"It's kind of like basic physics — what goes up must come down," former President Bill Clinton said of the economy in an interview with David Letterman on the "Late Show." Even so, when it seems like companies are falling left and right, many Americans are worried about just how low the economy can go. Yesterday, lawmakers reached a tentative agreement on a bailout bill that, if passed, would allocate $700 billion to buy out companies' failed loans. The bill, which will go to the House today for a vote,
has gotten a mixed reception; some have said is not enough and others that the government is overreacting to a problem that may work itself out. Some have even likened it to socialism. While the bill itself may not fix everything (a single thing rarely does), it does at least illustrate the willingness of the government (or parts thereof) to get involved and do something.
Let us not forget the lessons learned from the mistakes of President Herbert Hoover during the early hours of the Great Depression. Hoover was strongly against any form of governmental intervention when the stock market dove in 1929, believing that people needed to pull themselves up by their bootstraps and that the economy would work itself out. By the time he realized that it was a much more complex problem than the natural ups and downs of the stock market, it was too late — the country had sunk seemingly irreversibly into depression.
But Hoover was right about one thing: Depressions result from the natural fluctuations of the market, and no economy can sustain continually upward motion forever. The problem is that if we allow the economy to take its natural course, the inevitable end will be depression (the severity of which may or may not be as great as some have predicted).
The bailout bill has been criticized for its focus on big companies and its potential to help overpaid executives rather than the struggling middle class. While it is true that the bill is geared toward keeping large companies afloat, it must be noted that, as dissatisfying as it is to see them get a break, the power players keep money flowing in the economy to a greater extent than individuals. When the government issued its economic stimulus plan, which gave $300 to $1,200 rebates per household, studies showed it would only be marginally effective, if at all. Why? Because in times of financial uncertainty, people are more likely to save their money than spend it, meaning that the stipends that the government issued didn't necessarily get pumped back into the economy.
This is not to say, however, that bailing out the large corporations is the answer, since it all depends on how they utilize what could easily be called their second chance. But, despite all of the bickering and indecision, the current debate does demonstrate that national leaders at least recognize their potential to make the quick decisions needed to keep things together until a more permanent solution can be uncovered. Here's to seeing how well they yield it.
