The Bush administration sought congressional support Saturday for a $700bn bailout for US financial institutions to quell the turmoil in financial markets.Consider first those numbers, which offer two radically different points of view:
The plan would allow the government to buy the bad debt of any US institution for the next two years, raising the legal ceiling on the national debt from $10.6 trillion to $11.3 trillion.
President George W. Bush said: “We’re going to work with Congress to get a bill done quickly.” Treasury officials and members of Congress were meeting throughout the weekend to secure broad agreement on the package by the time world markets reopen on Monday. Legislation could pass early next week.
Saying the administration was faced with preventing the collapse of a financial “house of cards”, Mr Bush said: “People are beginning to doubt our system, people were losing confidence and I understand it’s important to have confidence in our financial system.” he said.
- With a "stroke of the pen" (as political writers like to say), the President will have the power to increase the national debt by $700 billion, a quantity that most of us can barely (if at all) comprehend.
- On the other hand that same "stroke of the pen" would be increasing the national debt by "only" a little more than 6.5%, which is the sort of markup that would not surprise us if it were applied to the groceries we were buying as sales tax.
The pathos of this negligence is painfully underscored by the use of the word "confidence" twice in the final sentence in the above quotation, a sentence uttered by George W. Bush. The only thing I could think of as that sentence stuck in my craw was a cautionary piece that Rafe Needleman had written for his CNET News.com blog back in August of 2006, where he described the Cluetrain Manifesto in terms of "shiny new values competing with reasonable but conservative older values." The irony of course is that it is through such "shiny new values" that the Bush Administration is now threatening our reality by playing reckless games with fictions of convenience. Indeed, when I wrote my commentary on Needleman's piece, I observed that he had overlooked how the "shiny new value" of confidence was winning out over the "conservative older value" of credibility, which is probably why the blunter description of a "fiction of convenience" is "confidence game."
Of course the very use of the word "value" is so abstract that just about any interpretation amounts to a confidence game. However, pulling a fast one in the philosophy of semantics is one thing; doing it with the working man's wallet is quite another, which is why Robert Solow has felt so strongly about the need for economics to dispense with the notion of "value" and stick to more ordinary observables, like price. That is where hit on the fundamental ugly truth of the chaos of this past week: For most of those large financial institutions, price is as remote an abstraction as value is; and, as we can see from the way of Government talks about the national debt, it is just as abstract in both the Legislative and Executive Branches. I suppose you could say that, contrary to what Solow believed, price is only an "ordinary observable" to those of us who have to pay it!