Why the Endless Bail-Outs are Making Things Worse
No surprise, argues Russell Roberts of George Mason University, the mindless, almost random federal bail-outs are going to leave us far worse off. Writes Roberts:
By acting without rhyme or reason, politicians have destroyed the rules of the game. There is no reason to invest, no reason to take risk, no reason to be prudent, no reason to look for buyers if your firm is failing. Everything is up in the air and as a result, the only prudent policy is to wait and see what the government will do next. The frenetic efforts of FDR had the same impact: Net investment was negative through much of the 1930s.
The next administration is unlikely to do any better. Mr. Bernanke is perhaps the greatest living authority on the Great Depression, yet he has failed to stem the damage. Messrs. Paulson and Bernanke are confronted with a sick patient. They have antibiotics. They have a scalpel. But is there any evidence from the last seven months that they understand the underlying cause of the illness, or how to cure it?
Worst of all are the political incentives that are unleashed when Washington promises to spend a trillion dollars (and counting). No one can spend such money wisely even if they want to. The information about who needs to be bailed out and who needs to fail is too complicated. Inevitably, such decisions will begin to be more about politics than economics.
The banks were first. Then the insurance companies. The car makers are getting a cut. Who’s next? The governors, probably. Homeowners are waiting. Then there will be the hedge funds. Once the line forms, companies will stop trying to save themselves and focus on being saved by Washington. The resulting spiral will be devastating.
Treasury Secretary Henry Paulson might exude confidence, but he has demonstrated that he has no idea what he’s doing. First the government was going to buy up bad paper. Then it decided to toss money at banks whether they wanted it or not. Now we’re going to have yet another housing bail-out program. Insurance companies are lining up for the federal dole.
How about a special program for writers? I’m tanned, rested, and ready to grab my share of the loot!
7 Responses »
Leave a Response
Subscribe to RSS
Somewhere in this great and blessed land of ours is a true statesman who needs to be identified. We are all depressed about being in another election and being forced to choose between two men who are surviving incredible challenges of campaigning yet are hardly of the ilk who have led us in the past. It is time to study the mistakes in leadership which led to the current fiasco, vote out the culprits who were too timid to speak up--i.e. have numerous statewide referendums across the nation--and show the powers-that-be that the Constitution requires being honored. The old military axiom: when all else fails, try following the directions. The Constitution was initially framed in the l780s and completed--or nearly so--in the l860s. Then followed 150 years of lessening importance of that Constitution (excepting the inclusion of women voting) which has paved the way for the crises of the l890s, the l930s, and now the present imbroglio. Who can lead us out of this mess???
I didn't think the GM company needs any bail out money as it would have the taxpayers to believe! Why would they crush brand new electric cars, that the taxpayers wanted to keep and purchase, not so long ago? I believe the CEO's took money from big oil, and caused their own problems. The public doesn't want to buy all these gasoline vehicles they continue to make! There is no reason in this world why GM could not be on top of the world right now finanially. The possible sales of the electric cars from the past and present day sales is the reason GM doesn't need money from the same taxpayers it kept cleaner cars from, and refuse to put on the market.
This just needs to stop. Let the big 3 car manufacturers go under. I mean yes people will be put out of work, but don't tell me the car manuafacturers that are actually prospering in the U.S will expand and employ some of them. Plus we live in America, do people realize the opportunities that present themselves in this country. Yes you might have to move, but there are oppurtunities everywhere. I don't understand, if my company was going under is the goverment going to step in, NO!!! and i would not want them to. If i failed that means I didn't do something right, so why award stupid CEOs. Thats just my thought on it. I'm tired of giving these stupid people who don't know what it is to work and live in America my money. I work hard for it, LEAVE ME ALONE!!!!!!!!!!!!!!!!!!!!!!!!!!
John R Clark - You nailed it on the head. We are in a leadership depression and we need to start our search for the right candidate in 2012. I pray Obama does a great job, although his plans just seem to be spend, spend, spend...not good. Therefore, who is out there for 2012? In the meantime, we all need to contact our representatives and let our voices be heard. Also, we need to work a little harder, be a little more creative, and inspire others around us so we can get the economy productive again. If not you and me, then who will get us through this?
Ok, one more thing. You can't blame Ben and Henry for changing their minds. They are working on an unsolvable problem. That is, no centralized committee can solve all the problems that will present themselves. This is why socialism has failed over and over again.
John R. Clark is correct - we suffer primarily from a lack of leadership. We have cheerleaders and we have conniving corporate execs and politicians, but we have no leaders. We won't either, if the current trends in education continue. We are developing generation of politically correct graduates who, if they have anyleaning toward critical analysis or evaluation, are afraid to to be critical or objective - someone's feelings might be hurt. We saw that when the administration's regulator tried to rein in Fannie and Freddie a few years ago. Barney Frank's feathers were ruffled and Congress was appalled at the very nerve of a regulator to call into question the actions of these necessary government organizations! Unless and until someone steps up, asnd within the confines of our Constitution and system of justice, calls the shots as they are, and refuses to allow travesties of justice such as Fannie & Freddie go uncovered, and unpunished, we are not going to get out of this moral and financial morass. Where will we find the 21st century Washington, Madison, Jefferson, Franklin? Probably from a hardworking solid homeschooled man or woman who can appreciate the results of hard work and who has learned from the woes of failure, and who has a rockbottom grounding in the great classics and the sacred scriptures.
I believe that the debt and guarantees difficult thing in life.
http://www.dirking.net