CNBC reports on a new Republican plan aimed at addressing the U.S. credit crisis. In general terms I'm happy there's a competing plan for the simple reason that more plans mean more gridlock and less likelihood of passing the Paulson/Bush/Leadership plan, ceteris paribus. I prefer no action to that awful plan, and Harry Reid just managed to make that plan even worse. DeFazio's No BAILOUT Act is still my favorite choice. Surely Congress can at least agree to raise the FDIC deposit insurance limit to $250,000, which is the heart of that simple plan.
The new GOP plan has some silly and even dangerous elements, and many elements are simply expressions of dogma rather than practical steps to solve current challenges. For example, the GOP plan calls for allowing corporations to apply losses in 2007 through 2009 back 5 years, so they can claim a refund. Why reward companies who are losing money? If I managed a profitable business, I'd be livid! That particular element is eerily similar to bad Japanese policy, propping up money-losing companies which should fail. Another example: suspending the capital gains tax for two years. That would only exacerbate selling pressure on assets, and at exactly the wrong time. We should be indexing capital gains and tax them at equal rates to ordinary income, to encourage long-term investment and discourage speculation. Repealing the Humphrey-Hawkins Full Employment Act would have no effect on the Fed (which obviously ignores the Act already) but might heighten anxieties among workers who would suddenly feel even more concerned about losing their jobs. Such fears would depress consumer spending, again at exactly the wrong time. And do Republicans really want to go to the voters in November and say they championed abolishing full employment? Seriously?
Where are the public hearings, by the way? Shame on the House and Senate leadership (majority and minority) for not insisting on public hearings before even thinking about a $700B bailout. Fortunately everyone in the House and one third of the Senate is about to face the wrath of America's voters on November 4th. The whole rotten and corrupt cabal deserve every bit of it. Have you written your congressman and senators yet?
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