I'm very concerned as Bush and Republicans are calling on Congress to rush through the package as-written.
Summary of reasons to hate the bailout:
1. The proposed bill gives Paulson unlimited authority and zero oversight. Any actions he takes would not be allowed to be reviewed by any administrative agency or the courts. (Would the Supreme Court strike the bailout down because of the "no courts" clause? If not, does that mean we're now Soviet?)
2. Paulson isn't being honest. He's planning on buying the troubled assets for above-market value. You're essentially "throwing taxpayers money to the financial world," to quote a liberal economist who opposes the plan.
3. It could cost well over $700 billion, that's only the amount Paulson could have outstanding at any one time. The bill gives no cap on the spending limit, it could be as high as he wants.
The real scary stuff is in the long-run. This $700 billion comes on top of the projected $500 billion deficit projected for next year. At what point do foreign countries stop lending us money? As I pointed out last year, we're headed for a huge problem. Over the next 20 years we're facing a huge increase in entitlement and health care spending for the aging Baby Boomers, and massive deficits. Today's bailout simply adds to this (worse if Democrats attach an "economic stimulus" package to it).
At some point America will become like every other deficit-happy country and default on its debt. That would mean China, Europe, Japan, etc. stopping their purchase of U.S. Treasury Bills to fund our deficit. It would mean a huge devaluation of our currency, a collapse of the dollar.
Naked Capitalism speculates that maybe if the bailout legislation gets passed as-is, the world will see the writing on the wall of U.S. default happening very soon and stop loaning us the money.
"We have said more than once that the the US in the same position as Thailand and Indonesia, circa 1996, except we have the reserve currency and nukes. It looks like we will have the opportunity to see how those two assets influence the end game."
My plan is to move away from dollar-denominated assets over the next 10 years as we prepare to make our move to Estonia. Call me crazy, but the odds of inevitable dollar collapse happening soon seem better than ever right now. My generation can't even fathom what America would look like then.
Economists debate how long things can go on just as they are now with no consequences; in other words: How long can America be the exception to the rule rather than a proof of it? That's the $700 billion question.