No More Bailouts

December 11, 2008

If our government’s economic experts really knew what they were doing, they wouldn’t be frenetically experimenting with the people’s money, treating billions like nickels. They wouldn’t be so hellbent on dampening expectations and instilling fear as if oblivious to the real impact of public psychology on the economy.

I’m just not buying their doomsaying anymore. Even if they’re right and we do end up in a full-scale financial meltdown, at least it will be finite and America’s best days will still be ahead of us. But if we don’t stop this panic-driven government intervention madness now, the chances are we’ll still face a major meltdown and pass the point of no return into the bottomless pit of socialism.

The auto bailout and future proposed gargantuan government interventions must be rejected.

Government bailout architects ominously warned that unless we adopted their original “$700 billion” bailout proposal to purchase distressed mortgage assets, we’d face catastrophic economic consequences rivaling or exceeding the Great Depression.

Just weeks later, these same architects betrayed their own warnings and said their do-or-die plan would not work after all. Buying the troubled assets wouldn’t inject capital into the banks quickly enough, so instead the government would have to distribute the money directly to major financial institutions.

But whatever happened to the government’s mollifying assurance that if we pursued the original asset purchase plan, which involved buying the assets at a bargain, taxpayers might even make money on the deal? How about its promise that its involvement would be short-term? Obviously, the government’s promises were more short-lived than its intervention.

Predictably, all kinds of supplicants showed up at government’s doorstep looking for their own “rescue” funds. And we’re just getting warmed up.

While Congress probably never should have authorized the original bailout plan, there is at least a plausible rationale to draw the line in the sand now. As others have noted, most bailouts to date have been to the financial sector. But once we open the door to the automakers, on what non-arbitrary basis do we deny future private industry petitioners, especially when their collective failure could arguably have a major impact on the economy?

Free market capitalism is obviously not perfect, but it’s the least imperfect economic system, and its pricing mechanism does an infinitely better job of allocating resources and rationally picking winners and losers than government planners could do, even if they had the foresight of Nostradamus on his best day.

Keynesian interventionist types insist that the intrinsic weaknesses of capitalism require large-scale government interventions from time to time, such as FDR’s New Deal. Nonsense. While there are certainly cyclical ups and downs inherent in market economies, there is usually scant justification for such major government adjustments.

Indeed, but for liberally biased historians, we’d understand that FDR’s actions exacerbated and prolonged the Great Depression and that Obama’s planned New Deal would do likewise. The financial meltdown was not caused primarily by too much capitalism but reckless government policies that interfered with the market’s pricing mechanism, such as mandating un-creditworthy real estate loans.

Even if we draw the bailout line now, we must understand that we’ve still seen an enormous government intervention under a Republican president’s watch, which will make future bailout proposals difficult to credibly oppose.

Some contend there is a silver lining in these bailouts, namely that their inevitable failure will teach the lesson that they don’t work and cause our rededication to market principles.

But this ignores that a large percentage of the political class has no fealty to market principles. The Harry Reids and Nancy Pelosis of the world are licking their lips in anticipation of the opportunities for government intervention this crisis presents, as Obama’s chief of staff, Rahm Emanuel, brazenly admitted.

In the typically arrogant spirit of social planners, they are poised to micromanage an industry they know less about than they know about balancing the federal budget. Worse still, they refuse to divorce their self-assigned mission of restoring financial stability to the industry from their policy and political goals of imposing environmental mandates and protecting their union voting constituencies.

It’s time to take our medicine, even if that means bankruptcy and the restructuring of an industry whose wages have long defied market standards. Any resulting hardships are sad and troubling, but the alternative is worse.

If we don’t stop this runaway freight train now, there might be no extricating ourselves from the government planning model, which would be disastrous for America’s unique and world-leading prosperity and liberty.

Conservatives better start screaming bloody murder, or the market enemies soon to dominate two of the three branches of the federal government with a lust for the third could build a socialist momentum that would be difficult to restrain, much less reverse.

Enough is enough.