Krugman Offers Lukewarm Support For Plan, Rips "Frightening" McCain

Update (11:42PM): Krugman offers lukewarm support for the plan in his new column, but warns that the plan isn't going to fix all our financial problems, putting a premium on who we elect as our next president:

The bailout plan released yesterday is a lot better than the proposal Henry Paulson first put out -- sufficiently so to be worth passing. But it's not what you'd actually call a good plan, and it won't end the crisis. The odds are that the next president will have to deal with some major financial emergencies.

So what do we know about the readiness of the two men most likely to end up taking that call? Well, Barack Obama seems well informed and sensible about matters economic and financial. John McCain, on the other hand, scares me.

Krugman says he wishes Obama had been more out front on the bailout bill (apparently forgetting that it was Obama who first used the line "no blank check"), but he saves the brunt of his ire for John McCain. Krugman details the long list of McCain failures on the economy, ultimately concluding that McCain's approach to modern economic issues is "frightening" and questioning whether McCain has "the judgment and temperament to deal with" them.

Original post:After reading the legislative draft, Paul Krugman offers a tepid acquiesqence to the bailout deal, but with a caveat.

On the deal itself, Krugman says:

The plan's real traction, if any, is in (2), which is a backdoor way to provide troubled firms with equity -- and the bill seems to say that taxpayers have to own this equity, although I wish it was clearer how much equity will be judged sufficient.

Not a good plan. But sufficiently not-awful, I think, to be above the line; and hopefully the whole thing can be fixed next year.

Krugman does offer a caveat, however:

House staff tells me that there are significant changes from this draft. More info when I get it.

The draft he was reading was posted on CNN.com and is an earlier version than the one on Huffington Post.

According to news reports, the deal has now been finalized, but no matter what they are saying, Krugman raises an important issue, which is that we need to be wary of any bait-and-switch efforts on the part of Congress, particularly on equity warrants.

Comments

[AcitizenNJ]

12:51 PM on 09/29/2008

I ask once again, it has become very obvious even more so this past week.

Were are the economic experts of America that have no political gain in this mess. There was one from Yale on GMA this morning who stated his disagreement with our president that this bill will not address the core of this financial failure. In fact it bails out the same folks that got us into this mess. If there are more of these individuals out there that want to be part of the solution then we need to hear from them and we need to hear from them now.

[Nickesq]

11:56 AM on 09/29/2008

Check out the level-headed criticism of the bill and haste to act now by Kucinich at democracynow.org

[Zenfull]

10:46 AM on 09/29/2008

The leadership of the USA has been reactive not proactive for many years. There have been many voices telling America about the underlying sewage and nastiness that occassionally seeped into our nice , comfortable lives where we thought our biggest problems were going on diets to lose weight or deciding whether we should buy or lease a new car and the like. The FBI sent memos to the President about some radical Islamist named Osama bin Laden; there was political unrest and bombings far away in Bali, in the Middle East and Europe; Dennis Kucinich and Stephanie Tubbs said unpopular things on the House floor which no one felt they needed to listen to, the housing market was spawning millionaires at an unsustainable rate.... When 9-11 happened, our President said we should go shopping, as the government scrambled to protect us with a massive security reoranization that restricted our political freedoms and our personal freedoms, cost us billions of dollars, unleashed a war and occupation that is costing us trillions of dollars, and now is trying to stop the flow of blood from our economic meltdown. So, just exactly is winning the War on Terror? Think, vote for a President who looks ahead at the future challenges and threats and does not merely react to the latest disaster. That would be...Barack Obama...hands down!

[Nickesq]

11:58 AM on 09/29/2008

Great observations.

[Yermammy]

10:32 AM on 09/29/2008

Paul is just hinting about how bad this bill is. He'd be killed for telling the truth.

[Fastcad]

10:01 AM on 09/29/2008

Lets not forget how we got into this mess. With easy money, home prices have escalated to a point beyond there real underling value. Food, shelter and transportation are the basics of life and necessary to maintain our economy.

Home values need to be lowered to be in line with food and transportation (fuel costs), they are only worth so much. Either the prices of homes is affordable or the dollar will be devalued to a level that represents its true value.

This bail-out is more borrowed and spend money that comes close to bankrupting this country. Our Gross National Product, Income, is now at 14 Trillion dollars and after the bail-out of wall street the National debt will be around 11 Trillion dollars.

This means two things, one the 700 Billion dollars borrowed bail-out dollars will be taken from the pool of available money, mostly from Asia, will lessen the amount of available money for the recovery.
Second, the bill does not correct the the high cost of homes. It will support there prices at artificially high prices which causes the dollar to be devalued and inflation will ensue.

We have got to deflate this unreallistic high housing market. It's going to hurt but if we don't lower real estate properties prices to there true values, everything will increase and the dollar will lose value.

If America has to fight another war like Iraq which cost 500 Billion, where are we going to get the money.

[Yermammy]

10:34 AM on 09/29/2008

The Iraq war is a farce. Convict Bush/Cheney for war crimes next year. Impeachment proceedings now would stop blanket pardons. Pelosi is complicit. The sun rises in the east.

[MKersh]

06:54 AM on 09/29/2008

http://financialservices.house.gov/
Emergency Economic Stabilization Act of 2008

[PT6]

12:16 AM on 09/29/2008

His ASSESSMENT of McCain is RIGHT ON!

But OBAMA has been working with Paulson and the Demo Leadership since DAY 1 and put forward the FOUR basic Principals AT THAT TIME - CHECK THE MEDIA for VIDEOS!

No plan done this quickly is optimal and will have flaws as all plans do.

After the first round of funding we will know a lot more and the PLAN can be DRAMATICALLY IMPROVED.

It is a THOUSAND TIMES BETTER THAN THE 2.5 PAGE PAULSON PLAN.

[kwalla101]

11:33 PM on 09/28/2008

PUT PEOPLE TO WORK; FIGHT GLOBAL WARMING AND RAISE THE VALUE ON HOMES... here's how:

What we NEED to do is to stimulate the economy by spending public money to do "green remodeling" (adding insulation and other energy saving features/updates to buildings and also installing site-appropriate alternative energy generation: solar, wind). Such measures applied to both public and private property would:

- get money in the hands of skilled construction laborers who are out of work;
- reduce energy consumption and thus CO2 production as well as lower the utility bills at a time when energy prices are rising exponentially; and finally
- raise the value of residential and commercial real estate.

This is a WIN-WIN-WIN situation all around. This has been done in a very limited fashion via tax credits in the 2005 Energy Bill-- a number of which have been renewed or are currently slated to be renewed-- but we MUST increase the funding level dramatically. If the bottom line is that we need to inject significant public money into the economy in order to divert any of several different great depression-like scenarios, let us do it in a way that maximizes the benefits.