The Bright Coast

Progressive Thoughts from San Diego Alums on Law, Politics, and Culture

Pondering the Bailout

Posted by sarjonycwit on March 14, 2009

I really hadn’t expected any aspect of the bailout to bother me for very long. After all, we had a new president, with a new agenda—one that’s much closer to my own. Take the other morning, for instance. On a whim, I turn on CNN, and there’s Barack Obama announcing the resumption of stem cell research. Just like that! We elected him, and then he announced that as a direct result, we would no longer be beholden to the most limiting ideas of fundamentalists. It was a reminder that while Obama may not be perfect—for instance, he seems to support the idea of the government giving money to faith-based institutions, a slippery (and unconstitutional) road if ever there was one—he remains wonderful and extraordinary, if only because we can do (and just did) so tremendously worse in so many ways.

But the bailout still gets under my skin. Maybe this is the case for everyone with a sense of number. (Warning: Tangent approaching.) It reminds me of an argument I had with my roommate. He thought Bill Gates was a lousy person because Microsoft competed unfairly, and it didn’t matter that he had given millions of dollars—pocket change, for him—to charity. The problem with this reasoning is that Bill Gates had given and pledged billions of dollars, and thus, with the help of people like Warren Buffett, generated a few tens of billions dollars that completely transformed global efforts to cure infectious diseases in developing nations. (Tangent winding down.) Well, this bailout is hundreds of billions of dollars—yes, a big multiple of the amount that changed the face of one of the worst problems in the world—and almost all of it is specifically designated for people that don’t deserve it: banks, investment companies, mega-corporations, and failed businesses. (See http://projects.nytimes.com/creditcrisis/recipients/table.)

The bailout offends reason no matter what your economic sensibilities are. It gives money to the rich, not the poor, money-lenders instead of money-owers, but also to failed business plans over successful ones. Take General Motors: Many years ago, brilliant people built a giant auto company that met consumer needs and delivered a product that was expensive and in-demand. In more recent decades, the company was run by people that completely ignored changes in our perceptions of the world that were obvious to billions of other people, and continued to produce gas-guzzling SUV’s, big Buicks and Cadillacs, and Hummers (!), while, presumably for political reasons, only briefly flirting with electric cars. The point is, they were out-competed. There are other auto companies doing better financially, and making better cars. What it is about having made lots of money in the past that entitles companies like General Motors to success in the future? Every dollar given to a failed dinosaur of a company is also a dollar not given to someone with a good idea, someone who is producing something useful, or might produce something useful in the future. (Someone agrees: http://www.nytimes.com/2008/12/10/opinion/10friedman.html?_r=2&em.) Why not let upstart companies compete for government funds? If the idea is to save Detroit, Michigan, why not offer tax breaks and assistance to companies willing to move operations to Detroit? If you gave $1 million each to 10,000 small companies to move to Detroit, you’d not only jump-start their economy—you’d also have saved over $4 billion. And why give $50 billion to Bank of America, a mega-corporation with one of the worst track records in the known universe, instead of giving it to the customers they boondoggle? Is it just easier to give money to warlords, who are few in number, rather than peasants, who are numerous?

I remember that people predicted problems like this when mega-corporations of unprecedented proportion started to form some years ago. When CitiGroup formed in 1998, it was pointed out (if I find the article, I’ll put it here) that it was greater in size than many world nations, and while we might have a capitalist philosophy of competition for survival (ha!), the collapse of such a corporation could not be permitted, as it would bring down the world economy. Then again, since we’re bailing out literally hundreds of little banks, maybe it’s more accurate to say that we’re bailing out an entire failed industry, rather than only the gigantic mega-corporations on whom we are apparently financially dependent.

This is not to say that Barack Obama is to blame for much of this. Naturally, the bulk of the most inexcusable handouts were the lovechild of the previous administration. But it is still our government, our Congress, that let it happen. It’s hundreds of billions of dollars most of us will likely never see again. And that should get under everyone’s skin.

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