By Arnold Kling
Reason TV has a video of a panel discussion that really articulates the frustration that libertarians feel about the financial bailout. As Tim Cavanaugh points out, the bailout redistributes from the prudent to the profligate. As Veronique de Rugy points out (footnoting Andrei Shleifer, et al), when people lose confidence and trust in one another, their confidence in government increases. Thus, government failure that undermines confidence winds up reinforcing the demand for government!
De Rugy and the others also mention my other frustrations. First, that the Republican Party betrayed libertarians so badly on this issue. Second, that the media portrayed opponents of the bailout as unserious and ideological. Bernanke, Geithner, and Paulson were hailed as saviors, even though they could just have easily been portrayed as bumblers. The whole thing was portrayed as government having no choice but to come in and clean up the private sector’s mess, rather than an ill-conceived attempt to stop markets from adjusting to a mess that was created by a combination of market failure and government failure. Third, that even though much of the public instinctively and correctly opposed the bailout, it sailed through without costing Congressmen their seats.
The one upbeat commentator is Len Gilroy. He thinks that the high level of indebtedness of government will force politicians to scale back spending and to privatize. I’m sorry, but he comes off sounding like Mary Poppins on laughing gas.
The only thing that heavy government indebtedness means is that the prudent will be bailing out the profligate state legislators and Congressmen, not just the profligate homebuyers and financiers.
If you’ve forgotten some of your bailout rage, this video will be a helpful reminder.