Last week, reports surfaced that confirmed what some of us knew and many suspected: the federal government was spending hundred of billions in taxpayer money on a bailout that has no oversight.
As the Washington Post reported, the Bush administration has already doled out $290 billion of the first $350 billion in bailout money, and the independent oversight required by the bailout law is non-existent. And the status of the progress report detailing where the money is flowing? Late, and getting later.
Treasury Secretary Paulson initially proposed purchasing toxic assets from financial institutions. But we are now watching Treasury spend $250 billion purchasing stock from nine of the nation’s largest financial institutions — a proposal Secretary Paulson had earlier dismissed as an admission of failure. Meanwhile, as the Treasury Department throws its weight around the economy, we’re hearing talk of bailouts for everyone ranging from life insurance and credit card companies to automakers and state governments.
Whether or not this change of course is a better use of bailout dollars than the purchase of big finance firms’ toxic waste is an important question. But it begs another.
The whole bailout concept is now completely different than the bailout that was sold to America back in September (a concept I didn’t buy in the first place). After this bailout “bait-and-switch,” why should anyone believe that the next round of $350 billion in taxpayer money is necessary or even that it will be used judiciously?
With this question in mind, I thought it was time to exercise one of the checks and balances in the bailout law. The bailout law gives Congress the power to “disapprove of” the second half of the $700 billion in bailout cash.
Treasury was allowed to use $250 billion in bailout funds upfront and another $100 billion kicked in when the President requested additional funding. Now $350 billion is in the hopper waiting for the next industry or company the government deems “too big to fail."
Congress can stop the madness. According to the new bailout law, Congress can withhold the next $350 billion of the bailout within 15 days of when the President — whether it’s Bush or Obama — requests the second half of the money.
I’ve authored the appropriate Congressional resolution (H.J. Res 101) that will do just that. Thanks to the way the bailout was written, this resolution must be considered by Congress within five days of when the White House requests the balance of the bailout cash.
The first blank check isn’t working like its proponents claimed. Congress has the power to rein in the ongoing bailout frenzy that is whittling away free market functions.
Government has never excelled at picking winners and losers. By not allowing failing companies and bad ideas to fail, we are only inflating the next bubble that is waiting to burst. And this time, it’s with your tax dollars.
If Congress agrees to disagree with the next $350 billion, our future economic prosperity won’t be the only thing to come out on top. Other benefactors will be America’s busted budget, our tradition of free markets, and most importantly, future generations freed from the shackles of $350 billion in new national debt.