GOV'T. BAILS OUT SOME COMPANIES, HANDICAPS OTHERS & SACRIFICES FREEDOM
By Dr. Patrick Jonston
September 27, 2008
The pit of economic bleakness looks like a black hole into the future to those attentive to the recent indiscretions of the federal government. I am concerned about the future of our national economy not primarily because of the predictable dramatic failures of private industries in recent weeks, but because of the government’s responses to them. Government regulation deserves much of the blame for the present crisis, and what do the politicians propose as a remedy? More government spending and more government regulation!
The recent failure of Ameribank, the twelfth federally insured bank to fail this year, the failure of mega-mortgage companies Fannie Mae and Freddie Mac, the bankruptcy of investment company Lehman Brothers, the demise of Merryl Lynch, and the colossal failure of one of the largest insurance companies in the world, the American International Group (AIG), would be traumatic enough without a government response that irresponsibly wastes taxpayer money and postpones the inevitable collapse of these companies and all of the others that will surely collapse in their wake.
The Federal government expended $85 billion dollars this week on the largest American insurance company, AIG, a move so stupid that only a bureaucracy with no personal wealth invested could do it. With this move, the government is taking over a half-trillion dollars in worthless mortgages and other bad debt by failing institutions. This is the largest intervention of the federal government into private industry. Fannie and Freddie will cost the taxpayers between $300 billion and one trillion dollars. The taxpayers have also been forced pay $29 billion to take the risk for billions of dollars of bad investments by Bear Stearns. Congress is also preparing to loan $25 billion to “struggling U.S. automakers,” a bill endorsed by the Republican and Democratic presidential candidates. The politicians from both classes continue to spend, spend, spend, deficit or no deficit.
Our founders tried to prevent this kind of statist intervention into the free market with the Tenth Article of the Constitution, which limits the central government to designated duties and gives all other obligations to the states or the people. Is there any constitutional authority for the federal government to take over private industry? No. These bailouts are unconstitutional.
It’s so easy to be risky with someone else’s money. Imaging a weekend of gambling somebody else’s millions in Las Vegas – wouldn’t that be fun? If you break even, it was worth the time; if you end up ahead, you give back what you took and keep the extra; if you lose money, it wasn’t yours anyway. Think about all the friends you could make by giving money away to fellow-gamblers, and all of the extra risk they could now take since the risk was with somebody else’s money. How giddy with compassion our politicians and bureaucrats get with our money!
Some of these failing companies, such as AIG, needed and received government help because wealthy investors and banks would not fill its requests for loans. Why? They were not sufficiently profitable. Their investments were risky. Their income and equity could not sufficiently guarantee that the loans requested would be repaid. The books showed that they were unlikely to be able to pay their bills and keep their promises to investors. It was just too darn risky.
Unable to get loans from banks and free investors, the free-market demanded that these companies liquidate assets in order for them to compete. The free market was demanding that AIG’s CEOs and automaker executives cut their million dollar bonuses, sell unprofitable assets, lay off employees that were less profitable to business, and make dramatic cuts of employee benefits. Isn’t that the fiscally responsible thing to do when your bills are greater than your income? Spend less, sell something, and get out of the red and back in the black, right?
But the politicians and bureaucrats are more concerned with votes than they are risky loans of the taxpayers’ money, which sting won’t be felt for many years, so they have something to gain in giving or loaning billions of dollars to companies who could not get private investors to give them the money. Just look at how many people will remain employed and keep their homes as a result of the government bailouts of those failing companies! Aren’t those politicians just so heroic and caring?
Now, the investment companies and automakers that are more fiscally responsible and, hence, are not struggling in the free market, will be handicapped in the market by these competitors who are taxpayer-subsidized. Imagine McDonalds receiving hundreds of billions of dollars in taxpayer funds. How could Burker King and Wendy’s compete? The quality of Burger King’s and Wendy’s goods will surely decrease, employees will certainly be laid off and benefits will be cut back as they cut corners in order to try to compete with their taxpayer-subsidized competitor. And McDonald’s, unconstrained by the risk and freedom in the free market, will not liquidate to cut costs to survive in the free market, and so their administrative salaries and benefits will remain artificially elevated. The rule that determines which company survives is not who works the hardest, treats customers and employees the best, or who keeps income above debt, but it becomes the company that has the most effective lobbyists in Washington, D.C., dipping their hands into the taxpayers’ treasury to keep their company heads above the competition.
