1/15/10:President Obama’s New Plan: I lose, You pay!

President Obama’s new plan to have one company, who has already paid back the money  borrowed, pay the losses of another company who can’t pay, should have us all very, very worried.  Politically, the people that are behind the President are some of the best I have ever seen in their ability to spin public anger and angst to their benefit, against the interests of the majority of our country.  On the surface, the public’s disgust that faceless banker’s are getting huge bonuses is appalling to most people who are hurting in the current economy.  People on different sides can argue that point, but I want to concentrate more on the end results if this is allowed to be how we handle problems going forward.

The point that needs to be focused on here is the end result of one business who has been able to pay off it’s debt, with interest, and the ability of another such as GMAC or Fannie Mae to not be able to pay off the money pumped into their business.  The difference in the two businesses is that one is controlled by government officials and the other is not.  Rather than the two examples being used to show that capitalism is the way to fix the problems that confront us and get this country back to work, it is used to show that failure will be rewarded by this administration. 

The thing to watch regarding this new ‘plan’ by this administration is this.  If the administration is successful at framing the discussion in terms of the TARP funds being one pool of money going to bailout various companies, and then at some point it is all paid back with interest, I fear our best hope to restart our economy may be lost.  Keep in mind that in order to do this, they need to blur the difference between companies like Fannie, Freddie, GMAC, and those of the ‘evil’ bankers.  Once the new ‘tax’ is imposed on these banks, it will be used to pay off the debts that the government-run companies simply cannot and will not be able to.   This administration will then claim that their plan worked and we need to apply it elsewhere.  At the same time, the debts of the other companies under government control will be forgiven because it was paid off, on the backs of the other companies, thus allowing those companies to claim that their debt was also repaid to the taxpayers!  (Through none of their own efforts!)

Now imagine this same model being applied to people who are underwater on their mortgages, deep in credit card debt, behind on their car payment, underfunded in their retirement, etc!  As with the above model, there really isn’t anybody who is writing a check to pay off the other person’s debt if it is done through a very small ‘fee’ on a despised institution like the faceless bank………unless of course the bank is forced to raise fees on ATM withdrawals, monthly fees on accounts, lower interest rates, or any other means that directly hurts people on fixed incomes that are just trying to make ends meet, in order to make up for this ‘little’ fee. 

And that is the ugly secret in the end.  In order to pay any new ’tax’ imposed by the government, a business has to raise costs somewhere on their customers.  This effectively serves as a hidden tax on the people who need the most help! However, this is where the best part of Obama’s plan goes into effect.  He is then able to go back and criticize the very same bankers because they have again taken advantage of the average citizen through the increased fees.  While the honest among us will see that this was all put in place by a government too involved in private business, our opponents will be able to produce a 30 second sound bite, and the process will begin again, with the middle class and poor left to pay the bills!