OK, so imagine the government tells you that you have to take $2000 of your money and invest it in a company that is going bankrupt. You lose everything. Then, your grandchildren will have to pay that money in a few decades, with interest. Sounds ludicrous? Well guess what, that’s what the government is telling you to do, and it’s called the Emergency Economic Stabilization Act of 2008.
It’s a piece of legislation, no less than 110 pages long, that is so bad, that, for once, socialists and paleocons agree on something! What a mess …
As I read the bill, a couple of things struck me. First, the sweeping powers that this bill gives to the Secretary of the Treasury, who, by the way, is not elected, and is a lame duck. We’re giving powers to somebody we don’t even know?!
But what’s more rediculous is the whole structure of this proposal. It used to be the case that markets were based on competition. If your company can’t compete, then it goes out of business. That now appears not to be the case: the government will now prop-up failing businesses. So let’s get this straight: imagine tomorrow everyone realizes that Windows stinks and switches to Linux (which they should do, anyway). Then the government comes in and bails out Microsoft Corp. so that it can continue making crappy operating systems. What?!
That’s right. And obviously it’s a case of competition in the market, since somebody out there does have money. JP Morgan Chase just bought WaMu and Wachovia is being sold to Citigroup. Some people are actually pretty well off, either because they were smart or got lucky. But that’s the nature of capitalism.
But two things are particularly striking: the wining on Wall Street and the threats on Capitol Hill. Politicians have scared voters to believe that we’re headed for a Great Depression unless this bail-out passes. Guess what? The economy is expected to grow 1.4% this year. We’re not even in a recession, at least officially. As for the Wall Street investors, they were being idiots bundling sub-prime mortgages and treating them as Markowitz portfolios. They know better than that (if they were paying attention in Econ 101). Why should the tax payer bail them out?
Though the bail-out failed today, it’s only a matter of time before something gets passed. An administration that already has many cringing (let’s see, record deficits, the largest increase in bureaucracy since FDR, a completely worthless “Economic Stimulus Package” …) wants to go out with a bang. And the scary part? Both of the people who wish to take over aren’t willing to make a stand against the bail out.
The author of this blog will be voting Libertarian …