With $700 billion dollars of government bailouts this year, the state is made to look like the Savior, but it is a false Christ who offers heaven for nothing, makes promises it cannot keep, excuses carelessness and irresponsibility, enslaves our posterity, and assassinates true freedom. Just as the serpent offered Eve wisdom and power if she would only take of the forbidden fruit, the false Christ promises orgasmic paradise of something for nothing, which fantasy fades when reality inevitably strikes. It took almost a week for the government to get water to the superdome during Hurricane Katrina, and we expect bureaucrats to improve the financial bottom line of these companies when the state is at the helm? Do we actually expect those rescued by the government bailouts to actually keep their jobs? What naïvity! What wishful thinking! The government just postponed the inevitable collapse, and made it much, much more costly for Americans. The bureaucrats have sacrificed billions of our wealth and our financial freedom to benefit the privileged few with political connections.
When the media speaks of the taxpayers footing the bill, we really receive an inaccurate misrepresentation of what is really taking place. It’s not as if the taxpayers’ money is sitting in the bank account of the U.S. treasury. The U.S. treasury owes much more money than they receive. The taxpayers’ treasury is in red, trillions of dollars in the red. The last three years, the Federal Reserve company has created over $4 trillion in new money out of absolutely nothing. Although this gives politicians the money they demand to spend in the immediate, it creates an obvious long-term problem for the rest of us: it devalues the dollars in our accounts. When these trillions of freshly printed bills flood the banking system, the money already in circulation – your paycheck - becomes worth even less. The Federal Reserve, at the behest of Congress’ lust for overspending, creates inflation which means that prices rise and your weekly paycheck purchases less. Our 401K and our savings accounts, which may be able to grow in size over time, will actually buy less when we cash it in. For example, if our savings increases 20% over 20 years, but the dollar is able to purchase 25% less goods then than it does now, then we lose. This is the natural result of the inflation-causing money-printing scheme of the private company, the Federal Reserve.
This government-sponsored inflation postpones the time when the taxpayers have to pay back, with interest, what previous generations of politicians overspent. When reality strikes and the bubble finally pops – and it will! - the politicians in office now won’t be in office then, and so they won’t be pressured to justify their incompetent decisions in order to get re-elected. Democrats and Republican majorities alike just want to spend their way to re-election and print money or borrow when they come up short, devaluating the dollar and our saving accounts as a result, without regard to balancing the budget, respecting our God-given right to enjoy the benefits of our own labor, or the freedom-threatening crisis they will bring upon our children and grandchildren.
This is why fixing Medicare and Social Security, government scams with unfunded liabilities in the tens of trillions of dollars doomed to bankruptcy before our toddlers reach thirty-five, just isn’t a high priority for those running for office. The bubble will pop when the con-artists’ terms (and, for many of them, their lives) have expired! They are counting on us to not pay attention that they cannot afford to keep their promises without going deep into the red and raising taxes on our children and grandchildren to rates comparable to the Communist U.S.S.R. Think that’s an overstatement? Listen this month to the politicians’ calls for more regulation to rescue us from the greed of Wall Street. What will ever more regulation and centralized planning bring us? Freedom like the U.S.S.R., North Korea, and Cuba, other nations enslaved by central planners. They prescribe more of the Marxist poison that got us into this mess.
The Word of God says that diligence, generosity, and having lots of children (Psalm 127-128) is the path to prosperity, but we have bowed to a different Savior, haven’t we? The counterfeit Christ offers birth control, abortion of “unwanted children,” and state-distributed retirement funds through Social Security. Rather than have large families to bring economic security in our retirement years, we want to take estrogen and tie our tubes, and trust in the Almighty government. We worship what we serve, America. We bow to the author of the standards by which we live.
Keep playing your video games, watching your TV shows, eating your buffets, sending your kids to pagan schools, enjoying your government benefits, and continue to imagine that your children and grandchildren will be as free as you. Continue to let the talking heads hypnotize you into thinking that the two political parties offer an authentic choice. Pay no attention to that rapidly rising tsunami on the horizon that will drown our children under either administration’s policies.
The government must exploit our apathy and our lack of care for our posterity in order to count on our support for them election after election, and we have not disappointed them. The freedom of our children and grandchildren may be the cost for our gullibility and careless trust of the federal government’s centralization of power. The most ominous symptom of our malady is not the federal government’s careless violation of the Constitution, their fiscal irresponsibility, and their bi-partisan usurpation of our God-given right to enjoy and spend our own wealth as we wish, but our lack of concern over this betrayal and exploitation.
We would do well to heed the words of Ben Franklin that appear on the pedestal of the Statue of Liberty: “They that can give up essential liberty to obtain a little safety deserve neither liberty nor safety.”
© 2008 Patrick Johnston - All Rights Reserved