The first week of classes is always so stressful: having to actually wake up before noon, buying books, having to wake up without a hangover, worrying that you’ve suddenly forgotten every single word of French over the summer. It’s just not fair that, on top of that, we have to worry about the fact that our economy is collapsing around us — and taking our money with it.
You may have heard that the economy is in crisis. Oil prices are through the roof, the dollar is tanking against foreign currencies, lending is some seriously risky business and the bottom is falling out of Wall Street like it’s the Tower of Terror. Banks won’t lend out money for fear of not getting a return. And even though the real crisis may be on Wall Street, the ripple effects are being felt anywhere there’s money.
A flailing economy means there are fewer jobs – bad news for us students looking to enter the workforce. The tight purse strings on bank loans will only make it more difficult for us to get on solid footing right out of college. And let’s not forget those escalating gas prices and the sinking dollar.
Luckily, the government is here to help. When financial markets were showing signs of distress, who was there with money to boost them? The government. When unfortunately-named mortgage giants Freddie Mac and Fannie Mae failed, who was there to buy them out? The government again. When insurance company AIG was on the brink, who was there to rescue them? Yup, you guessed it.
Now Congress is debating a bailout plan that could potentially save the flailing economy, but could also mean less money for taxpayers. The plan, comparable in size to the government action after the Great Depression, would give the Treasury $700 billion to buy up troubled assets from failing companies, allowing the firms, now without the dead weight, to recover. The boost in investor confidence would lead to further growth in investment. The hope is that this plan would allow banks to start freeing up money and help the big financial companies get back to business as usual instead of filing for Chapter 11.
Being a government plan, it’s shrouded in questions and Congress is taking its time debating the details. Will it work, or will it just allow the companies to get back to the risky spending that got them in trouble in the first place? Might firms decide to just keep buying those perilous assets with the knowledge the government will just bail them out again? How much oversight will the government have over their new assets? How much oversight will anyone have over Treasury Secretary Henry Paulson? And who foots the bill?
All of these questions are worrying investors, in turn plunging the economy even deeper in crisis. But it’s the last question that’s most relevant for the most people. $700 billion is a practically unimaginable number and you can’t just pull that out of a hat. Economists aren’t sure where exactly the money is coming from, but all signs are pointing to taxpayers paying for at least part of it. That doesn’t sit well with people who had nothing to do with the crisis, but might be expected to pay to fix it. A poll by CNN/Money showed that 62 percent of people think the government should intervene to help the financial crisis. However, 65 percent thought the proposed bailout would treat taxpayers badly, which translates to less support than that 62 percent would indicate.
Furthermore, the government’s actions throughout the crisis have also spelt bad news for small business owners. One writer pointed out after the AIG purchase that the money could have been spent on small businesses, probably to greater effect. The whole crisis has been bad for new businesses who depend on loans, basically kicking the job market while it was down.
All in all, the crisis and the bailout spell trouble in the short term. The flailing economy means fewer jobs for graduating students and a weaker economy for people just starting out on their own. Furthermore, loans are harder to find, even for those with good credit. The bailout also could mean higher taxes or less government spending. The positive effects won’t be felt immediately, so seniors are especially in danger of entering the real world at the worst time.