Written by Audrie Zettick on November 17, 2008
I’m not a big advocate of slippery-slope syndrome. You know, thinking that every action or policy leads one down a road of incremental steps, until you inevitably end up with some undesireable outcome. With some exceptions, I don’t look for that slope behind every vote, executive order or policy proposal. Perhaps it’s because I’ve a healthy respect for less government and assume people see the world the way I do.
I initially saw the bailout as one of those rare circumstances where government intervention was warranted because one sector of the economy threatened to take down the whole. Silly me (nerf bat to head). The $700 billion bailout is a slope with a big incline and we’re careening toward the bottom fast. Or, more accurately (mixing my metaphors)–the bottom of the trough.
We’ve done government bailouts before and the economy and country lived successfully through them. The savings and loan crisis (good background here and here) of the 1990s and the Chrysler bailout (see Heritage Foundation here) come to mind. But as some policymakers point to the (debatable) success of these past efforts, the “gimme” syndrome is upon us, and everyone’s lining up for some of the goodies –unions, automakers (and their supply chain), wall street, even main street. We’re all shopping at Bailouts R Us.
I couldn’t agree with Michael Barrett more.
“Small businesses still cannot get money, people are still getting laid off, and most of the people in our government still have their heads up their butts refusing to acknowledge that the real problem is trying to bailout these companies and banks in the first place. How can a capitalist system work if the government keeps trying to monkey it all up?”
We got into this complicated mess for many complicated reasons, not the least of which is that the federal government injected its policies into the mortgage business via Fannie and Freddie, revised Community Reinvestment Act guidelines that resulted in banks lowering lending standards but passing the risk to others, and HUD directed Fannie and Freddie to make loans to those with below median incomes for their areas of residence.
Attempts at bailing out AIG are already backfiring, as more funds are needed (they are now also feeding at the $700 billion trough) and its become apparent to some (especially the AIG stakeholders) that private investment might now be a better rescue alternative. TARP money may be used to bailout Detroit’s bloated union pension obligation.
Buying Off Main Street –
Main Street’s trough is ready to be filled: enticing us to go more in debt on car purchases by allowing write-off of interest, sales tax (see B. Mikulski proposal) and allowing certain mortgage holders to negotiate for lower mortgage payments IF they fall behind by a couple of months payments (FDIC proposal here). (Don’t get me started with the law of unintended consequences on that last one). And let’s not forget the proposed Economic Stimulus Package, Round Two.
Collectively, we all need a bib from chowing down on the slop of tax dollars. But our kids are going be doing the mopping up.