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The Economic Handoff
In this Jan. 5, 2009 file photo, Treasury Secretary-designate Timothy Geithner looks on at left as President-elect Barack Obama meets with members of his economic team at his transition office in Washington. Geithner, President-elect Barack Obama's choice to run the Treasury Department and lead the economic rescue effort disclosed to senators Tuesday that he failed to pay $34,000 in taxes from 2001 to 2004, a last-minute complication in an otherwise smooth path to confirmation. (AP)

Treasury Secretary-designate Timothy Geithner looks on, at left, as President-elect Barack Obama meets with members of his economic team at his transition office in Washington on Jan. 5, 2009. (AP)

First it was the banks and Wall Street in crisis. Then, the whole economy. Now it’s the bailout itself in the hot seat.

Nevermind the nail-biter over TARP funds, and the billions that seemed to disappear into the gullet of the banking world. In the high-wire economic handoff from Bush to Obama, the near trillion-dollar stimulus package itself is being buffeted from all sides. It’s too big. It’s too small. Too fast. Too slow.

It’s not easy pulling out of the dive we’re in.

This hour, On Point: What Bush leaves Obama. The high-wire handoff — and rescuing the bailout.

You can join the conversation. What are you expecting from team Obama?

Guest:

Joining us in our studio is Linda Bilmes, lecturer in public finance at Harvard’s Kennedy School of Government. Former assistant secretary and chief financial officer at the U.S. Commerce Department, she is co-author, with Joseph Stiglitz, of “The $3 Trillion War: The True Cost of the Iraq Conflict.”  Her new article with Stiglitz, “The $10 Trillion Hangover: Paying the price for eight years of Bush” (subscription required), is on the cover of the January issue of Harper’s magazine.

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  • mike

    i do hope they use the money to help the home-owners and the hard working american, not giant corporations,who took the money to sure up there books, and outsource more jobs.

    , like my company did and is doing, no names but my company is a investment bank who got 2billion,and than started outsourcing as much as they could, but on the news it was stated the commerical banks would be getting that to help lean money and free up credit

  • Steve P.

    I am hoping they help the hard working Americans also with this bailout. But, if a person bought a house with no down-payment and shaky credit, and then found themselves underwater, I think it is best for that person to become a renter for a few years before they can become a “Real” homeowner.

    I waited until I was 34 years old to save up and make my first modest purchase. I secured a mortgage based on what was less than 1/4 of my monthly paycheck. I also got a fixed rate mortgage, so I would not need to open myself up to future risk with an adjustable rate.

    These are not new concepts. I enjoyed being a renter for over 12 years. Stricter lending standards that are ENFORCED can help avert this problem in the future.

  • Steve

    I find it interesting that we are paying interest on the money that we borrow from the Federal Reserve.

    What does the Federal Reserve do with the interest? Pay it out in profits to their shareholders? Why doesn’t this interest accrue in our government accounts to help pay of the debt?

  • nick

    This time, let the money flow to the bottom and let it trickle up since we know from the last 30 years that the “Trickle Down” effect only reaches the pockets of the rich.

    How is there no accounting of where the billions went last fall???

    I guess the trickle down also hits the pockets of our Senate and Congress.

    Nick

  • Robin McClellan

    Any system that runs on “hope and faith” and promises rewards beyond spiritual ones is in trouble. An economic system can’t survive long on “hope and faith,” it really needs to run on fundamental economic and ethical principles…which ours hasn’t for some time. In fact our economic recovery relies on increased consumer spending and economic stability requires us to save. The bailout does nothing except add another layer to the base of the pyramid scheme.

  • Lori Bell

    Why are you talking about injecting liquidity. That will do absolutely no good if people won’t borrow and spend and they won’t do that until they are sure they will have a job tomorrow. This talk is all backwards.

  • http://www.startmoneysmart.com Jameel Webb-Davis

    Individual responsibility! Just getting jobs and money to the people is not the only solution. Financial education is never discussed. And not just how to invest, how to save or how to buy a house. Financial education about how to create a budget, how to stay organized so bills get paid, how checking accounts work, how credit cards work. This stuff is not understood as much as we think. Make financial education a requirement to getting another stimulus check.

  • Everett

    The financial part of our economy is terminal. There are trillions of off balance sheet, “level 3″ “assets”, that are probably going to be valued at a few pennies on the dollar, once the banks and pseudo banks can no longer hide them. TARP is too small to fix any of this, it is just buying time so that financial insiders can optimize their CYA programs.

