No One Makes A Bad Idea Worse Like the House GOPers

By Lee Russ

Saturday, September 27, 2008 at 07:57 PM

On Thursday I asked "will they [House Republicans] use this [bailout proposal] as an excuse to do away with still more taxes on rich folks?" Of course they will, or at least try until they're exhausted......

McClatchey reports that the "details" of the House GOPers alternative to the bailout plan include:

...a temporary elimination of the capital gains tax, a two-year tax holiday that allows U.S. companies to repatriate earnings from abroad, and an insurance program that would be a private-sector alternative to the $700 billion taxpayer rescue proposed by Treasury Secretary Henry Paulson.

Well, of course, sure, goes without saying. Worried that a multi-billion $$ giveaway to a segment of the American business world will piss off your constituents? No problem, make a big show of standing up for "the taxpayer," then propose a huge, multi-billion $$ giveaway to investors and businesses--a pretty shameless attempt to use an impending national disaster as cover for more mindless tax cutting for the business world. The capital gains tax is related to the financial market squeeze only in the minds of the folks for whom all problems stem from too many taxes.

If this proposal gets widespread public support, I give up.

While I'm ambivalent at best about bailouts of the type the White House and the Senate seem to be angling for, the House GOP plan makes even less sense.

In fact, the McClatchey story notes that the House GOPers really don't seem to have a plan so much as a few ideas reduced to talking points:

At a Friday afternoon news conference, [Rep. Joe Barton, R-Texas] said he and fellow Republicans want a market-based solution and proposed an insurance-like program instead of the government buying the bad assets.

But he couldn't specify just what was being insured, the actual bond that no one wants to buy, or the underlying collateral, which are mortgages, some of them distressed. Details, he said, would come later. Ryan's office didn't share details of his insurance plan when asked.

The root of the credit-market problem is that mortgage bonds have been rendered illiquid, meaning no one wants them, insured or not.

"We feel that the Paulson compromise is the best plan to restore confidence, credit availability and market stability in a timely manner," said Travis Larson, spokesman for the Securities Industry and Financial Markets Association. "None of the other alternatives put forward thus far achieve those fundamental objectives."

On the tax proposals, temporarily waiving the 15 percent capital gains tax "would cost hundreds of billions of dollars," said Len Burman, director of the Tax Policy Center at the centrist Urban Institute, a think tank.

Barton and colleagues have not yet offered exactly how they would offset the lost revenues. They said they seek to avoid a taxpayer bailout, but cutting taxes means foreswearing tax revenue, so taxpayer money is in the mix either way.

Not only are taxpayer $$ in the mix "anyway," but they are deeper in the mix and less likely to be recovered under the GOP scheme. The hundreds of billions in lost tax revenue from suspending the capital gains tax would be permanently lost, and we'd still be on the hook somehow for the cost of "insurance." You can pitch the insurance as coming from the private sector all you want, but I doubt you'll find a "private sectarian" dumb enough to undertake that amount of insurance on a bad risk without some further guarantees from the fed, meaning U.S/us.

And, of course, the same GOPers pushing tax holidays for businesses and investors will refuse--absolutely refuse, I say!!--to fund any relief for homeowners looking at foreclosure.