I have a serious question for readers. What’s worse, bailouts for government or bailouts for the private sector?
Yes, both are bad, but is it worse to bail out a bankrupt entitlement program, such as Social Security, or it is worse to bail out an industry, such as the financial sector?
To bail out the housing sector, or to bail out Medicare? Fannie and Freddie, or GM and Chrysler?
All these examples involve huge amounts of money, and both private-sector and public-sector bailouts have perverse long-run effects, but which is worse?
And don’t forget there are lots of other bailouts in our future, as discussed on this interview for Fox Business News.
The interview took place before Christmas, but the topic is even more relevant today since the budget season is about to begin.
Most of the discussion was about government agencies and programs that may get more handouts, though bailouts for the Federal Housing Administration and the Pension Benefit Guaranty Corporation would be indirect bailouts for big business and housing.
So we’d get the worst of all worlds, more government spending and more cronyism.
Or, as they call it in Washington, a win-win situation.
But I call it legal corruption.
International Liberty 
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Poorly managed companies fail. Poorly managed Government programs fail. A pox on both their houses. Medicare must be reformed by raising the eligibility age and lowering benefits by increasing co-pays, etc. Current deductions must go into a fund that is untouchable by the Feds. It can not be their slush fund. The Federal Government has no business being in the Housing and Loan business. Same goes for FEMA and Federal Flood insurance.
States should be responsible for disasters within each State. California shouldn’t have to pay for tornadoes in the Midwest. When Cali breaks apart during an earthquake and falls into the ocean the Midwest shouldn’t have to pay the bill. We really don’t want to see an artificial archipelagos built and paid for with Federal Tax dollars to replace the California coast.
The only exception might be when North Korea attacks the west coast, since it would be an attack on the country by another country.
Bailing out a government entity does nothing to remove the cause of the problem, it’ll keep requiring more and yet more bailouts in the future until politicians become honest, start telling the truth, and stop pretending that what they do is in the public’s interest.
Bailing out a private company is less likely to be an ongoing affair. a) not all politicians benefit, and b) any bailout interfere with policitians’ ability to buy votes by bribing the public with their own money.
So, bad as both are, bailing out a nominally private company would seem to have far smaller direct long term repercussions than bailing out any government program.
Of course, indirect considerations also come into play such as moral hazard, but couldn’t that be balanced out by Public Choice?
I really resent the reference to Social Security being an “entitlement”.
I’m sure there are portions of SS there are terribly abused for the “dole’, however there are also huge contributions by the working public over the years that were paid in by the “working” folks and their employers, that are literally being stolen by our government for ‘whatever’???.
Why does this procedure continue to evolve without correction?
Reblogged this on This Got My Attention.
“trying to cure a rescission with more cheap credit is like trying to cure chemotherapy with more cancer.”
http://m.dailykos.com/story/2010/03/01/837337/-Smackdown-Keynes-vs-Hayek-With-Poll