The economic stimulus bill has now been signed into law by President Barack Obama. By the time it was done, its passage by Congress was thoroughly politicized — but, of course, that is the way of most things in our nation’s capital.
What is far less political is the general dissatisfaction with the other half of the economic recovery plan — the idea of using taxpayer money to bail out the banks. The unhappiness with this plan is not rooted in either party’s beliefs or rhetoric. Even people whose interest in politics is limited to voting every four years feel very strongly that giving huge sums of federal money to banks is just wrong.
The banks, for their part, have not helped their own case much. The banking industry has an extraordinary number of executives who could pass for donkeys, and commercial banks continue to use the recession — which they helped create — as an excuse to make their relationship with their customers even more adversarial.
The Treasury Department wants to make sure that the public’s money is used to bail out only “good” banks, and although that is still a pretty loosely defined term, it probably means giving federal help only to those banks likely to be still standing after the storm.
Still, whether the money is given to the healthiest of the sick banks, the sickest of the healthy banks, or just randomly distributed, it boils down to using tax dollars to prop up failing enterprises. And it is not at all clear that all this money being thrown at the banking industry will save the day. According to some analysts, they still might fail.
The American people do not seem to like this whole idea very much, and it is hard to blame them. Who does?
Putting things in perspective, though, banking isn’t the only collection of failed enterprises being bailed out by taxpayer money. The other half of the federal government’s economic recovery plan — the $787 billion stimulus — contains lots of money for activities that are not only in serious financial trouble but also have failed miserably.
One of the largest of these is the locally controlled public school system, which, because of budget pressure, was facing massive layoffs. More than $100 billion of the new stimulus spending will go to education, most of it to the K-12 public schools, which will use a good bit of it to plug the holes in their budgets.
The federal stimulus money will probably save the jobs that were at risk, at least in the short run. The alternative, having teachers hit the unemployment lines, would certainly not boost public confidence.
While it is probably a good thing, it is not a wonderful thing. Sadly, our public school education system is as broken as our financial system, and throwing federal money at it is not likely to help the schools any more than throwing federal money at banks will improve our financial structure. In its own way, bailing out the public schools is not any more attractive than bailing out the banks — except that the banks seem to have more donkeys in suits.
While people object to bank bailouts, there is no equivalent public outcry about a federal subsidy for the public education system. This is probably because the education system failures are not quite as immediately visible.
In our newly beloved theoretical world, it doesn’t matter whether the money is spent wisely or is an absolute waste. Spending is spending, period, and you increase it in an economic downturn in order to raise demand. In that world there is no distinction between immediate spending and long-term payoff, for example, or between a bridge to nowhere and a productive investment. That idea, of course, appeals to the collective mind of Congress, and the result is that we get their kind of world — public spending that supports failed programs and worthy new ideas alike.
In the real world, of course, it does matter. Eventually financial reality will impose its will on Congress and on us. At that point we probably won’t regret spending money on economic recovery but we surely will regret wasting it.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.
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