Bailout, without a fight.

263-171 from 228-205.

Apparently, the bailout has become more receptive with the added 100 billion dollars worth of tax breaks in various matters such as movie production, wooden arrows of some sort for children, racetrack ownership, and in perhaps the more useful field of alternate energy. But what has all these got to do with the subprime crisis? Apparently $17b in tax incentives for alternate energy, but $700b elsewhere. Which part of the bailout or rescue plan is a rescue, and who is being rescued?

What will happen with $700b pumped into the economy? Unless basic monetary policy is not sufficient here due to the complexities of the real world, more money of such high quantities will create inflation. Higher prices on goods. Lower purchasing power of the American dollar. Prices of bread may rise and the same will follow for milk, eggs, candies, soda, clothing, gadgets, and even oil. After all, taxes on oil and gas production is set to be raised to fund the bill's incentives for green energy. In the big picture, that may encourage companies to move toward a more environmental source of energy production and expedite the move to eco-friendly fuel. Thomas Friedman may be getting the results of his arguments. However, I suspect that a switch to green energy is not going to be swift and easy and the average American is still running his or her vehicle on oil. Oil prices have gone up from about $2 per gallon to over $4 per gallon in two years. Can we expect oil prices to fall in the future? No. Firstly, people are so dependent on oil in america and the producers have so much more power than the consumers that they would not consider dropping prices for the welfare of the people at the expense of their revenue or profit. Secondly, oil production has gone up and so this cost, in this oligopoly, will be reflected back onto the consumers. Surely, oil prices will jump. With an increase in prices of commodities, the bailout has yet to address the common person. Will any of the $700 billion of the bailout or the $100 billion in tax breaks go toward subsidising the commodities that the average person considers a neccessary good? I don't know. But as of yet, I have heard nothing about that. If there is indeed subsidising on these products, does it cover the negative impacts the bill would have financially cost? Will solar powered sedans be available at competitive prices to the public soon? Will they be subsidized so the less affluent people in the country can trade their oil-dependent vehicles for something that runs cheaper?

Here, Thomas Friedman will be disappointed with the truth of his analogy of nobody wanting to pay extra to have his lamp powered by green technology when he already has light from his lamp. Perhaps he would if he knew that a non-green technology driven lamp will not be available during his time due to decreasing natural resources. But oil is not exactly running out in the lifetimes of the leaders of the nation. Will the goverment spend money to subsidise the people and help usher an era where funding will no longer be available from the taxation of oil? When J.P. Morgan found out that Nikola Tesla's free power Wardenclyffe Tower would conflict with the idea of a meter to charge for electricity or for the need to construct cables for the transmission of electricity, both ways through which a business was possible, investing came to a halt and was advised against by Morgan himself. Unlimited and free electrical and related power in the world, were it truly possible by Tesla's tower, was denied to the world in place for monetary profit. Surely the national government must have known of Tesla's project, if for no other reason but national secutiry. Surely, it could have provided the funds if it so desired as it would later fund space exploration. And surely the priorities of the governments and the nature of men have not changed considerably to warrant trust over distrust that one should expect government support toward free energy.

Tax breaks are instead directed into movie production. While some may consider movies a neccessary good, the vast abundance of entertainment available for free on the internet should not make it as important a product as basic groceries or oil. When Merill Lynch is being bought over and other financial institutions are collapsing at the benefit to the surviving players, the cost of making a movie is getting cheaper. The government is claiming less money from the movie production industry for its budget and probably going to claim it instead from somewhere else, possibly the households. Racing car tracks will be taxed less. Who will be taxed in its place? After all, $700 billion dollars and more is being transferred out to save the financial institutions troubled by the subprime crisis. Will the money come from withdrawing military prescence in the Middle East? The tax breaks for those industries are irrelevant.

A saving of the companies that have until now been financial giants will surely save a lot of jobs. It will keep employees with a salary. With retrenching or retiring of some employees or with a company deciding to hire more people, this also means jobs for people seeking to be employed in the relevant field. But if the purchasing power of the average person's salary in that field of business and that of someone in a totally different industry declines due to increased cost of living, then even among the small players of the world's money, the share of the pie is being redistributed. Those in the business sector may get a slice but also a considerable amount taken back in the form of a higher cost of living. Those in other sectors that have no benefit from the bailout will have more of their pie taken away too. Some will have less money so that more people have some money. But then of course, surely people employed in the area of business could get a job outside of those firms that are saved by the bailout whether in another business sector or in an entirely different field altogether. Without the sustaining of these financial giants, workers in this financial sector may be laid off and the high earners in the field will stop, temporarily or not, getting thier large salaries. In that respect, less people will have some money (in terms of a regular pay) so that more people will not have less money.

The first case sounds rather socialist - taking money from some and having more people have money. But it becomes capitalistic if the new people make more money than those who paid the sacrifice.
The second sounds capitalistic - less people with money so others can have more money. But it is also socialist if the people paying for the benefit of the others were the richer lot.

What happens now to the free market model? A $700 billion investment into the companies the government deems it wants to uphold, probably paid for by the average taxpayer, blatantly resembles a command economy. What's more is that there was not even a fight. The rejection of the bill 5 days before it was revised with auxillaries and approved surely does not constitute even a decent show of force. The first bill was ridiculous with its request for total control over bailouts in the hands of one man. Yet, the ridiculous only became more ridiculous 5 days later before approval.