Friday, October 03, 2008

Alaska Congressman Don Young Votes "No", But, Swayed By $110 Billion In Pork, U.S. House Passes New Bailout Bill 263-171, And Bush Signs It

Despite a number of stalwarts like Alaska Congressman Don Young holding firm on their opposition to the $700 billion bailout bill, the U.S. House easily passed it by a 263-171 margin on Friday October 3rd, 2008. Full story published by the Anchorage Daily News, the ADN's Alaska Politics blog, and the Fairbanks Daily News-Miner, which contains the complete text of Don Young's statement against the bill. National stories by CNN, MSNBC, CNBC, and ABC News.

By party, Democrats supported it 172-63, while the Republican count was 91 Yes, 108 No. Democrats picked up 32 more votes this time, while Republicans scored an additional 26 votes. Complete roll call available HERE. But the vote did not pay immediate dividends on Wall Street, as stocks were down 158 points for the day and 818 points for the week.

Click HERE to identify the 58 House members who switched their votes from "No" to "Yes".

The bill, a 450-page monstrosity labelled the "Emergency Economic Stabilization Act of 2008", is primarily designed to provide up to $700 billion in public funding to buy illiquid securities in order to unfreeze credit markets. The bet is that the government will recoup much or all of that money by selling the assets later, assuming stability returns to the financial world. Among other provisions, it would ensure legislative oversight of the Treasury-run bailout and would give the government an ownership stake in the firms that it aids, which, in turn, would give taxpayers a share of any profits once the companies return to profitability. It also would limit the pay of executives in firms that benefit from the bailout. Bloomberg offers a pretty good Q & A analysis HERE, to address common questions which may arise in the public mind about the effects.

The Senate version made one significant change to the earlier financial-rescue package: It more than doubled the insurance that the Federal Deposit Insurance Corp. provides on customer deposits to $250,000 from $100,000 for a one-year period. It is believed the threat of bank closures and realignments will be greatest during the upcoming year, then recede as credit lines thaw and the economy stabilizes. The FDIC also was granted temporary powers to borrow without limit from the Treasury to keep the banking system solvent. Economists think that the FDIC measures will boost confidence in small community banks.

However, the Senate loaded up the bill with $110 billion worth of pork in the form of "tax breaks". Spelled out in greater detail in this CNBC story, these ranged from a one-year fix to prevent the alternative-minimum tax from hitting more taxpayers to extending the research credit for business to allowing rural utilities to issue tax-exempt bonds for use of renewable energy. In addition, there were also some ludicrous tax breaks for motor-sports racing tracks, makers of wooden arrows for children and the rum excise tax for Puerto Rico and the Virgin Islands. There was also some Alaska pork in the bill - all placed therein to bribe the House into passing it. And it worked.

However, despite the presence of Alaska pork in the bill, Congressman Don Young still voted against it. Congressman Young said that out of roughly 3,500 phone calls and e-mails about the bill, approximately 3,200 urged him to vote no. The Alaska pork included tax benefits for Alaska fishermen and other plaintiffs harmed by the Exxon Valdez oil spill -- a measure Young has supported and that could cost taxpayers up to $49 million. It also included authorization for roughly $17 million for rural Alaska schools, to make up for lost timber revenues, which Young admitted was quite tempting, But Congressman Young stood on principle, saying that the "sweeteners" don't make up for other aspects of the bill, which he characterized as a "slippery slope toward socialism". See his complete statement in the News-Miner.

But President George W. Bush wasted little time in signing the bill into law. Bush quickly praised the bill's passage this afternoon from the Rose Garden before heading back inside to sign the measure without any ceremony. "By coming together on this legislation, we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country. We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy," he said. Bush then added, "Americans should also expect that it will take some time for this legislation to have its full impact on our economy."

Commentary: The problem with this bill is that it's designed to restore the unbalanced consumer-biased economy which esteems unearned income over earned income. It's designed to restore the primacy of credit in our society. It assumes these premises to be correct.

However, these premises need to be challenged. Our deindustralization has restricted our economic autarky through the forfeiture of much of our production sector to foreign countries. And for those workers who cannot compete in this volatile casino economy and who would ordinarily do the blue-collar jobs which provided a decent living, they've been marginalized by the importation of a foreign underclass who take these jobs and, in turn, drive down wages and benefits.

The problem is not just symptomatic - it is systemic. Reform is just a band-aid; revolution is the cure. It can still be a peaceful revolution, but time is running out.

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