Wednesday December 17, 2008 6:55 am
Werd: Bailout - Part Three
So the much belabored point of Part Two was that, in my opinion, we all realize that a bailout is needed.
There are some dissenters that would argue that no taxpayer money should rescue financial organizations or our American auto makers. But anyone that seriously supports this philosophy is following the terrible advice that pushed us into the Great Depression:
Even today, with an economy much less dependent on bank loans than it was in 1930, a wholesale failure of the banking system, together with an extended fall in prices, could have a devastating impact. The reason most economists discount this possibility is that they don’t believe policymakers will make the same disastrous mistakes their predecessors made in the 1920s and 1930s, when the authorities stood by as the financial system imploded and withering deflation developed. [Full article here.]
The lesson learned from the Great Depression was that no government intervention at all is a sure-fire way to see the system collapse severely. There are many debates about what the government should specifically do, but all the debaters agree that doing nothing is the worst option of all. Nonetheless, many citizens seem to be opposed, in principle, to any bailouts at all that move taxpayer money towards rescuing banks or our automakers.
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For some of these citizens, it is a matter of degrees — the argument is that any bailout must include conditions that ensure the corporate recipients of this taxpayer charity are subject to regulation and oversight, and that any loans are repaid with appropriate interest to the taxpayers. However, this argument is somewhat marginalized by the leanings of our Obama’s economic team, who will surely make all of those requested features present in any proposed bailout.
A smaller minority believes that any bailout is a waste of taxpayer money. They argue that allowing the banks and automakers to fail will allow the free-market system to realize its absolute value, while simultaneously allowing other companies the opportunity to fill the vacuum that the failures create. If one bank fails, another bank will open to take the first bank’s lost market. If the big three American automakers fail, plenty of other automakers will swiftly fill the void. They will further argue that these banks and automakers are simply being punished by the market for their worst qualities, and the result of that punishment will be an environment that rewards the businesses of the future that make more prudent investments and business plans.
If a man was swimming in the ocean and had his leg eaten off below the knee by a shark, it would seem foolish for him to be silent and resign himself to bleed out in the sea. We would expect the man to scream until he had no more breath. If he was brought to shore, people wouldn’t sit around to see how long it took for him to bleed to death: the lifeguards would do their best to save him. In the end, they might not be able to save him, but they will surely try. To honestly believe the government can respond to the biggest economic decline in 80 years by doing nothing is to believe that the man in the ocean would just shut up and drown. Such a man is not human, such a government is not a real government.
The idea that we won’t pay taxpayer money to save these crumbling industries is an option that will never be pursued. It is not a possibility, no matter how many times we call our representatives.
To those objecting to blank-check bailouts: you are part of the solution. To those that say no bailouts should occur: you are whistling in the dark.
You cannot stop the bailout, you can only hope to contain it.
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