The largest savings and loan and the largest insurance company go belly up. One trillion dollars lost in the stock market in one day. Two trillion dollars lost in housing values. Congress hands the Treasury secretary $700 billion in a panicked vote and heads out of town. This isn't the failure of one firm, or one industry. We are witnessing the collapse of a failed ideology -- what the famed investor George Soros calls "market fundamentalism," the belief that markets are always perfect and government should deregulate, cut taxes and get out of the way.
We now have learned once more -- as we did in the Great Depression -- that that road leads off a cliff. Tax cuts led to massive deficits, sustained because foreign countries like China were happy to buy our dollars so they could sell us goods. And Wall Street, liberated from the regulations created during the Depression, went on a binge. It invented exotic new products that no one understood, and then borrowed heavily -- 30 cents to 40 cents in debt for every dollar of capital -- to gamble on their rise. They had the party, and now we are paying to clean up the mess -- and to deal with what is likely to be a terrible and protracted hangover.
Yet the Wall Street implosion hasn't blown away the bad ideas. Look at the bailout plan passed by Congress. It is aimed at buying some of the trash debts of the Wall Street banks and investment houses in the hope of getting the financial system moving again. It does nothing for the real economy in which people work and live. Nothing on housing. Nothing to help states and localities about to make deep cuts in spending. Nothing for Main Street.
Keeping the banks afloat will help Main Street, we were told, because they supply the loans and financing that small businesses need. But this is like bailing out the pilot's cabin of a boat when the boat is taking on water through the hull. It won't work. The real economy is going into a downturn. People are losing jobs, hours are getting cut back, small businesses are hurting. States and localities will start cuts of teachers, police and construction projects. Restaurants and bars will lose business; many won't last. Retail stores will face a holiday nightmare.
But bad ideas have a steely grip. In the week before the Wall Street vote, Republicans in the Senate threatened a filibuster to kill even a vote on a small -- $50 billion -- stimulus package that passed the House. On the day of the Wall Street vote, they blocked even consideration of a measure to extend unemployment benefits to the hundreds of thousands now unemployed that are having a hard time getting jobs.
Ideology is blinding these folks to reality. We need, right now, a plan to kick-start the economy. That would include measures to stem the flood of foreclosures that are driving down the prices of homes across the country. That would include revenue-sharing with state and local governments in exchange for a promise to sustain current employment levels. It would include major investments in renewable energy and conservation, putting people to work while reducing our dependence on foreign oil. It would include rebuilding our infrastructure -- everything from bridges to mass transit to sewers --that is falling apart after years of neglect.
We are headed into a troubled time. We need to act now. We can't wait another year before those so blinded by their ideology wake up and see what is going on around them.