  • Manoog in Providence

    This is the opportunity to not bail out failure but to get a grip on where we have gone wrong since the Reagan Administration ushering in the wholesale concepts of quick return on investment and planned obsolescence.

    Firstly the oil / refining industry should, with its record profits bail out or make loans to its greatest benefactor, the sluggish automobile industry who refused to even raise MPG on domestic versions of models they sell in Europe and could have done so here.

    While on the auto industry, the master ‘planned obsolescence’, pull up GM and Ford 1964 predictions at the World Expo in Flushings, NY and what kind of cars would be floated off the assembly line for the 1970′s and 1980′s and you will get a very clear picture that “the future is not what it use to be’.

    Compare the value of solid foundations and long term growth of the remaining “blue chips” prior to the Reagan/Bush Era and .COMs of the Clinton Era.

  • http://www.richardsnotes.org Richard

    I think Linda Bilmes is brilliant. I hope you’ll have her back regularly. As a matter of fact, I’d like to recommend that she becomes a regular like Jack to talk about these things and no doubt these topics will be on the front burner for years to come.

    Go Linda!

  • Lilya Lopekha

    $350 Billion is wasted!!! TARP – Iraq Link.
    We do not deserve any better. Look at the bigger picture. Look at what we created.

    Do we ask questions? As a nation, we failed to ask the Administration to tell us “WHY” we invaded Iraq… and how can we trust ourselves to ask what they are doing with the TARP.

    Isn’t it obvious? We created this “non-accountability” monster.

  • Marianne

    Tom, I am tired of hearing pundits blame consumer confidence for the poor performance of the economy. We are spending less, not because we are afraid, but because we have no more money to spend. In the past several months, we saw weeks and weeks of record-high gas prices, which we had to pay. Then, prices went up on everything from groceries to electricity and insurance. In my own household, all of our 4 cars needed costly repairs. (For the record, three are from US manufacturers). So, where would I get more money to spend? Buy things and pay with my credit cards? OK. I’ll do that, but I’ll only spend what I can pay off when the first bill comes due. I’m not paying 22% interest!

  • Mike

    After hearing this show, I’m convinced we can’t spend $700B effectively. I only see impending disaster equaling the disastrous spending in Iraq – score 1 each for Republicans and Democrats, zero for the American people.

    Any large project requires years of preparatory work, environmental impacts, etc. We just can’t do it. Tax cuts will be much faster and easier – and will be more evenly distributed than the sycophants who will be after the $700Billion.

    Good God, I wish I could do something about it!

  • Karen

    One thing that bothers me in all of the discussion of the country’s financial mess is the underlying message that *everyone* in the country has been on an extended financial binge. There are, in fact, plenty of us who have been trying to do things right. My husband and I are both +/- 60 years old. We have worked all our adult lives (except when in school); we bought a house that we could afford and paid it off month by month; we live a modest life style; we pay our credit cards off in full every month; and we have planned carefully for our eventual retirements; and we try to be good citizens of our community, our country, and the earth. And our extended families have largely behaved the same way. It is therefore extremely frustrating to seeing our carefully planned resources dwindle through circumstances beyond our control. It is fortunate that we do not plan to retire any time soon.

    While we are extremely pleased to see that the Obama team seems to be addressing the problem from a basis of principled intelligence (rather than narrow self-interest, we think it is unlikely that we can expect anything more than self-interest from many members of Congress (especially the conservatives), and we foresee a lot of foot-dragging and wrangling. We remain hopeful but are not expecting much.

  • http://domesticdomestic.blogspot.com Bill W.

    One of the “restructuring of the economy” requirements is to change the footing of families–and to keep the money out of Washington, because this gang (no matter what party) just can’t shoot straight–they “don’t have the chops,” as Tom put it.

    So here’s how we do it:

    1) Families (and individuals) become corporations. Business corporations.
    Their business is raising children, keeping body & soul together. A domestic-domestic corporation (domestic, as “of the state”, and domestic, as “of the home, the domus”)

    This means all the reasonable and necessary expenses involved in this business–food, clothing, shelter, transportation, education (80% of entertainment) etc. is deductible from gross income.

    2) By legislation, no more employees–we all become contractors–1099.

