Thursday, September 25, 2008

McCain sides with conservatives and House Republicans who question the bailout and its costs to taxpayers

Ths is bad thinking and based on a false understanding of government finance. The only cost to taxpayers is a small increase in debt service ($700 billion at 3.6% 10-year T-Note yield equals $25 billion per year in additional debt service or about 2-tenths of one percent of GDP). That will not be paid for with a tax increase. The only other cost is the possibility that the additional debt makes the dollar go down, however, it is not sure that this will happen and even if it does, it is only an oblique "cost." On the contrary, doing nothing and allowing the economy to contract is a very real cost to every American and to investors around the world. McCain has thrown away his chance to win the presidency because of his obstinacy. He is taking a purely ideological view to placate extreme conservative members of his party and they are wrong in their understanding of this. It will doom McCain and hurt the economy.

No comments: