“If politicians remain in the saddle and ride the private sector, the entrepreneurs who have powered America’s growth in the past will be displaced by lobbyists with access to the government honeypot.” – Irwin Stelzer, senior fellow and director of Hudson Institute’s Center for Economic Policy
Every day we hear about another federal program labeled “economic bailout,” “rescue package” or “economic recovery program.” These proposals raise a number of questions – What section of the Constitution gives the government the right to support private companies with taxpayers’ money? What gives the government the right to favor one industry or company over another? How much will these bailouts cost, and can the country afford them? Will they actually do any good, or will they result in crippling taxes and deficits? How will we know when we’re finished with this process? However, the question I keep coming back to is whether these decisions are based on sound economic principles or on political pandering?
The latest round of federal interference with the economy started out with the panic associated with the collapse of the housing market. Congress proposed bailouts for AIG, Bear Stearns, Fannie Mae, Freddie Mac, Citigroup and a host of other companies that held toxic mortgage-based securities. Politicians argued that these companies were so large and so intertwined with the national economy that the whole system would collapse like a house of cards if they were not artificially propped up with taxpayer dollars.
Once Congress approved the $700 billion Troubled Assets Recovery Program (TARP) in October 2008 to help troubled banks and insurance companies, the floodgates were opened. Suddenly, everyone wanted a bailout, no matter why they were in trouble. Some proposed diverting the TARP money to help their industry, and others wanted new programs. The total demanded by various industries, as well as state and local governments, is now in the trillions of dollars, and the cycle of greed shows no signs of slowing down.
The auto industry was first in line at the government trough. They threatened that if taxpayers did not cough up billions of dollars to save them, the Big Three would go out of business, lay off hundreds of thousands of people across the nation and plunge the country into another Great Depression. The automakers’ public relations machine and lobbyists went into overdrive, pressing Congress to save the jobs of all those voters, not to mention bailing out major campaign contributors.
They might have had better luck if the press had not pointed out that when the representatives of the Big Three came to Washington to beg for help, they each traveled in a private luxury jet. Maybe they got the idea from the people at AIG, whose executives went on a $440,000 spa retreat just days after receiving an $85 billion bailout from the government. When Congress demanded that the United Auto Workers union agree to pay and benefit concessions as well as include some government oversight in the bill to make the U.S. auto industry more competitive, the deal collapsed.
It is true that the failure of the auto industry would have ripple effects throughout the economy, especially in the Rust Belt. But where do we draw the line? What about casino companies? Nevada is just as dependent on casinos as Michigan is on autos. Thousands of people in our state have lost their jobs as casinos lay people off and delay or cancel construction projects. Why not bail them out? What about homebuilders and their subcontractors? How about any business involved in selling big-ticket items like electronics, appliances or luxury cars? Should these companies be bailed out too?
Maybe the problem is that they need more lobbyists. Come to think of it, maybe taxpayers need lobbyists, too. Who speaks for us? They are supposed to be our elected representatives after all.
I am sure I am not the only one who wonders what is going on behind the closed doors in Washington and what kinds of deals are being made to decide who receives these rescue packages. Are economists and financial experts being consulted, or are politicians selling taxpayer funded rescue programs to the highest bidder?