Main Street is feeling Wall Street's pain. Not as viscerally or explosively, but the impact of the U.S. financial crisis on average Americans is real. That connection has often been lost or glossed over in the ongoing debate over a $700 billion government rescue plan. But resolving the nation's financial woes is going to cost taxpayers one way or another. The overall cost is not yet known, but a Senate-approved version of the Bush administration's rescue package would provide a mechanism to relieve the credit crunch, some needed relief for consumers, oversight protections and limits on executive compensation. It is an acceptable compromise to the bill that was rejected this week by House of Representatives. Leaving the matter to market forces carries its own risks, and that is not an alternative.
The House's defeat of the Bush plan was a setback for Democrats and Republicans who had worked through the week to revamp the president's proposal and make it palatable for a majority. But many argued that the legislation didn't do enough to protect the interests of taxpayers, who were bombarding congressional offices with calls to defeat the measure. Supporters complained that the administration hadn't forcefully explained that everyone benefits if and when the economy is back on track. But opponents won out and the bill was defeated.
The collective response in some offices in Washington and on Wall Street was, now what? But since Monday's vote, the national conversation seems to have shifted and the talk now is of declining car sales, the difficulty in borrowing money, sinking investments, job losses - the stuff that matters to Main Street America.
Scott Broerman, Bruce Alderman and Drew Greenblatt are a cross-section of Maryland's Main Street, and they are feeling the impact of the financial crisis. Not at home, necessarily, but surely at work. Mr. Broerman owns a small running store in Annapolis. While his customers are still buying running shoes, sales of apparel and expensive equipment have slowed and he's cutting back on inventory. Mr. Alderman, a stockbroker in Baltimore, is fielding calls from clients anxious about their investments. And Mr. Greenblatt, president of a wire products company, told a Baltimore Sun reporter that financing to expand his business isn't as easy to get, and his company is profitable.
Baby boomers who are nearing retirement are concerned about their nest eggs and pensions. Some economic experts are warning about an expected rise in unemployment. Cities and municipalities are scaling back capital projects because they can't get financing or count on revenue streams to pay off debt. In Baltimore, for example, fees and taxes related to home sales, which fueled multimillion-dollar surpluses in the past, are down even as average home sale prices have held relatively steady.
In Washington, meanwhile, the Senate revised the Bush economic bailout package in an attempt to persuade House members to approve it when they reconvene today. The changes include $150 billion in tax breaks for individuals and businesses and an increase to $250,000 of the amount of savings per individual that the government would insure, incentives that also carry a cost (the federal deficit will grow).
Homeowners at risk of foreclosure aren't assured of anything more than a government effort to try and make their loans more affordable, but with millions of people in that predicament, it's hard to see how the government can satisfactorily make good on that pledge. That's why we again urge a consideration of legislation to allow bankruptcy judges to take on that challenge, even for a limited period of time. The bill, opposed by the banking industry and others, could carry a sunset provision to ensure it would be a measure of last resort in response to the foreclosure crisis.