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When Congress approved the Emergency Economic Stabilization Act last month - legislation commonly referred to as the Wall Street bailout package - Democratic U.S. Rep. Jerry Costello and Republican U.S. Rep. John Shimkus voted against the plan. The nay votes were cast, both say, in part because there was no revenue to pay for the expenditure and all of the money would need to be borrowed - pushing the national debt over $10 trillion, an all-time high.
“The national debt has doubled in the past eight years,” Costello said. “It’s gone from $5 trillion to over $10 trillion dollars. We just added potentially $700 billion to the national debt. It will be borrowed money, and we will be borrowing that money from China and from Japan and from other foreign countries. We should have paid for it,” he added.
According to the Office of Management and Budget, interest on the national debt already consumes about 9 percent of the entire federal budget.
“If you go back to the beginning of our country,” said Costello, “President (George W.) Bush has accumulated more debt for our nation in eight years than all of the 42 presidents before him combined.”
Costello suggested that one way to pay for the bailout might have been repealing the tax cut that the very wealthy received under the Bush administration. Another, he said, would be to institute a fee on stock transactions. According to Costello, a one-fifth of one percent (0.002) fee on stock transactions would generate about $150 billion per year.
Costello said that he also didn’t like the rush to judgment that was caused by the Bush Administration. He said more than 200 economists from across the country were telling Congress to slow down and consider alternatives, but President Bush and Treasury Secretary Henry Paulson’s inflammatory comments were stoking panic on Wall Street.
“When the President of the United States tells the American people that the Congress must act by Monday,” Costello said, “then expectations are raised to the point where, when it failed in the House on Monday, the stock market dropped 777 points. There is no question in my mind that it was the president who built up those expectations. When the Congress did not accept his proposal, people pulled their money out of the market and there was a huge sell-off. The Administration really made a horrible mistake by coming out immediately and setting an arbitrary deadline. It should have told the American people that it was working with the Congress to examine every option, and that together they were going to find the best option to stabilize the market in order to help the American people and the economy,” he added.
In addition to his objection that the bailout bill will add to the national debt, Shimkus outlined two other reasons for his opposition.
Shimkus said he believes in capitalism, which is based on the concept of balancing the risk against the gain - and that bailing out losers will simply encourage riskier behavior in the future.
“If you believe in capitalism and you believe that people who raise capital assume risk and should reap the rewards of their hard work,” Shimkus said, “then you also have to accept the premise that risk is risky and that those who invest capital assume that risk…and the government should not go to other people to mitigate their losses. That’s part of the capitalist system, and that’s what makes it great and challenging. When government comes in to ease the risk, it could promote riskier behavior,” he added.
A third issue, Shimkus said, was that he didn’t like handing over that much power to a single appointee.
“We’ve handed that $700 billion over to an unelected bureaucrat, (Treasury) Secretary Paulson, to choose winners and losers,” Shimkus said. “The primary example is when he chose to bail out AIG versus Lehman Brothers. Now, who made that choice? He made that choice. Who else was involved? Really, no one else. To give one person that much authority and power is scary, and not in the best interest of the country.”
As a Republican, Shimkus said that he received a call from the White House staff to solicit his support. Shimkus said he told them he was against it; they went over the changes that were made to the original bill and asked if that would change his vote. It didn’t. Shimkus said he thought that if the White House staff thought he might be wavering, he may have received a call from the president - but he never did.
“I just want this economy to recover,” Shimkus said. “Now we’re stuck with a bill that’s been signed into law that doesn’t seem immediately to have helped very much.”
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