years”. In it he points out frightening prescience of this all-time classic.

For the uninitiated, the moral of the story is simply this: Politicians invariably respond to crises — that in most cases they themselves created — by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

In the book, these relentless wealth redistributionists and their programs are disparaged as “the looters and their laws.” Every new act of government futility and stupidity carries with it a benevolent-sounding title. These include the “Anti-Greed Act” to redistribute income (sounds like Charlie Rangel’s promises soak-the-rich tax bill) and the “Equalization of Opportunity Act” to prevent people from starting more than one business (to give other people a chance). My personal favorite, the “Anti Dog-Eat-Dog Act,” aims to restrict cut-throat competition between firms and thus slow the wave of business bankruptcies. Why didn’t Hank Paulson think of that?

These acts and edicts sound farcical, yes, but no more so than the actual events in Washington, circa 2008. We already have been served up the $700 billion “Emergency Economic Stabilization Act” and the “Auto Industry Financing and Restructuring Act.” Now that Barack Obama is in town, he will soon sign into law with great urgency the “American Recovery and Reinvestment Plan.” This latest Hail Mary pass will increase the federal budget (which has already expanded by $1.5 trillion in eight years under George Bush) by an additional $1 trillion — in roughly his first 100 days in office.

The current economic strategy is right out of “Atlas Shrugged”: The more incompetent you are in business, the more handouts the politicians will bestow on you. That’s the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies — while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to “calm the markets,” another trillion of national wealth is subsequently lost. Yet, as “Atlas” grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate “windfalls.”

I’ve been thinking about re-reading the book, especially since I’m sure I’ll understand it a lot more than I did 30-some years ago, but I’m concerned that I’ll get too angry (again) over the treatment of the individual in the story … and by the creeping sense that there’s nothing one can do to keep it from happening in real life. Of course, in the book, one man — the right man — can make a difference.

Ultimately, “Atlas Shrugged” is a celebration of the entrepreneur, the risk taker and the cultivator of wealth through human intellect. Critics dismissed the novel as simple-minded, and even some of Rand’s political admirers complained that she lacked compassion. Yet one pertinent warning resounds throughout the book: When profits and wealth and creativity are denigrated in society, they start to disappear — leaving everyone the poorer.

One memorable moment in “Atlas” occurs near the very end, when the economy has been rendered comatose by all the great economic minds in Washington. Finally, and out of desperation, the politicians come to the heroic businessman John Galt (who has resisted their assault on capitalism) and beg him to help them get the economy back on track. The discussion sounds much like what would happen today:

Galt: “You want me to be Economic Dictator?”

Mr. Thompson: “Yes!”

“And you’ll obey any order I give?”


“Then start by abolishing all income taxes.”

“Oh no!” screamed Mr. Thompson, leaping to his feet. “We couldn’t do that . . . How would we pay government employees?”

“Fire your government employees.”

“Oh, no!”

Abolishing the income tax. Now that really would be a genuine economic stimulus. But Mr. Obama and the Democrats in Washington want to do the opposite: to raise the income tax “for purposes of fairness” as Barack Obama puts it.

David Kelley, the president of the Atlas Society, which is dedicated to promoting Rand’s ideas, explains that “the older the book gets, the more timely its message.” He tells me that there are plans to make “Atlas Shrugged” into a major motion picture [A younger Glenn Close would make a dynamite Dagny Taggart, IMHO. NW.] — it is the only classic novel of recent decades that was never made into a movie. “We don’t need to make a movie out of the book,” Mr. Kelley jokes. “We are living it right now.”

About that hole burning in my pocket…

Woot! Free money from the government!

Hmmm, wonder where they got it? Maybe someone accidentally left the printing presses on overnight at the Mint.

The proposed “stimulus” sounds kind of dubious to me. Kind of like pouring some Heet into your carburetor; you get a quick roar and a flash, maybe a puff of smoke from the engine and then it’s gone. If there isn’t any gas in the tank to begin with you’re not going anywhere.

It’s hard to believe $150 billion can disappear as quickly, and with as little effect, as moth pee evaporating off a light bulb, but a little extra one-time disposable income isn’t going to encourage people to save or invest, which is what’s really needed if you want to get the engine running again.

Oh, don’t worry, I’ll take the money, alright. And any leftover cheese if the government’s still got any. It’s just hard to think of what to spend it on as the value of the money is going to depreciate even as it’s still in the mail to me. I think the wise Reverend Mother, also known as “The Finance Minister” around our house hit on the best (if most ironic) use for the almost intangible money:

Buy gold.