Who Needs a Bailout?
A few hundred billion here, a few hundred billion there and soon we’re talking about real money-our money. Sometimes we forget that the money Washington blithely throws around is either paid through our confiscatory tax system or borrowed against our future taxable earnings. Certainly government has a function and for that it needs to collect revenue. It needs to fund the military to protect us from threats outside the country, there are certain infrastructure needs like the interstate highway system that are best handled at that level, and of course the funding of its own operations and the payment of salaries to all those elected officials that do good in our stead. The redistribution of wealth, however, is not a function of government under our constitution.
In this case, however, I am not talking about taking money from the successful among us and giving it to the lazy. This time the government is taking our money and giving it to businesses that made bad decisions. Some of those decisions were forced on them by the government itself, that is to be sure. The fact is, however, that we think that business should always be good, there should never be recessions or depressions, the stock market should always go up and it is the government’s job to make sure all that happens. Considering that the government was at least partially responsible for the mess to begin with, I’m not so sure they are the ones we should be looking to to solve it.
The primary purpose of the first seven hundred billion dollars of this “rescue package” was to stabilize financial markets by buying up bad assets and pumping liquidity into the market. It has evolved into the government actually buying equity in some of these banks. From economics 101, every shareholder in a company has a voice, no matter how small that voice may be. The government's voice has never been small so if the government has a stake, the government has a voice, a direct voice, much different than the one used in the past that used regulatory and tax intimidation to get it’s way. Do we really want the same people who bankrupted Medicare and Social Security and buy five hundred dollar hammers to run a bank? Do we want Nancy Pelosi designing our cars? It is the risk and innovation in the private sector that makes it successful. There is no risk in government because it can print its own money to cover losses and bureaucracies by definition are opposed to innovation. Some banks and companies, big and small, need to fail. If they have run themselves so poorly that they need a government bailout, the additional money will simply be subsidizing failure. Welfare for individuals perpetuates poverty by eliminating incentive and the same is true for businesses. No one is too big to fail, other business will take up the slack and meet the needs wherever they may be, that is the genius of capitalism. It may take a little time and there may be some hardship but the innovative can-do spirit of the American entrepreneur will find a way and recovery will follow.
One of the more amusing aspects of the government's argument for the bailouts is that spending our money buying equity shares will bring a “return” to the taxpayer. Does anyone really believe that? Let’s assume for a moment that the bailout of Bank X actually works and they turn their business around. Their shares that were worth fifty cents are now worth one hundred dollars so the government, you and I, made money on our investment. What is the government going to do with that $99.50 per share it just made? Is it going to give it back to us? Is it going to put it towards the huge national debt we’ve piled up? No, congress will spend it on donkey museums and bridges to nowhere.
The fact is it is when the government tries to fix something is usually makes it worse. The government tried to “fix” the problem that not everyone in America could buy a home. That gave us the sub-prime mess that began this whole economic decline. The fact is, not everyone should own a home and giving historically irresponsible people the ability to get one isn’t going to “solve” anything. The fact that some people do not have health care is not a reason to force everyone to have socialized medicine. If government would stop meddling and just stand back, if it would stop regulating and taxing the life out of our economic engine, our country would grow, more people would have better and higher paying jobs because more entrepreneurs would be successful and people would be able to afford their homes, health insurance and other things they want and need. The bailout we need is not more government money and interference but less. We don’t need a bailout by government but from government.
In this case, however, I am not talking about taking money from the successful among us and giving it to the lazy. This time the government is taking our money and giving it to businesses that made bad decisions. Some of those decisions were forced on them by the government itself, that is to be sure. The fact is, however, that we think that business should always be good, there should never be recessions or depressions, the stock market should always go up and it is the government’s job to make sure all that happens. Considering that the government was at least partially responsible for the mess to begin with, I’m not so sure they are the ones we should be looking to to solve it.
The primary purpose of the first seven hundred billion dollars of this “rescue package” was to stabilize financial markets by buying up bad assets and pumping liquidity into the market. It has evolved into the government actually buying equity in some of these banks. From economics 101, every shareholder in a company has a voice, no matter how small that voice may be. The government's voice has never been small so if the government has a stake, the government has a voice, a direct voice, much different than the one used in the past that used regulatory and tax intimidation to get it’s way. Do we really want the same people who bankrupted Medicare and Social Security and buy five hundred dollar hammers to run a bank? Do we want Nancy Pelosi designing our cars? It is the risk and innovation in the private sector that makes it successful. There is no risk in government because it can print its own money to cover losses and bureaucracies by definition are opposed to innovation. Some banks and companies, big and small, need to fail. If they have run themselves so poorly that they need a government bailout, the additional money will simply be subsidizing failure. Welfare for individuals perpetuates poverty by eliminating incentive and the same is true for businesses. No one is too big to fail, other business will take up the slack and meet the needs wherever they may be, that is the genius of capitalism. It may take a little time and there may be some hardship but the innovative can-do spirit of the American entrepreneur will find a way and recovery will follow.
One of the more amusing aspects of the government's argument for the bailouts is that spending our money buying equity shares will bring a “return” to the taxpayer. Does anyone really believe that? Let’s assume for a moment that the bailout of Bank X actually works and they turn their business around. Their shares that were worth fifty cents are now worth one hundred dollars so the government, you and I, made money on our investment. What is the government going to do with that $99.50 per share it just made? Is it going to give it back to us? Is it going to put it towards the huge national debt we’ve piled up? No, congress will spend it on donkey museums and bridges to nowhere.
The fact is it is when the government tries to fix something is usually makes it worse. The government tried to “fix” the problem that not everyone in America could buy a home. That gave us the sub-prime mess that began this whole economic decline. The fact is, not everyone should own a home and giving historically irresponsible people the ability to get one isn’t going to “solve” anything. The fact that some people do not have health care is not a reason to force everyone to have socialized medicine. If government would stop meddling and just stand back, if it would stop regulating and taxing the life out of our economic engine, our country would grow, more people would have better and higher paying jobs because more entrepreneurs would be successful and people would be able to afford their homes, health insurance and other things they want and need. The bailout we need is not more government money and interference but less. We don’t need a bailout by government but from government.
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