Thursday, October 02, 2008

The Senate Bailout Plan: "That's Not All..."

The bailout bill the US Senate passed reminded me of one of those late night infomercials. You know the ones where the company isn't convinced that you are going to buy something so they throw in "that's not all, oh no, that's not all." You see a very similar approach to selling this bailout in the final legislation passed by the Senate.

The original proposal that came from Treasury Secretary Paulson and President Bush was a mere two pages long. The US House got its hands on it and it became a little more than 100 pages long. There is no reason to worry, however, because Harry Reid (D-NV) has announced that the Senate has made it better by bringing it up to 451 pages and by adding over $100 billion to the final bill. If more is better, we certainly got that from this bill that passed by a very wide margin.

Fiscally Conservative Republicans put the breaks on the bailout bill that came to the US House because they thought it was too wasteful and transferred to much power to the federal government. So adding more pork and power to the government will make it more likely to pass? We will have to see.

So what will you find in this multi-layered package:

- Tax Breaks for Wooden Arrows designed for use by children (Sec. 503)

- Tax Breaks for Film and Television Productions (Sec. 502)

- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)
- Tax earmark “extenders” in the bailout bill.- Virgin Island and Puerto Rican Rum (Section 308)

- American Samoa (Sec. 309)

- Mine Rescue Teams (Sec. 310)

- Mine Safety Equipment (Sec. 311)

- Domestic Production Activities in Puerto Rico (Sec. 312)

- Indian Tribes (Sec. 314, 315)

- Railroads (Sec. 316)

- Auto Racing Tracks (317)

- District of Columbia (Sec. 322)

- Wool Research (Sec. 325)

Who knew that Indians were about to go bankrupt? Considering they have their growing gaming interests, I thought we might be able to borrow money from them. The above are just a few of the examples that were added. I encourage you to read the bill in its entirety, if you have a few days to spare. I think it would make sense also to find out how your Senator voted on this bill.

In the end, however, I see this bill passing in the US House. There are specific tax breaks for small to medium size businesses to help encourage their recovery, tax relief for those hit by the recent natural disasters (hurricanes in the South and tornadoes in the Midwest), and there is an increase in the requirements on the Federal Deposit Insurance Corporation (up to $250,000 from $100,000), putting more responsibilities on the banks.

In spite of such assurances, I have to question whether the trade offs of our freedoms and the potential socializing of our financial systems is worth the short term "stabilization."
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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