Wednesday, October 08, 2008

McCain Advocates "Trickle Up" Economics

As John McCain's chances for reelection appear to be dwindling, his desperation becomes more obvious in his policy proposals. During the second debate with Barack Obama, McCain argued how he hopes to see the $700 billion bailout be implemented. After all, it will be the next President who implements the vast majority of this program with only a few months left in the Bush Administration.

McCain proposed something that is far more likely to come from the mouth of a Democrat -- a very liberal Democrat at that -- than a Republican stalwart. McCain proclaimed that he wants a significant amount of the money to go to bailout those in foreclosure directly. If you are about to lose your home and are months behind, the government should step in and rescue you. This is certainly better than helping the Wall Street fat cats, right?

The problems that come from such a policy are numerous. Such a plan will spread the moral hazard so rampant today to the general consumers. You will find them falling into the false sense of security that, no matter how bad the decision one makes you will get bailed out.

Worse still, what type of message does it send to the vast majority of Americans that figured out how to pay their mortgage even with the sub prime problem? I am sure the government, with all of its brilliance, will create a window for which people who prove they have had late payments will be able to participate as well. I have said all along that this $700 billion is a down payment. We are looking at $1.5 trillion by the time we are through.

What about those who already lost their homes? Tough luck. This bill is all about timing, not fairness. Those poor souls will simply have to lament their loses.

This bailout is fundamentally wrong and very dangerous to the long term prospects of this economy. It has done little to positively effect the markets and does far more at raising questions instead of answering them. It has essentially led to the socializing of our banking system and has damaged the respect for risk that is necessary in maintaining a free market economy. Members of the House and Senate who voted for this bill will find themselves haunted by it.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

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