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.
READER COMMENTS
Niccolo
Dec 29 2008 at 8:18pm
The best result I can think of from this would be a complete collapse of the US economy. Blow it up and start all over again. The American experiment has failed, so why not just cut your losses? What more can you really do, anyways?
KipEsquire
Dec 29 2008 at 9:18pm
Well, it will also of course mean higher interest outlays (a nondiscretionary expenditure), likely higher notional interest rates (perhaps significantly higher), and a shift (also perhaps signigicant) in wealth transfer, since it may well be rich Americans who will buy all this new-issue Treasury debt rather than the Chinese (who are increasingly unable and/or unwilling to loan Washington money at an absurd 4%).
John Booke
Dec 29 2008 at 10:03pm
As long as we’re willing to pass the debt on to later generations does it really matter now or during the next 10 to 20 years if we just print all the money we want? Who cares if the Chinese or any other country declines to buy more US Treasuries as long as the Fed buys them? As long as US shoppers do most of the world’s personal consumption are’nt the other countries chained to US dollars? Can you think of any other country that comes close to our personal consumption? What is wrong with 20% US unemployment as long as those unmployed are able to shop and keep US personal consumption on an uptrend. Give five thousand dollars to every American family every three months until GDP is back above 3%. Every time GDP drops below 3% then repeat give-aways. Sounds odd but it would work.
Pietro Poggi-Corradini
Dec 29 2008 at 10:41pm
One trillion dollar-bills stretch to about 156 million kilometers, which is roughly the distance to the sun. How’s that for exorbitant?
Maniel
Dec 30 2008 at 12:26am
Unless we share Niccolo’s death wish for “a complete collapse of the US economy,” we need to continue to advocate the same thing for government that financial advisers tell their hopelessly indebted clients: first, cut up the credit cards. It might be hard, since we are definitely addicted to debt, but unless we endure the withdrawal and kick the debt habit, we could see Niccolo’s death wish come true. The motto should be “transform into an equity-based economy” or words to that effect. As serious as the situation is, and as fast as government is now heading in the wrong direction, this country has seen worse and gotten through it.
Lord
Dec 30 2008 at 1:56am
The way to prevent bailouts is well understood. It is to prevent them from being necessary in the first place. I have little sympathy for those who abandoned responsibility earlier insisting abandoning responsibility is the responsible action. Don’t blame me. I never voted for Bush.
Adam
Dec 30 2008 at 7:42am
Yes, it matters that the Feds bail out the profligate at the expense of the prudent. You get more of what you subsidize and less of that which you tax and punish. We’ll get more of the profligate and foolish and less of the prudent and wise. The national economy will gradually sink and the middle class will recognize itself unashamedly as a welfare class. Yes, it really is good to covet thy neighbors wife and wealth. Tax the prudent and wise, and watch them disappear.
Letalis Maximus, Esq.
Dec 30 2008 at 9:04am
Oh yeah, Lord?
Well, I didn’t vote for Barney Frank, Chris Dodd, Duke Cunningham, William Jefferson, Charlie Rangel, Ted Stevens, Harry Reid, Nancy Pelosi, Diane Feinstein, John Murtha, Trent Lott, or any of their ilk, either.
But I still got stuck with them.
Daniel Klein
Dec 30 2008 at 9:15am
I resent the Mary Poppins crack. Politically she was a veritable Margaret Thatcher, just much more pert and comely. Snip snap!
willis
Dec 30 2008 at 9:20am
The author of this article seemed surprised that nearly everyone disapproved of this Congress’s performance, yet returned them all to office. This seeming incongruety can easily be explained. Congress is not elected in a nation-wide election so a congressman has only to win in his district. Eventually, the temptations of money and power corrupts even the most idealistic of congressman. They, in turn, corrupt the most influential supporters in their district with earmarks, tax breaks, government contracts, etc. and are thus assured of return to office. Efforts here-to-fore to break the incumbent advantage have focused on campaign finace reform and naturally have proven fruitless. The answer is much simpler…remove the temptation and opportunity for corruption with term limits.
fundamentalist
Dec 30 2008 at 9:24am
“Third, that even though much of the public instinctively and correctly opposed the bailout, it sailed through without costing Congressmen their seats.”
