How Brewsters Millions and Star Wars Explain the $700 Billion Bailout

Just to get our heads around how absurd this bailout proposal is, let's use movies as our metaphor.

First, is the metaphor of Brewster's Millions (which, incidentally, I discussed in a recent newspaper column about political movies, and whose original story was - unsurprisingly - written during the Gilded Age). That film was hilarious because Montgomery Brewster was asked to spend $30 million in one month without accruing a single asset of value.

Now, the political and media elite would have us believe it is possible to responsibly spend $700 billion dollars not in a month like Montgomery Brewster, but in one week, potentially without accruing a single (mortgage-backed) asset or equity stake of value. Incredibly, we are expected not to laugh hysterically, but actually think this is a serious idea. We've gone from Brewsters Millions to Bush's Billions.

Just on this basis alone, how can any legislator vote for this? Do you really believe Congress can craft a bill responsibly spending $700 billion in five days? I've worked in Congress - these people can't spend that much money responsibly in a 12-month budget process. And now we are expected to believe that the smartest and shrewdest way to avert a crisis - rather than exacerbate one - is to spend $700 billion in one week? I don't care what kind of weak "oversight" or executive pay language is in there - taking less than a week to authorize the spending of 5 percent of our entire GDP is criminally irresponsible.

Brewsters Millions was funny because it was fiction. This isn't funny at all. Anyone who votes for this bill in its current fashion is engaging in gross economic negligence that drove us into the crisis. Wall Street speculators got themselves into a mess by betting big and losing. Now political speculators in Washington are betting 5 percent of our entire economy on one spin of the roulette wheel - and will charge the loss to average taxpayers.

Yet, Congress, the presidential campaigns and the national media are all espousing what we might call the Princess Leah message from Star Wars. "Help me Obi-Wan Kenobi, you're my only hope," Leah pleaded - and its the same thing our ruling class is saying. Help us taxpayers, bailing us out with no strings attached is the economy's only hope.

But is it? Last I checked, the Treasury Department pushing the plan is on the record acknowledging that it made up the $700 billion number, not basing it on any data or substantive plan at all. In fact, the only substantive plan I've seen is the one put forward by James Galbraith, one of the most respected economists in the country.

Under the heading "A Bailout We Don't Need," the University of Texas professor takes to the Washington Post today to outline an alternative economic rescue package - one that doesn't involve handing over almost a trillion dollars to the corporate campaign contributors who created this crisis in the first place.

Here are some excerpts:

With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.

Next, put half a trillion dollars into the Federal Deposit Insurance Corp. fund -- a cosmetic gesture -- and as much money into that agency and the FBI as is needed for examiners, auditors and investigators. Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary...Review the situation in three months, when Congress comes back...

[The housing price crisis] could be resolved in three years, rather than 10, by a new Home Owners Loan Corp., which would rewrite mortgages, manage rental conversions and decide when vacant, degraded properties should be demolished. Set it up like a draft board in each community, under federal guidelines, and get to work...

Reenact Richard Nixon's great idea: federal revenue sharing. States and localities should get the funds to plug their revenue gaps and maintain real public spending, per capita, for the next three to five years. Also, enact the National Infrastructure Bank, making bond revenue available in a revolving fund for capital improvements...

Here's another problem: the wealth loss to near-retirees and the elderly from a declining stock market as things shake out. How about taking care of this, with rough justice, through a supplement to Social Security? If you need a revenue source, impose a turnover tax on stocks.

A while back, Barack Obama listed Galbraith as one of his economic advisers. Sadly, Galbraith was left out of the emergency meeting Obama convened about the crisis. Evidently, the Illinois senator believed it was more important to have people who created the crisis like Citigroup's Bob Rubin nearby than an expert like Galbraith who has been sounding the alarm for years - and who has a rational plan to get us out of this mess.

But just in case you actually believed Washington's Princess Leah message of desperation - that the $700 billion bailout is our only hope - think again. There are plenty of other ways to address this challenge.

The problem, of course, is that this isn't about the American economy. It's about disaster capitalism and enriching the people who engineered this crisis to begin with. Bush (ie. Mr. 19 Percent) is the Obi-Wan Kenobi of the shock doctrine, both parties in Congress who are helping him push this bailout are akin to Darth Vader - and the circle is now complete. When those legislators capitulated to him on the Patriot Act and the Iraq War back in the post-9/11 fearmongering days, they were but the learner. Now, sadly, they are the master.

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future