George Bush and TARP

Pres. Bush approved the second half of the Trouble Asset Relief Program (TARP) funds that were used to bail out financial institutions and the automakers.  $700,000,000,000 in total.

 

I oppose the request for $350 billion in TARP funds because it is impractical and wrong in principal.  I believe TARP is impractical because it will exacerbate our hardships in the long run by inflating the money supply and slowing the growth of currently successful and potentially successful businesses. TARP is wrong in principal because it violates every person’s right to work, form contracts, produce goods and profit. It is the principal of individual rights that needs to be protected in order to have a foundation for prosperity.

The discussion of bailouts should not be about which policy will benefit the most people.  It is not possible to count or judge.  It is possible to say 600,000 people will lose their jobs if Chrysler is not bailed out, but it is not possible to say how many will lose their jobs when other companies are forced to pay for the bailout.  A discussion to determine which policy will preserve the most jobs can go on indefinitely with no solid answer.

Some argue that certain companies are “too big to fail” and have to be saved in order to save the overall economy.  Large companies often run into managerial problems and creative stagnation.  If they are not able to solve these problems they should go bankrupt and sell their assets to people who have new ideas. All is not lost.  The pieces can be reorganized and put to profitable use by new owners.

Failure is an important factor in discouraging irrational or thoughtless behavior.  It also opens up opportunities for new ideas to blossom.  When the government favors certain businesses over others, the failure mechanism cannot function properly.  Failing banks and large automotive companies are favored at the expense of people and businesses that have not failed.  How is a businessman expected to make ends meet, and in addition pay for part of the subsidies going to his competition?  He cannot. Eventually he will become entrenched in the begging game or give up.  This is sold under the banner of the well-being of the financial market as a whole, but all it does is perpetuate the status quo and stifle innovation.

How are we to come out of an economic downturn if we are forced to invest the same institutions that caused the problems rather than using our money to develop new institutions?  Government oversight has been proposed in order to assure the public that their investment will be successful. But why does this guarantee success?  Does the government not make irrational decisions from time to time? Are we to provide future bailouts for the companies that are forced to follow an irrational mandate of the government? A bailout and then control policy is a downward spiral that sacrifices the successful to the irrational until there is little left.

Bailouts encourage businesses to institute policies and take on risk that would be irrational in a free market.  Control in the form of preventative regulation encourages the average and stifles innovation.  Control in form of price and wage fixing undermines the profit motive behind production and efficiency leading to shortages.   How are we to generate new industry by restricting the products, methods of production, and profits of potential business owners?  How are we to plan long term if the products of our labor can be taken from us by force at the whim of congress?

We should be encouraged to live within our means by realizing the positive and negative consequences of the risks we take.  We should be encouraged to produce goods by removing the restrictions on industry and by protecting people’s right to produce, keep, and trade their products. Businesses that commit fraud and violate individual rights should be punished accordingly.  Otherwise they should be free to profit from their products and remain innocent until proven guilty.

Mark Dohle