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Bailout would take away lots of change

Robert Shapiro

TEXT OF COMMENTARY

KAI RYSSDAL: Both presidential candidates have been talking tough about the economy. Not like they really had an option. John McCain said this morning he wants a bipartisan oversight committee to keep an eye on how Henry Paulson spends that $700 billion he's about to get his hands on.

At a speech in Green Bay today Barack Obama announced that he'll hire a chief performance officer to make sure the government's spending taxpayer money wisely. There is some irony here. Because amid all the uncertainty about how this bailout's going to work, commentator and economist Robert Shapiro points out that $700 billion is a whole lot of money not to have.


ROBERT SHAPIRO: Whatever we do, this bailout will use up virtually all of the resources the next president needs to bring about whatever changes he's envisioning.

That's because the government will need those resources to buy up all those devalued mortgage-backed securities and their derivatives.

The direct costs of buying up all those falling securities will come over the next several months. But any revenues the Treasury eventually recoups from selling them back to the market? That won't happen for years, if ever.

And that leaves the next president facing a deficit of $600 billion to $700 billion, maybe more.

There goes the money for President Obama to expand health care coverage, or for President McCain to cut corporate taxes or extend President Bush's tax cuts for wealthy people.

And next, President Obama may have to trade off a major push on alternative fuels against those new tax cuts for the middle class.

While President McCain may have to give up extending tax relief for dividends or the funding for his educational reforms.

Both candidates also may face a version of the dilemma European leaders faced in the 1960s and 1970s, when they gave up plans to maintain strong military spending in order to elaborate their social welfare protections.

Here, this time, the next president's promises to expand the Army may well give way to new subsidies not for poor or working people, but for the financial institutions that once presided so proudly over the global economy.

Since most of the bailout's costs should come in the next two years or so, they shouldn't constrain the new president's longer-term plans for perhaps one major initiative. That is if he still has any public support left after failing to deliver on all those other promises he's making right now.

RYSSDAL: Robert Shapiro used to be the Under Secretary of Commerce in the Clinton administration. He's now the chairman of the consulting group, Sonecon.

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