Editorial Commentary 1

“Pandora’s Bailout”, by Holman W. Jenkins Jr., is the best commentary I could find for the recent fiasco in the economy and the multi-billion dollar buyout of investment banks. Unlike the others I have read, he is the first to actually state a solution to the problem. Jenkins has written for The Wall Street Journal since 1992, he has done articles for Policy Review and National Review. He also holds a Masters from Northwestern in journalism. His article is intended for a more educated audience.
Jenkins does not agree with the buying out of the investment banks. There are three main reasons why he disagrees with the proposition. First, besides the multibillion dollar buyout of the investment banks, the government would also have to buy out all of the houses to secure the investment. Second by buying all of the mortgages the government would become the world’s largest landlord. Finally the taxpayers’ gains would be filtered into keeping non payers in their houses.
His solution would be to let the government be a last resort buyer for mortgage derivatives. Then to help stop the price decline of houses in the southwest and Florida, he talks of having the government buy up and demolish the surplus creating an increase in price for the houses still standing. This would up the price of mortgages, which would in turn recapitalize banks. This also lessens the government involvement by instead “buying thousands of houses, not millions of mortgages”.
I believe this is sound thinking on a basic level. There is a problem with a surplus, and there is one of two ways to fix a surplus. You can either lower the supply or increase demand. Now to increase the demand you must lower the price of the houses on surplus, in turn lowering the value of the houses already built. This in turn hurts the people who did the right thing and bought the house they could afford and helps those who made a mistake. Also to do this you would need a subsidy form somewhere to make up for the capital lost in the price drop. This would either come from the taxpayers or bank loans which got us in this predicament to begin with. However a decrease in supply would cause the price of the houses left to move up in value, allowing the people who did spend wisely to come out on top.

Economy Today

The article by Time magazine entitled, “Obama, McCain Try to Seize Economy Issue” is about the two candidates’ different views on how the economy should be fixed. While both agree in saying that it is not the public’s fault for obvious reasons, who they blame, are two different stories. Obama points his finger at the current administration, and their trickle down theory when it came to tax cuts. McCain, on the other hand, blames the greed on Wall Street. To fix the problems both have talked of tax cuts. Obama wants tax cuts for the poor and middle class workers, while McCain wants bigger tax cuts for corporations and wealthy businessmen. Obama wants stricter regulation on businesses, and McCain would like less federal involvement.
The reason this article is so important is because economics is what fuels everything. It is the big topic. The number one cause of divorce is money. The easiest way to have peace between nations is through open trade. This article specifically has to deal directly with you, unless you feel like never getting paid or having a job. The questions of “how much say should government have in private business?”, “why give a tax cut while we are in extreme debt?”, and “what do I stand to gain?”, because let’s face it Americans are individualists, all come up in this article.
http://www.time.com/time/politics/article/0,8599,1841314,00.html