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Bailout 2.0

February 20, 2009 | By Nathaniel Ward

Last week, the Obama administration announced new plans to "rescue" the economy with another round of bailouts.

Heritage economists David John and James Gattuso explain the plan's flaws:

As announced [last] Tuesday by Treasury Secretary Timothy Geithner, the plan is a grab bag of policies of doubtful effectiveness and uncertain consequences financed with $2 trillion or more in taxpayer dollars. To make matters worse, key elements of the plan were merely placeholders lacking concrete details about how they would be actually work.

One thing seems certain. These massive new programs will increase Washington's control over the financial system, placing politicians in the role of bank managers and hedge fund investors, to the long-term detriment of consumers and workers.

Open letter: The 'stimulus' is horrible for America

In an open letter to the Congress and the President of the United States, Heritage President Ed Feulner called the American Recovery and Reinvestment Act –the so-called 'stimulus' bill –the most "far-reaching and revolutionary" Heritage has ever seen. "And never have we seen," Feulner says, "a bill more cloaked in secrecy or more withdrawn from open public exposure and honest debate."

The process by which this law came about marks a serious blow to open, republican government.

Feulner writes:

Both chambers of Congress suspended their budget rules to push it along. And both the President and the leaders of the House and Senate have violated their solemn promises that the bill would be available for several days of public review prior to voting, so that the American people might have a chance to learn what is in the bill and to make their views known to their elected officials.

Hillary Clinton goes to Asia

Secretary of State Hillary Clinton made her first trip to Asia this week. The trip was "long on signals and short on substance," says Heritage expert Bruce Klinger.

But this "is not necessarily a bad thing, especially when it sends several critically important messages to allies Japan and South Korea," explains Klinger, because "her trip communicates that Asia matters to the United States and that Washington is committed to a predominant role in the region over the long-term."

Klinger says that a major priority for Secretary Clinton should be to "reassure our allies that the U.S. remains committed to the complete and verifiable denuclearization of North Korea and unequivocally state that Washington will not accept North Korea as a nuclear weapons state."

Heritage expert Walter Lohman points out that "from a strategic perspective, the trip is an excellent opportunity to tend to America's two most important allies in Asia (Japan and South Korea) and consult with its chief competitor for regional influence (China)."

But Indonesia should not be overlooked.

Lohman writes:

Indonesia is the world's most populous predominantly Muslim country. Its gentle faith, deep spirituality, and respect for pluralism are an inspiration and example to the world. An Indonesian face on Islam has the potential to completely change the way many in the West view Muslims.

Due to both President Obama's connections to Indonesia and the strong diplomatic foundation created by President Bush, U.S.-Indonesia relations are poised for a constructive new era. There are two things, however, that Clinton should keep in mind as she prepares to usher it in: First, Indonesia is much more than a "Muslim country," and second, it is a developing democracy under assault from a determined Islamist minority.

Specifically on the Chinese front, Heritage expert Derek Scissors says that hope is slim for bilateral economic relations between the U.S. and China. The burden is on Washington, he says, "to make better choices than Beijing has. The U.S. cannot simply block Chinese goods, as the mammoth quantity of diverted products would cause the E.U. and the rest of the world to raise trade barriers in response."

Other Heritage work of note

Obama's surprise decision to send Churchill home is both wrong-headed and crassly insensitive towards America's closest ally, coming at a time when nearly 9,000 British troops are fighting alongside their American counterparts in Afghanistan. 

  • Heritage expert Andrew Grossman debunks five myths about allowing bankruptcy judges the authority to modify home mortgages. In the entire mortgage mess, one policy – that of denying judges the authority to "strip down" mortgages – gave lenders more certainty; which in turn meant smaller down payments and lower interest rates for borrowers. Now, Congress is considering snuffing out this lone bright spot in the housing debacle. Grossman concludes that granting this authority would be "overbroad, extreme, and, for that reason, risky."
  • The right strategy for the next phase of immigration reform includes safeguarding our southern border, promoting economic development and good governance in Latin America, enhancing the legal workers program, reforming U.S. citizenship and immigration services, and enforcing immigration and workplace laws, say Heritage experts. The current situation in Mexico also poses a major problem in which American involvement can help if it is calculated and modest.
  • Heritage experts Ray Walser and James Roberts advise the Obama Administration to take seven steps that are critical to Mexico's political stability and economic health including diminishing incentives for illegal workers, reaffirming a commitment to free enterprise, a stated willingness to fight drug cartels, and to encourage Mexico to open its energy sector to foreign investment.  
  • Writing in today's Wall Street Journal, talk radio host Rush Limbaugh asks President Obama whether the government will re-impose the so-called Fairness Doctrine on talk radio. "What will it be? Government-imposed censorship disguised as 'fairness' and 'balance'? Or will the arena of ideas remain a free market?" As part of our ten-year Leadership for America campaign to get America back on track, Heritage is collaborating with Limbaugh to help advance conservative ideas to broad audiences.
  • Senator Jeff Sessions (R-AL) cited Heritage on the Senate floor during last Friday's stimulus debate:

"According to both Robert Rector at The Heritage Foundation and Steven Camarota from the Center for Immigration Studies—Mr. Rector was the architect of welfare reform and one of the best minds in the country on these issues—this legislation we are talking about passing today or tomorrow could result in several hundred thousand jobs being given to illegal immigrants—several hundred thousand."

In other news

Coming up at Heritage

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Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation. David Talbot contributed to this report.