Tuesday, December 30, 2008

The Year of the Bailout

I consider myself the perennial optimist. I always try to view things from a "half full" versus "half empty" perspective. But 2008 was a challenging year. It is a year where it appears that we made a paradigm shift when it comes to the role of government in the economy.

I believe that future history books will call 2009 the year the United States became the "bailout nation." We saw more of such today with GMAC Finance receiving $6 billion from the federal government. Democrats defied the image of being for "the little guy" that they worked so hard to maintain by leading the effort for bailout for major banks and corporations. There was far more reluctance by Republicans to bailout these fat cats, but in the end, I am sure the media will find these bailouts the complete fault of the GOP if they fail and will be seen as an act of courage by Democrats if they are interpreted as successful. The reality is, we already know they have "failed" because we had to abandon the ideas of limited Constitutional government to make them happen and the hangover effect of them may not be felt for years.

What is almost as negative as the Constitutional and policy implications of these bailouts is the view they project of what is important to us a country. In the United States we have a safety net for the poor, we bailout the super rich, and we obliterate the engine that creates more than 80 percent of the jobs in the country through excessive taxation, regulation, and licensure law. The highest income groups are not nearly as influential as those rising up the economic ladder in creating jobs, yet we sacrifice the entrepreneur at the altar of the mega corporation.

Those who have eaten at the trough of bailout are extremely vulnerable in the future. The government never "gives" without demanding more. Many of the task masters in government that have fed these companies, have advocated the nationalizations of industries. The hubris to think they will not be vulnerable is unbelievable.

The United States has been successful because of its long term commitment to economic freedom. This freedom includes the right to succeed and fail. Moral hazard is an important element in economic freedom. There has to be consequences to failure in order to avoid those mistakes in the future. The government is replacing this system with one that will eventually force the failure of many entrepreneurs and create a new welfare class of the mega wealthy. Let's hope 2009 sees a reversal of such a trend.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

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