A Modest Bailout Proposal

How about a trickle-up Bailout instead of trickle down.

By Scott Marshall

Perhaps the biggest fault of the bailout being debated (possibly passed by the time you read this) is that it is based on the idea that the relief given to Wall Street will trickle down to hard-hit working class folks on Your Street.

Who knows? Given that the underlying problem of crazy predatory mortgages and lending practices, and the housing bubble are not fundamentally addressed, then the bailout could just as well not avert a meltdown. Most people you talk to don’t have much confidence that the bailout will slow foreclosures, unemployment, or declining incomes.

But what if the bailout went the other way? What if taxpayers bailout themselves and then the benefit trickled up?

How could you do it? What if everyone who has lost a home to foreclosure in the last year, or is in foreclosure, or is behind on their house payments, got a bailout directly from the Treasury? This would be a direct injection of liquidity into the financial markets. Banks and lending institutions would receive an infusion of cold hard cash from their victims, er… customers. This would immediately stimulate consumer spending also. It would free up stressed incomes for working class families and right the injustice of the unfair and predatory lending practices used by the big finance boys on Wall Street. If this works then Congress might want to extend it to car loans and other big loans – this would inject liquidity into the auto industry instead of the $25 billion taxpayer bailout to auto already passed by Congress.

I can hear the rightwing now. How can you reward those who used poor judgment and borrowed over their ability to pay back? Well yeah…. Isn’t that the “principal” that is already enshrined in the Wall Street bailout? Not to mention that the housing bubble that got us into this mess began with risky, predatory loans. But now increasingly the crisis involves conventional loans, overwhelmingly by folks who have faithfully paid their mortgages. Wouldn’t millions of people getting a several thousand dollar bailout do more to free up spending and money circulation than a few dozen big lenders getting billions to put in their bank vaults?

This could even be extended to health care. Instead of a bailout of insurance vampires like AIG, or silly schemes to give tax credits for private purchase of insurance, why not pay the full premiums with no deductibles and no co-pays for every person in the US. (Might be called single payer) Then, working class families (the overwhelming majority) again, would have more cash to circulate and consume – billions in liquidity. And corporations would shed billions in healthcare costs thus freeing up huge amounts of capital to invest in creating jobs and Greening their industries. Congress might then realize that the predatory “middlemen” of big financials, like private insurance companies, don’t really play any useful purpose anyway – and could be allowed to go out of the healthcare business.

Not only would $700,000,000,000 probably be enough for a trickle up bailout, it would probably also calm world markets faster, because it would get at the root of the current economic crisis. And it would promote goodwill and a better image of America. It would show that even under gigantic state owned capitalism with all it’s vast inequalities, it is still possible to fight and win humane, logical, people-helping solutions.

I can hear my conservative friends now, “This will only lead to even bigger public programs. People will start taking about nationalizing the big oil and energy companies, nationalizing the banking system, free education and childcare, and on and on.”

Well yeah……