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Saturday, June 06, 2009

The "Wisdom" of Bailouts

I've left this issue alone for awhile, but it won't go away. The mess Bush started by playing Herbert Hoover President Obama has continued through his bad polices and trying to out-FDR FDR (or worse).

Chrysler and General Motors, once titans of American capitalism, have both declared bankruptcy and, as one Drudge Report headline put it, "fallen into the arms" of the Obama Administration. Let's be clear about what that means: the government is now running those companies. Socialism is a system where government owns or controls the means of production. Is that not what we're facing in the banking and automotive sectors? And is there not, perhaps, more on the way? I believe so.

We now know the template, at least:

  1. Government or its sympathetic partners in the media identifies a business or industry to be "in trouble."
  2. Government offers funds to "rescue" said company or industry, BUT...
  3. Government imposes rules or conditions on the aid that make it nearly impossible for the company/industry to do business.
  4. The company/industry declares bankruptcy.
  5. Despite several centuries of bankruptcy laws and traditions, the bankrupt company/industry is not liquidated among the primary creditors but kept by the government, with some of the proceeds given to political allies of the Obama administration.

So if you're a business CEO or even just an employee of a large business, you've got to wonder about your future. Contraction elsewhere in the economy means your business is going to be off, even if you're doing well otherwise. Do you take "bailout" money from Uncle Sam? The obvious answer seems to be no. But then what are your choices? Cut back on production or operations, and you have to let go of workers, creating more unemployment. Remain at full production, and you end up losing money. Remove your business overseas? Not so fast, pal. Socialism is on the march elsewhere in the world, and the Obama administration will not let you go without a punishment. Plus you face the bad media publicity of "shipping jobs overseas."

And then we have the obscene $3.5 trillion federal budget, much of which is dedicated to expanding government activities and powers, not improving the private sector, where traditionally economic activity has taken place. And this $3.5 trillion doesn't even include the additional money Obama wants to spend on nationalizing the healthcare industry. The government couldn't really afford Bush's measly $700 billion bailout scheme, and Obama just (more than) doubled down that bet. The money will only come from raising taxes on what few sectors of the economy are productive, borrowing from leery creditors overseas who are facing problems of their own, or printing more money. Sooner or later, we will be in the grip of inflation.

And let's be clear: none of these Obama-led policies is improving the economy. They are making them worse. The only thing growing is government. Given all these circumstances, I can only conclude that the results of these policies are on purpose. The president is not interested in improving the economy. He wants to grow the government. I have no idea how to stop this mess, though a logical person, seeing a man stuck in a hole, would most likely advise him to stop digging. Obama, on the contrary, has gotten a steam shovel, and is looking for an oil drill. My proposed solutions can be found here, but are summarized as follows:

I want the president to cut taxes. I want him to ease up on the private sector. I want him to stop telling businesses that it's not appropriate to travel to Las Vegas or Orlando for conventions. I want him to stop criticizing anyone able to afford a private plane. I don't want him to spend more in one year than most of the most expensive years-long projects in American history. If he's going to spend taxpayer money, let it be for basic infrastructure, basic research and development (including space exploration), quality academic and trade education, and temporary relief of economic hardship. If he really wanted to kick up the economy, he could cut the number of the federal regulations (and the bureaucracy responsible for increasing their number), bypass bailing out banks and other companies, and send every taxpayer $10,000. We would probably still come out ahead...plus, he'd stimulate consumer spending like nothing anyone has ever seen! I could get behind a program like that.

I'm willing to bet this is not the sort of change people hoped for when they voted for Mr. Obama. Though I could be wrong. In any case, this certainly IS change, isn't it?

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If you're interested, here are my other entries on this topic, going back to Bush:

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