Main Street gets government help too
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TEXT OF COMMENTARY
Kai Ryssdal: Seventy-two hours later, it’s not like people are less angry about the Wall Street rescue package. Or in the vernacular — the bailout. Helping Wall Street with Main Street’s money. Maybe the events of the last few days have persuaded more people that we’re all in this together. And anyway, commentator and economist Andrew Samwick says Main Street’s been getting its fair share of help all along.
Andrew Samwick: We’re hearing more about the virtues of Main Street and the vices of Wall Street during the current financial market meltdown. Now it’s true that once-respected financial institutions have turned themselves into dens of greed, corruption, and incompetence. But Main Street has been leading a life that is far from virtuous, and the federal government has been bailing it out for years.
Consider the so-called stimulus package passed in January. The largest part of that legislation mailed $600 rebate checks to low- and moderate-income households. The government didn’t raise taxes elsewhere to fund these checks. So, at best, private debts went down by about a hundred billion dollars while public debts went up by the same amount.
But when we apply these principles to financial institutions, we call it a bailout.
Since the sweet spot of the Internet bubble a decade ago, the federal government has run annual budget deficits rather than raising taxes to pay for its spending. The American reaction to higher income has been to boost consumption. Were deficits not such an easy option, public or private spending — or both — would have been lower. This is really no different than an explicit bailout — we have moved our debt to someone else’s account.
Who is the mysterious financier who has been bankrolling our binges? People like to point the finger at the Chinese or other foreign investors who have purchased the government debt resulting from budget deficits. But these investors will eventually be repaid from future tax revenue.
Ultimately, it is future generations of taxpayers who will be left to pick up the check for our consumption binge. Even before Bear Stearns collapsed, our children were going to finance the bailout of the excesses of Main Street.
Ryssdal: Andrew Samwick is a professor of economics at Dartmouth College. He used to be the chief economist for the president’s Council of Economic Advisors.
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