    3) What once was wages/personal income becomes, by fiat, inter-corporate payments.

    This adds a new requirement for families–they have to run themselves as businesses. With financial management and contracts galore.

    It takes “marriage” out of the government realm. My short-hand: Don’t Marry, Incorporate.

    And it “takes personal income off the table” for Congress.

    The states, which control “domestic corporations,” would also control the “domestic-domestic corporations.” And would make up for personal income tax losses with corporate fees and taxes.

    However, EVERY corporation, domestic and double-domestic, would be on the same footing.

    The goal is to keep money within the home and within the state. The feds would have to talk with the states.

    And families would have to learn about finances and negotiating contracts. It would move reading, writing, contracting, financial “literacy” to the fore, in schools, personal service contracting. No more “employees at will.” It all becomes “goods and services by contract only.”

    Sea-change? Yes. Necessary? I think so. Look where we’ve gotten by concentrating our financial resources in Washington, and in self-aggrandizing (did I say lawless?) mega-mega corporations, ever-expanding, ever-more-”intertwined” and evermore precarious, with all our yeggs [sic] feeding from one basket. And not in a good way.

    bw

    PS: I’m amazed that so many interviewers of congressional officials–our “elected” officials–don’t question in this vein: “OK, you say you’re waiting for the details on this or that presidential proposal. But YOU were the one elected to create the legislation, design and define the details. It’s supposed to be ‘Congress PROposes; the executive DISposes.’

    “So what legislation are YOU proposing? What legislation are YOU writing, on behalf of your citizen-constituents, rather than your big-bucks contributors? Look what an absolute mess your failure to do your job has left us all in. You need to get to work, guys ‘n’ gals.”

    And of course, we newly-minted Domestic-Domestic Corporation executives (formerly known as “constituents” and “wage slaves”) have to tell you what we expect, what we think of your efforts, on something like a daily basis. Which means we need web-cams pointed at your seat in Congress, in your office buildings, the the lobby, the gym, the restaurants around K street, wherever lobbyists are found. We will be your NEW business lobbyists.

  • Majawill

    Hardworking American families don’t need anything. They are already working for it. It’s the people sitting around doing nothing who need help. We should start giving these people cash because they will spend it. This stimulus will generate more economic growth than giving hardworking Americans money they’re just going to use to pay off credit card debt on their 60″ plasma.
    And by people doing nothing, I’m not just referring to guys living under highway overpasses. I would include politicians, these guys and gals deserve a raise. This would help the financial sector because they’d put the money in the bank as opposed to the payola they get that goes in their freezers. That doesn’t stimulate anything.

  • http://dontmarry-incorporate.blogspot.com/ Bill W.

    (Correcting web log address in previous post. Mea maxima lapsus memoriae, or something like that.)

    bw

  • Steven J

    I’m all for taking the next step into Maglev trains and its required infrastructure. By funneling massive amounts of money into existing roads and bridges (which is needed) hinders the countries capability to move forward into a potential, totally green transportation system. Using advanced technologies/techniques the Maglev system can be faster than jets for personal transportation and more economical than heavy trucks for freight purposes.

  • http://www.ohthereishope.com Chelsea

    GET CREATIVE PEOPLE! Even if the government isn’t. We need to stop waiting around for the government to help us and instead start helping each other. That way when the GOV finally starts to help we’ll already be in a good place!

    Don’t play into the lies of redemptive violence, big corps, and special interest- get creative instead. Can’t afford a house? Live in an apartment and make the neighborhood as cool as possible. Have block parties! Can’t afford a vacation? Save up then do a house switch with someone from another city! Don’t have a job? Start a non-profit, do a help/work exchange program overseas or in your own city, start selling grilled cheese sandwiches at truck stops! Who knows!! get creative! No money? Find others with the same situation and start a community! Help each other out- watch each other’s children, feed each other, take others in who need help!! We can overcome this whole thing together but we have to be TOGETHER!

    I’ll say it again- We need to stop waiting around for the government to help us and instead start helping each other NOW!

  • http://tombstone001.blogspot.com MOHAMMED N. RAZAVI

    Before we propose and deliver another bail out, will someone please show us what has happened with the money before. That is the one hundred sixty billion of the first Bush bail out, eight and half trillion dollar purchase of worthless paper by the treasury, and the three hundred and fifty billion of the troubled assets relief. Where did that money go and show me how much difference it has made in stopping bankruptcies, slowing of home foreclosures, and stopping job losses.

