Opinion

Today's bailout is tomorrow's burden

However self-absorbed the "Me Generation" may be, we can't possibly spend our money as fast as the Baby Boomers are spending it for us. Last week, Treasury Secretary Hank Paulson and the Democratic Congress proposed an unprecedented $700 billion bailout for firms on Wall Street.

What began with an $85 billion "bridge loan" to insurance giant American International Group and a bailout of $200 billion or more for mortgage backers Fannie Mae and Freddie Mac has now culminated in a $700 billion high-finance rescue plan, threatening to bring us to a grand total of nearly $1 trillion in new federal spending in a single week. When you factor in all the interest that we'll pay, it could be $2.5 trillion.

Barack Obama seems to have no problem with this, and neither does John McCain, but if you are under 40, you should.

The Government Printing Office estimates that the federal government spent more than 9 percent of its 2007 budget paying interest on debts. When you keep throwing around dollars you don't have, a trillion here and a trillion there, pretty soon you're talking about real money. And with a trillion-dollar war in Iraq and a trillion-dollar Medicare drug entitlement already in the mix, we're not exactly flush.

That's not to say the economy isn't in trouble. An army of intelligent economists claims the money markets are frozen because banks can't be sure the banks they're lending to aren't up to their necks in bad debts and won't end up defaulting. So, the logic goes, the federal government must become a buyer of last resort and scoop up these bad debts to inject some trust back into the system.

But how does the government know better than anyone else what the debts are actually worth? The doubt plaguing the market results from Wall Street firms making poor judgments, for which Paulson's plan now stands to reward them in spades. Couldn't the government resolve the liquidity crisis by lending to banks, rather than buying bad assets?

Some say we'll profit by the bailout - and if it actually comes to pass, we should all hope so - but even they base their predictions on calculations we can't check. "I estimate the average price of distressed mortgages that pass from 'troubled financial institutions' to the Treasury at auction will be 65 cents on the dollar, representing a loss of one-third of the original purchase price to the seller, and a prospective yield of 10 to 15 percent to the Treasury," opines Stephen Gross of PIMCO, the largest bond mutual fund in the United States, in the Washington Post.

It's not unthinkable, but when no one can tell what these mortgages and other securities are worth, Gross sounds more certain than he should.

The kicker: "My estimate of double-digit returns," writes Gross, "assumes lengthy ownership of the assets."

In other words, what the government takes, it shouldn't plan to give back anytime soon.

The government may already become a 79.9 percent stakeholder in AIG as part of that bailout. If Paul Krugman and congressional Democrats get their way, the government will also become a controlling stakeholder in the banks it bails out. Has anyone begun to think through the consequences? How is a government that owns a piece of a company supposed to enforce the law against it or treat its competitors equally?

The malfeasance witnessed under Franklin Raines at Fannie Mae hardly suggests optimism.

"If the government directly controls major financial institutions, that would give the new administration extraordinary leverage over the national economy," former Atlantic Monthly blogger Matthew Yglesias delights. "Suppose the new CEO of AIG decided he didn't want to insure assets of companies whose executives make unseemly multiples of the national median income?

"There are all kinds of crazy things you could do. And of course not all of them would be good ideas. But some of them would! ... I think it creates a real opportunity for 'socially conscious insurance underwriting' or whatever you care to call it."

There's simply no limit to what you can afford given time and an unlimited supply of other people's money - that is, ours.

Thanks to the government, it doesn't matter if we've never bought a house; we'll pay for it. It doesn't matter if we've never bought stock; we'll bear its costs without its benefits. It doesn't matter if we've never heard of AIG or if the idea of financing a bridge loan sounds curiously like being knocked to the ground and robbed blind.

"This is not a position where I like to see the taxpayer," Paulson comforted us last Sunday on "Meet the Press." "But it is far better than the alternative."

How can he, or anyone else, be sure of that?

The sad truth is that when you consider what's actually at stake for people our age this November, there's little hope, little change and little straight talk. Just a choice of which suit gets to keep reaching into our pockets and telling us it's for our own good.