Mad World....

Had Kerry been elected in 2004 and had he initiated a similar "bail-out", can you imagine how Republicans would be responding to the near random manner in which Bush and Paulson are running around, throwing bushels of money at the financial industry? Or that the auto industry's request for $25 billion in federal loans would seem miniscule as opposed to the Bush/Paulson blank check for the financial industry? A year, or even six months ago, could you have imagined a blasé reaction by Congressional Republicans to a Democratic President-Elect's proposed two-year $600 trillion economic stimulus package?

You can blame whomever you want for those aspects of this crisis that predate Bush's tenure. Certainly, financial deregulation that occurred under Clinton played a role in this mess. But it's difficult to get past the top-to-bottom, front-to-back incompetence of the Bush Administration. And despite their lies protestations, the leaders of financial giants like Citigroup knew that they had flushed lending standards down the toilet and were taking enormous risk in the hope of reaping huge profits - and paychecks. I don't want to seem vindictive, but if they've run their companies into the ditch to the point that they need these multi-billion dollar handouts, given that context their CEO's should be tendering their resignations.

As recently as March, we were given projections like this:

You can see this for yourself in Table VI.F8 in Social Security's 2007 trustees' report. Compare "income excluding interest" with "cost," and you get cash flow numbers. (I'm ignoring interest, because it's paid with Treasury IOUs, not with cash.) You see that the system's cash flow is projected at about positive $92 billion this year. Nice. But by 2020 it's negative $96 billion, rising to about negative $280 billion in 2025, half a trillion in 2030.

Oh my.... half a trillion dollars in twenty-two years? Strangely, back in March that seemed like a big number. So what's the cure?

It would be nice to have $2.3 trillion in useful assets in an equivalent of a sovereign wealth fund - but we can't turn back time.

We can still buy time by investing current cash surpluses in non-Treasury assets. But that would require a change in the law and a change in the Washington mindset, neither of which seems to be in the offing.

Darn shame, because if we had invested the Social Security trust fund in private securities that follow the Dow, we would have earned, no wait, lost $800 billion. You know, on paper. I think Social Security privatization is off the table for a while.

What I wonder is, has the scale of this bail-out blown any notion of fiscal responsibility straight out of the budget. What will it take to get us back into a world where a half-trillion dollars is a "big deal"?