Armchair Economist

Everyone knows that their ideas for how the government should do things are the best ideas, so with that in mind and knowing full well that the bailout bill has already been passed, I think it's time that I shared my opinions! I'm going to take a slightly different approach, however, and share with you my bailout plan and why it is not a particularly good idea.

I think the government should give money to lenders, not by purchasing bad loans, but by paying off parts of loans in repayment. That's right, put a little bit toward your mortgage and a little bit toward my student loans. The financial institutions of America still get the money and you and I get a little bit of debt relief.

Why is this my plan? I'm in debt. Plain and simple. My debt isn't going to be considered a "bad asset" because I make payments on what I owe. I'm in deep enough that it's going to take a long time for me to get out, but not so deep that I'm a major default risk. If the government is giving away money, I'd like a little bit, thank you.

Why is this not a good idea? It isn't practical. It's idealistic. Above all, there's no way to make it fair. There is no way to pull this off without rewarding debtors. The government bailing anybody out is inherently unfair, I understand, but it is really easier to provide relief from the top and establish stability again in America's financial sector. Consider the logistics of debt relief. Would it be a set dollar amount? A percentage? What kind of debt is eligible?

A set dollar amount would benefit most those with the least debt. It would, in a sense, be a reward for having less debt, but it would not help keep the highest risk loans out of danger, and bad assets are what the bailout is focused on to begin with. Besides, how much relief would an individual get in this scenario? The amount of money set aside for immediate relief is less than half of the total bill budget, so I think it would turn out to be a rather short term cushion for the consumer and satisfy no more than this year's tax rebates (and how quickly did we all spent that?).

A percentage-type debt relief would benefit those with larger amounts of debt. It would reward bigger spenders and give more relief to people with more collateral. Yeah, this would look like helping the rich more than the poor. In one sense it might be the most fair, however, because the relief on an individual budget would be much more "equal" than the relief from an equal dollar amount for everyone.

What kind of debt might be paid down? Mortgages? Credit card debt? Student loans? Business loans? Car loans? Americans are so good at getting things that we can't afford to buy outright that we have loans for everything. Mortgages are the biggest reason that financial institutions are in trouble now. But I don't have one of those. I don't have a car loan, either, nor do I own a business. I have three creditors - Citi, Sallie Mae and Uncle Sam. They aren't the ones that seem to be in trouble (well, maybe the last one). Would my debt even be considered because of who I am lending from?

Honestly, to make a scheme like mine work, I think they'd have to write a code akin to the tax code. That would take far too long and be far too messy. Emergency relief requires something faster than that. No, it probably won't seem fair, and it may not be fair. I'm glad it's not my decision to make. I don't know if I would do any better than the next armchair economist.