The 9-12 Project of Central PA

"You Are NOT Alone!"

An Answer to Ben Stein's Claim That "Bailouts Work"

Yesterday, I saw an episode of "Cavuto on Business", in which the “bailout” of GM was discussed. As you may know, GM has recently run advertisements bragging that they have repaid their loans ahead of schedule. Ben Stein, a guest on Neil Cavuto's show, concluded that bailouts work. I take great exception to that comment. Bailouts do not work!

When Ben Stein says that bailouts work, he may as well also say that if a thief breaks into my house, steals my money, and uses that money to get his brother's business out of trouble - that works as well. That is exactly what a bailout is! Yes, bailouts sometimes serve the intended purposes of rescuing a corporation that is failing and insuring that the grateful corporation contributes money to the campaigns of those who bailed them out. However a bailout is destructive to our economy and freedom in so many ways!

Bailouts are the antithesis of freedom! If a company fails, the equipment, buildings and other assets of that company still exist. The employees, and all the knowledge, skills and experience they represent still exist. A failure of a business is an opportunity for other entrepreneurs to step in and purchase those assets and hire those employees, putting them to better use. The newer, smaller companies that grow from the ashes of that failure will likely be better run, having learned from past mistakes. The results to society of allowing a large corporation to fail are likely to be short term pain, but much greater long-term growth. Bailouts deny the potential for that greater growth to occur.

Bailouts are often given to companies on the premise that the company is "too big to fail". What a wonderful concept! Once a company grows to a certain size (and makes certain campaign contributions) they can behave as irresponsibly as they like, and the government will steal money from other people to get them out of trouble!

Although employees have a right to form unions, even Ben Stein must admit that it is possible for a union to put such a heavy burden on a company, that the company can no longer compete or operate profitably. When that happens, often the only way to get rid of the union is to let the company fail! By bailing out a unionized company, a politician is encouraging union policies that are destructive to business (and, of course, assuring himself votes and contributions from those same unions).

Ben Stein's logic is: The government has bailed out GM, and GM continues to exist. Therefore bailouts work. I say NO! To obtain the money to bailout companies, the government must either take it from someone else in the form of taxes, borrow it (which is basically just taxing future generations), or print it (which is simply an invisible tax, because the money in your bank account becomes less valuable).

The government cannot create wealth. All they can do is transfer wealth from one person or corporation to another. For every large corporation bailed out, somewhere else small, unknown businesses are failing, due in part to their tax burden, unnoticed and unmourned by the media, the politicians and the government that destroyed them. For every job the government “creates” elsewhere jobs are lost. The burden of our federal tax system, taking money for bailouts and other unconstitutional programs, steals $100,000 or more from middle-class families over a period of 20 years. Nobody can tell you with a straight face that losing that much money does not harm those families!

Now that GM has supposedly repaid their public loans, that money has not been returned to us. But, even if the government were actually to refund all those taxes, the remaining cost to all of us from the bailout cannot be computed. Those costs consist of: the loss of opportunity for future growth which would benefit us all; the continuation of corporate and union policies that make automakers less competitive; and a government that has seized powers to control private corporations, and spend public money in ways never authorized by our constitution.

People like Ben Stein who blithely comment that bailouts (and other government atrocities) work look only at the intended results, but ignore the fact that those results are obtained at devastating cost to others. They are promoting the disastrous collectivist policies that are leading to the destruction of this great nation, and the loss of all of our priceless freedom.

Thank-you very much Comrade Stein!

Views: 11

Comment by Robert Shearer on May 2, 2010 at 11:29pm
Peter - Great post - and well said. Thanks!


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