Friday, February 20, 2009

The Era of Government Bailouts

I was listening to my usual diet of talk radio and babbling toddlers on the way to work today when a phrase caught my attention. And no, this wasn't a part of the show I was listening to. It was a commercial for one of these credit help places. Their pitch was to get help now in this "government bailout era" to get out of debt.

Whoa. Get help because we're in a government bailout era?

I'm assuming that , unless you believe it's the government's role to pay off maxed out credit cards, you just registered a WTF when you read that line. And you would not be alone.

I seem to remember there was a time when you ran up debt and had only three choices. First, you could talk with the bank and try to get things worked out so you could pay it down. Second, you could declare bankruptcy and hose your credit for 7 years, but at least get out of it for a while and get yourself breathing room. Or third, there was always disappearing off the grid to avoid paying anything (and I've known people to do this to avoid paying child support and alimony), which involves breaking the law if you want to work.

But now, everyone is looking to money from the eternal fountain of Washington. Last fall, it was Wall Street bankers and the automakers begging and receiving cash. Now, the plans to pour money into the housing market are floating (and looking more like giving candy to the child molester).

It's a domino effect. As one group gets bailed out, another group sees the potential and comes to Washington with cap in hand looking for a dollar or a hand job. And the last two administrations, when faced with an unstable market, have responded in the same way: Throw money at the problem.

So let's step back to the principle: It is not the job of the federal government to bail out people and companies when they make bad decisions, nor is it the role of Washington to manage the economy. It can be argued (and is reasonable) that the federal power be used as a governor on the economy, keeping the rough patches from being too rough, which will also blunt some of the unrestrained growth. But our fearless "leaders" are now using the police power of the state as a rudder, to try to steer the economy in the same direction, not realizing that they're either going in circles, or heading for a big-assed reef.

Neither is complete deregulation the answer. At this point, with so much entanglement, changing the rules yet again will only encourage the unscrupulous to do what they always try to do: Use the system to their benefit.

So let's call it reregulation. The idea is to do two things. First, we start saying no to bailing out any aspect of the economy. The downside is that, for those who are financially struggling (both companies and individuals) with mounting debt, it's going to suck. But simply providing bailouts will not help. For those who need it, we already have a safety net.

The second part is the actual reregulation. In shot, we take every industry and start over, write a whole new set of regulations, with less regulation on top of regulation. We have it written independently form the political process, by both those in the industry, their critics, and a mix of wonks and eggheads. Then, when they have it ironed out, we send it to Congress for a straight up or down vote. No adding or subtracting to feed the political desires of asshats who would have problems managing their way out of a wet paper bag with a chainsaw and a coffee-filled bladder.

Now I know the latter part has a chance somewhere between a snowball and a capon in a cockfight, but the biggest problem we've seen over the years with regulations is the people writing them. As they've run the course with regulations (Sarbanes-Oxley is the one I hear the most bitching about lately), they've resorted to bailing out those who, whether for personal gain or foolishness, or just bad choices, are now struggling under the weight of this mess.

And only in getting ut of the era of government bailouts do we have a chance at prospering once more.

4 comments:

TAO said...

Patrick,

The whole concept of supply side economics when coupled with our tax policy has been to give the rudder to the government to direct the benefits of economic growth to a few.

Thus to now acknowledge that government is somehow directly involved in managing the economy is abusrd.

To acknowledge that Reagans tax cuts benefitted the economy is to acknowledge that the government manages the economy.

To acknowledge that tax cuts themselves are beneficial to the economy is to also acknowledge that government spending in beneficial to our GDP. Whether one wants to accept that argument or not is another issue.

To claim that wars (such as WWII ending the Great Depression) is nothing more than saying that government spending can create economic growth.

Since the government has only one source of income, which is the taxation, and since we have not totally lost our sanity we can acknowledge that ones spending must be matched at some point with ones income....

That pretty much locks us into the reality we find ourselves in today. So, find a time when we prospered economically that did not involve government intervention?

That would put you back before FDR. Then by 'prosper' I would ask you to define what you mean by 'prosperity.'

Go for it big guy!

TRUTH101 said...

Patrick is not as irrational and deluded as I originally thought.

Patrick M said...

Tao: ...since we have not totally lost our sanity we can acknowledge that ones spending must be matched at some point with ones income....

Uh, you did notice the deficit? Asshattery doesn't even cover it.

We have lost our sanity. That's the point of the post.

That would put you back before FDR.

That's kind of the other point.

101: Told you! :)

TRUTH101 said...

Perhaps you told me Patrick. But I haven't been on the receiving end of one of TAO'S intellectuall beat downs yet. I must be doing things right.