I heard a story on NPR about a poll that showed that the public was fairly evenly split on the issue of bail-outs. In addition, the media overwhelmingly sold the financial problems as the worst the world has ever seen since creation and hounded politicians for a solution. Policians saw that the media was on their side and would portray them as heroes. Then the media pimped for the pols and told the public they were stupid for opposing bail-outs.
Mencken said that the art of practical politics is to keep the public alarmed and begging for rescue. The mainstream media empower politicians in practicing their dark arts.
Ben Franklin
Dec 30 2008 at 10:11am
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Dr. Fred in PA
Dec 30 2008 at 10:15am
The way to stop the profligate spending and borrowing is to remove the power of government to steal property from one group of people and giving it to another (so that they can get reelected, so that they can increase their power, so that they steal more, repeat ad infinitum). That, in turn, would require that the people of this country actually internalize and practice the concepts of self reliance and personal responsibility. I think Ayn Rand is right. Time for Atlas to shrug his shoulders. I don’t see anything good coming down the road.
George
Dec 30 2008 at 12:59pm
I have some hope that new industries escape “help” from congress and grow to replace existing industries. For example, the Telecom Act of 1996 focused on mature industries like wired phone service while largely ignoring wireless and the internet. Over time, wireless and the internet are making wired local and long distance telephone service irrelevant.
The separate actions of individual consumers can veto the efforts of the government to pick winners and protect losers. For example, I’m moving savings from a bank that received bailout money to a local one that I’m pretty sure didn’t sell an equity stake to the government. A massive bailout boycott could force bankruptcy liquidation of the weakest firms and scare the strong ones into avoiding government help. Easy for us to not buy new GM or Chrysler vehicles until they say uncle.
I agree with willis regarding the need for term limits. Another idea would be a large cash prize to be awarded to any challenger that defeats an incumbent. The prize for this lottery would increase with years of service of the incumbent. Bet the possibility of becomming an instant millionaire would help with candidate recruitment.
SenatorMark4
Dec 30 2008 at 1:51pm
Dr. Fred is right to note that the only way to stop this nonsense is to stop the government from stealing from us and then giving it to others to buy votes. The question is how you go about that. I think that all people can relate to the fact that undeserving people don’t deserve our government bailing them out and that is why they were so universally unpopular in most of the polls. It requires a perception shift in looking at government. If government were required to file IRS Form 1099 for all grants, favors, loans to individuals like we ALLOW them to force us to file on our labors, it would stop much of the corruption. Would Charlie Rangel have had four rent controlled apartments in New York if he’d had yearly 1099’s filed to note his benefit of the rent control? Would the IRS (Income Reporting Service) fail to act if illegal aliens failed to file a return for their foodstamps and welfare reported 1099’s? It is a perception shift that is obvious, fair, and easy to implement.
Concerned Citizen
Dec 30 2008 at 3:51pm
Dr. Fred has a point. Everyone has a choice to continue to contribute to this madness or simply drop out, become self sufficient and take a different path. If you continue to contribute, whatever you earn will be taken in the form of higher taxes, inflation and other confiscatory policies of the government.
This will become more apparent when the credit crisis becomes the currency crisis, i.e. the $$ becomes worth-less than it is today.
rhhardin
Dec 30 2008 at 7:01pm
One tiny fact supporting the bank bailouts is that the legal system is not capable of responding to a wave of bankruptcies. Everything is tied up in court forever.
It’s sort of a bankruptcy fallacy of composition to think that it can deal with it.
mtraven
Dec 31 2008 at 12:24am
Hahahahahahaha.
Libertarians have always been, and always will be, nothing but useful idiots for Republican kleptocrats. “Betrayal” implies that at some point in the past, this was not the case.
Comments are closed.