Procerity

Surely there is something wrong with a financial system that privatizes profit but socializes losses. There is a growing bitter indignation on the part of those selected to bear the cost with which they are being saddled. The 1 trillion dollar Paulson plan equates to a cost of about $3,300 for each of the approximately 300 million people in the U.S. The Economic Stimulus Act of 2008 distributed only about $150 billion directly to taxpayers, and is expected to contribute over 1% to GDP according to the Mid-Session Review of the Budget of the U.S. Government. Wouldn’t a better alternative to bailing out Wall Street be a series of economic stimuli spread out until the crisis is dissipated? The cost of the Paulson plan could pay for six or seven boosts to the economy of the size of the original Economic Stimulus Act of 2008.

If the taxpayers received a series of economic stimuli, it would simply be a shift of cash flows through time (assuming that taxes would eventually be used to recover the cost). Instead what is being proposed is a massive wealth transfer from the many to the bailout the few. And to make matters worse, there appears to be growing doubt that the bailout will avert a recession. There may be some merit in Congress weighing alternatives to the Paulson plan as it is currently proposed.

Procerity’s Prognosis: Expect an even more infuriated public if the bailout rescues the financial market makers but still culminates in a recession.