    Secondly we need to know, how we keep this money from being sent off overseas for Chinese goods and the Arabian oil.

    Last and not the least, how we tax this money back in the pockets of the goverment.

    We can brag all day long but we are on the verge of becoming another broke third world country, or worse, a capitalist version of the old Soviet Union with all its corruption, poverty, and lack of civil and human rights.

  • Alex Szczech

    I direct everyone to Chris Martenson’s ‘Crash Course’. He does a marvelous job explaining why the economy is in the mess it’s in and also why the recovery some have in mind won’t be forthcoming: http://www.chrismartenson.com/crashcourse

    I’d love to hear Tom interview Martenson.

  • Hal Hancock

    Let’s start telling the truth.

    Linda could have explained that the first TARP $350B was distributed *clearly and openly* by buying preferred shares in Banks which *return interest* to the taxpayer. This *re-capitalized* the banks –> stopping the continuing failure of a large bank every few days!

    TARP was used to prevent a general failure of most all large banks.

    Imagine if this wasn’t done: Citibank gone, dead. Bank of America under threat and a bank run.

    How would the economy look then, with a more intense panic?

    AND…TARP was used mostly *as recommended by a prominent nobel prize winning economist*, and many economists and experts…

    And this accomplished *exactly* what TARP was for: to stabilize the banking system and prevent general collapse.

    Instead, Linda said this was a

    “Raw Deal”

    This reminds me of the rhetoric used by some politicians that obscure this necessary and relatively good (not perfect, but not bad) use of the TARP funds.

    Honestly, I’m getting more and more disillusioned about the rhetoric being used.

    We cannot win the war for economic justice using tricky rhetoric. Really, it will backfire.

    The scramble to blame Paulson — make him the scapegoat — for the continuing fallout from the collapsed credit bubble collapse is a trick, and I don’t want any part of it.

    It will backfire.

    We need openness and complete communication on our side if we are to make more than brief progress.

  • Jonathan

    I enjoyed hearing Linda Bilmes explain in such a clear way what big challenges we face. She is a breath of fresh air – you should have her back more often.

  • Tiger

    mike: I’m shore glad you’re their…thanks for the insight

    Steve P: I’ve rented all my life and drive $2000 used cars…you speak the truth

    nick: as soon as the checks come back, we’ll know who got the money; then we’ll ask them

    Robin and Lori: excellent points, thanks for your post

    Jameel: The typical kid coming out of public school gets no training in those areas…go figure.

    Manoog: It’s all Republicans fault…got it.

    Lilya: Are we then all slaves to the Electoral College?

    Marianne: You’re on the right track

    Karen: Meet Steve P and Marianne

    Chelsea: you are so right….and you’re hot to boot.

    Mohammed: Get with nick

    Hal: Thanks for the clear thinking and dose of truth.

    Hey! I love NPR; really, I do…but if it wasn’t for crazy old ladies, you guys would be after a bailout too.

  • http://none Barbara Ann Tronsgard

    Just wondering how the Congress men and women who are debating the bailout would react to President Bush or President – elect Obama coming in to the Chamber and telling those that have ten years or more of service have a package deal to review and those with less are no longer members of Congress!! Some times I think that this would be very helpful for the American people. The Members may then understand what the majority of Americans are going through during this crisis.

  • steve g.

    Linda was great! I am a 48 year old business owner and
    love to here strait talk!

  • Rowen

    I just listened to this show and I found it very informative and it helped me to understand what is going on. Thanks.

  • Alberto H.

    I see that Germany has passed a stimulus package alongside a deficit-repayment law. I’d like to ask your guest why can’t the US do something along these lines? It is one thing to ask for us to defer paying off the debts but surely we should recognize that eventually we will be in deeper as a result of all these bailouts?

  • Judy

    Once again the corporations control our government. Our leaders are “corporatists and an oligarcy”.

    They think it’s OK to plunder our treasury. It’s OK to leave our families and old on the streets. It’s OK to send our citizens to war for their profit and Empire control. It’s OK to destroy lives and our communities. It’s OK to bankrupt the most powerful country in the world (democracy) so they can rule like kings.

    Say no to Obama and Congressional push to the Americas Union (Fascist rule).

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