Connecting the Dots on the Economy: A Helpful Read

I don’t know about you, but the recent financial meltdown has almost brought about paralysis of thought.  How to make sense of sense of the flurry of Hill meetings last week, a nearly cancelled presidential debate, a failed bailout vote in the House, bizarre ramblings from a certain VP candidate about “this globalization that we’re a part of in this world,” the drop in the Dow, the endless explanations from economists who struggle to distill the issue into something digestable?

Scouring over the “no” votes on the House bailout package, I saw that the two Representatives that I follow, Republican Jean Schmidt in Ohio and Democrat Elijah Cummings in Maryland, folks who don't agree on much, both voted No. What would I do if I were in their shoes? Would I take the side of the many Americans who disagree with expensive and fast-moving action to bail out Wall Street? Or would I work to do something, anything, to address the unraveling of our financial system, agreeing with the other side that Americans just aren’t getting the severity of the situation (though I did have a good laugh listening to Chris Matthews rail last night that “this issue is so over the heads” of Pres. Bush, U.S. Sen. McCain, and other folks on the Hill). In any event, this brings me to the point of today’s post – a front page New York Times article by David Leonhardt about the public’s skepticism of a $700 billion bailout package. He opens with a parable from the Great Depression:

In 1929, Meyer Mishkin owned a shop in New York that sold silk shirts to workingmen. When the stock market crashed that October, he turned to his son, then a student at City College, and offered a version of this sentiment: It serves those rich scoundrels right.

A year later, as Wall Street’s problems were starting to spill into the broader economy, Mr. Mishkin’s store went out of business. He no longer had enough customers. His son had to go to work to support the family, and Mr. Mishkin never held a steady job again. 

Leonhardt goes on to explain that, for now, the crisis has had little effect on most Americans, beyond their 401(k) statements. He, like others, criticizes U.S. Secretary Paulson and Fed Chairman Ben Bernanke for their poor ability to communicate to American voters, in simple and real terms, the crisis and what to do about it. So Leonhardt gives it a try, and I admit that it is one of more cogent, concise explanations I’ve read. He doesn’t get in the weeds or show off his economic acumen, but rather relates the facts of the broader financial crisis to the everyday economic decisions and options facing everyday Americans. His final paragraphs were the most important, and helped to shore up my support (as a voter) for a bailout:

But in the end, this really isn’t about Wall Street. It’s about reducing the risk that something really bad happens. It’s about limiting the damage from the past decade’s financial excesses. Unfortunately, there is no way to accomplish that without also extending a helping hand to Wall Street. That is where our credit markets are, and we need them to start working again.

“We are facing a major national crisis,” as Meyer Mishkin’s grandson says. “To do nothing right now is to do what was done during the Great Depression.”