Shorter Mort Zuckerman: "Oh boy, we're all screwed".
Financial expert Zuckerman appeared on Morning Joe to talk about the Federal bailout of Fannie and Freddie Mac - a move that he estimates will cost the taxpayer upwards of $500 billion added to an already record federal debt. The panicked looks on the faces of the hosts as he laid out just how bad it could be were the most vocal commentary though. Zuckerman says that Fannie and Freddie are "too big to fail" because their paper is held by financial institutions worldwide and if they fell then the world economy would plummet like a stone in a "systemic crisis".
But he also says that "this is not the end of the real problem", which is $5 trillion plus in mortgage loans with record foreclosures and falling house prices. In other words, America's piggy bank is broken. Zuckerman says that no-one should think the bailout is the end of the story: "this problem is still not measurable, we still don't know where the bottom is," and that the only way out in the long term is to "force savings upon the American people, and that's called taxes."
We're already seeing the immediate results of the the credit crunch. For instance the Highway Trust fund, which pays for infrastructure repairs and improvements, is almost broke. It's funded by the gas taxes it's tapped out. That has a knock-on in the ability of the federal government to provide construction contracts to businesses and construction jobs to those unemployed, in a time of rising unemployment. The massive amount of money that is going into financial bailouts could have been going to such projects instead, which would have provided some buffering against recession.
It's possible that the Bush administration will ask Congress to give money to the Highway Fund anyway - and it probably should - but yet again someone has to pay the bill eventually for deficit spending and that someone will be you and your grandchildren. Ditto the huge bills for Iraq, massive homeland security and defense spending, the trade deficit and so much else we can thank the profligate Bush administration and Republicans in Congress for. They have, as a solid group, opposed any kind of financial regulation legislation. For Republicans, it's a free market only until John McCain's "middle class" with over $5 million in the bank are hurting, then its socialism for the financial markets all around.
Just remember, though, that the economy does better with Democrats in the White House and Congress and that in this election, while John McCain cares most about personas, the Democratic convention revealed that Democrats care most about the economy.