In financial crisis, it's still a democracy

Robert Reich

TEXT OF COMMENTARY

TESS VIGELAND:

Michigan is among the states facing massive deficits. Last week the legislature approved $134 million worth of budget cuts. And of course the auto industry's woes aren't going away any time soon.

Today GM suspended work on a new engine plant in Flint as it awaits word on a government bailout. There's still no indication from the White House on when a bridge loan might be forthcoming.

There's been a lot of talk about how much it will cost to keep the Big Three in business.

But Commentator Robert Reich says there's more on the line than just money.


Robert Reich: I'm among those who think there's good reason to give the Big Three a $14 billion bridge loan to stave off immediate bankruptcy until they come up with a restructuring plan. But I've got to tell you, I'm deeply troubled by what I hear is the administration's likely decision to give them a bridge loan, when just last week Congress said they can't have it.

Call me old-fashioned, but I believe in democracy. And under our Constitution, Congress is in charge of appropriating taxpayer money. If Congress explicitly decides not to appropriate it for a certain purpose, where does the White House get the right to do so anyway? By pulling the money out of another bag? That other bag, by the way, called the Troubled Assets Relief Program, or TARP for short, was enacted to rescue Wall Street, not the automobile industry.

Now personally, I think there's more reason to rescue big automakers than big Wall Street banks, but what I want isn't the issue. It's what our representatives voted for. When they voted for TARP in October, they didn't say to the President, here's a $700 billion slush fund to use as you wish. They said: Here's $700 billion for Wall Street.

If it's a slush fund, everything's arbitrary. I mean, why autos and not, say, state and local governments? They're running short about $100 billion this year and as a result are slashing public services, including the nation's schools. Even as it is, TARP is shrouded in secrecy. The Treasury has burned through about $335 billion so far, and no one knows exactly how or by what criteria. Why, for example, did it set tough conditions on some banks while giving Citigroup the sweetest deal imaginable?

The dictionary meaning of a "tarp" is something used to cover things up, which is exactly we've got. But our system of government depends on sunlight, transparency, public awareness. It also depends on Congress exercising its constitutional duty to make laws and the president executing them. An economic crisis is no excuse for turning our back on democracy.

VIGELAND: Robert Reich is a professor of public policy at the University of California, Berkeley. His most recent book is "Supercapitalism."

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