The $700B Bailout Needs a National Referendum

♠ Posted by Emmanuel in , at 9/24/2008 02:04:00 PM
The (surveyed) people have spoken, and they are unhappy with the $700B bailout plan being assembled in the halls of the Federal Reserve, Treasury, and Congress. This from a recent Bloomberg/LA Times poll:
Americans oppose government rescues of ailing financial companies by a decisive margin...[b]y a margin of 55 percent to 31 percent, Americans say it's not the government's responsibility to bail out private companies with taxpayer dollars, even if their collapse could damage the economy, according to the latest Bloomberg/Los Angeles Times poll.
Note, however, that dissimilar results have been found depending on how the question is phrased. As anyone who has conducted surveys or studied survey design can attest,
many factors can influence the results. For instance:
A poll by the Pew Research Center for the People and the Press, asking a different question, found that Americans, by 57-30 percent, favored government action to save financial companies.

The Pew poll told respondents that the government is ``potentially investing billions to try and keep financial institutions and markets secure'' and asked whether that's the right thing to do. The Bloomberg/Los Angeles Times poll asked whether ``the government should use taxpayers' dollars to rescue ailing private financial firms whose collapse could have adverse effects on the economy and market, or is it not the government's responsibility to bail out private companies with taxpayers' dollars?''
I can see how the phrasing of the Bloomberg/LA Times question may have influenced the results. The term "bail out" is potentially loaded with negative connotations, while mentioning "taxpayers' dollars" frames the question more in terms of respondents bearing the burden, not just the government.

Like Daniel Gross, I believe that a US recession would be good for it and, in turn, the rest of the world. Reducing overconsumption, redressing the trade balance, and making American industries more competitive in world markets should help Americans prepare better for the future as opposed to continuing the status quo of mindless consumerism encouraged by a culpable government. Instead of these endless frantic attempts to forestall a painful episode which is sure to come, the US might as well take things as they come and make the best out of it. Meanwhile, the rest of the world will have to find other sources of final demand instead of relying on the US as consumer of last resort.

Now to the political question. With even politicians like Richard Shelby (rightly) doubting the logic of loading up the country with bazillions more in debt and its dire consequences for the dollar as well as public finances, it'd be sensible to subject this matter to a national referendum. Given that national elections are coming up, the timing is right. Ultimately, the US will be subject to financial pain. Does the bailout reduce this pain in the short-term or increase it in the long-term? Perhaps it's best to...ask the people.

If there were a more appropriate matter to put to a national referendum in America, then I haven't seen it. Then again, a national referendum on the bailout may be too sensible for the folks at the controls.