From Peter Goodman, "But Will It Work?" in today's NY Times, page A-1:
"Some question the prudence of adding [$700 billion] to the nation’s overall debt at a time when the Treasury relies on the largess of foreigners to cover the bills."
The best argument in favor of being so reckless is not an edifying one. If you are going to crash and burn no matter what, why not max out the credit cards first and have a really good time.
On a more serious note, the fact that absolutely no one is discussing financing this wildly expensive bailout is exemplary of why the U.S. is likely headed for a catastrophic fiscal collapse. The core problem is more political than economic. Changing course would be conceptually easy to do though painful in practice. But Republicans have succeeded in utterly banishing from public discourse the idea of a budget constraint. Apparently nothing needs to be paid for. A $2 trillion Iraqi war? Reason to cut taxes. An $18 trillion Medicare prescription drug benefit? No need for financing. And imagine what would happen politically today if Pelosi, Reid, or Obama pointed out that we need to pay for this bailout. They're not that brave, but frankly I don't blame them. Why fall on your sword if no one will listen anyway?
Enacting the bailout without financing is sheer insanity, but it's going to happen beyond a doubt. You may ask: Does it really make sense to increase taxes at a time when we're teetering on the brink of recession? The answer, I'd say, is that it makes perfect sense to announce the tax increase - just not to implement it yet. A tax increase to pay for the bailout, with a deferred implementation date (say, 2010 or 2011) would be stimulative if considered credible, since it would reward accelerating economic activity.