Sep 23, 2008 9:20 pm US/Central
Repercussions Of Government Bailout Plan
CHICAGO (CBS) ―
You've heard about the government's $700 billion bailout plan. But, do you understand what it means to you? CBS 2's Dana Kozlov reports.
It seems you can't escape the subject right now. The $700 billion bailout is being harpooned on street corners and discussed all over the country.
"I would say, 'what about the little guy?'" said Kevin Thibot, Chicago resident.
"It's very difficult to understand exactly what's going on," said Michael Gravlin, Chicago attorney.
When broken down, some analysts estimate the bailout could cost each taxpayer about $5,000 if Treasury Secretary Henry Paulson's plan fails. But Economist Diane Swonk says the real question is, what happens if we don't do it?
"I can tell the American public that I think it's better to do that than risk the Great Depression all over again," said Diane Swonk, Mesirow Financial. "But the reality is unless you're getting a check in your mailbox, it doesn't feel good."
Swonk and Equity Analyst Matthew Warren say the goal is to stop the current credit crunch. If that's not done, it will be very difficult, if not impossible, for people to get loans for homes, college and cars.
"If no one can go out and get a car loan, if it goes down by 50 percent plus, then you have real issues," said Matthew Warren, Morningstar, Inc. "You have issues in Detroit, it spreads through the broader economy, and people start losing their jobs and all that starts to feed on itself."
Swonk also believes the bad business dealings by these companies will force change that you'll notice. That will include more regulation and, she believes, the way CEOs are paid.
"If they got fired, they would get a lot of money – that's gone. That's gonna be out of the picture now," Swonk said. "If you're good at what you do, you'll be paid it. If not, you won't be. You'll be under the same risk that every one of us faces."
Warren says ultimately, any taxpayer loss will be an addition to the country's deficit - which is already the highest it's ever been.
That means more tax dollars will be used to pay off the interest on the deficit instead of being used to cut taxes or fund government programs. You can't see it - but it has repercussions.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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