There's been a lot of talk about Bailout Mania that has infected Washington, DC. It seems like everybody is holding their hands out for federal money to shore up problems they've been ignoring for quite some time. For all we know, Carrot Top might be asking for a bailout of his act.
Conservatives have teed off on the bailouts, but not too many have tapped into the real problem with the corporate bailouts. And as you might expect, I'm going to point it out. I know economics can be as exciting as watching Al Gore, but this is important to understand why the Washington bailouts won't work.
When you have a capitalist system like ours, the relationship between a consumer and a producer is at the heart of it. The two are expected to keep each other in check so neither one takes advantage of the other. But the current situation is one where both sides aren't exactly playing honestly. Consumers are in a position where they want to buy as much as they can without having the financial means to buy what they want. Producers are in a position where they are trying to hide losses to appear financially strong and viable. When you have something this dishonest, the system is going to break down.
And when it breaks down, people suffer.
Now, imagine if that relationship gets further altered by the government stepping in and infusing te producers with money, but doesn't do anything for the consumers. That removes the element of risk, which also removes an incentive for the producers to do anything differently. If there's no risk for failure due to being able to rely on government to bail you out, what's the incentive to change and improve the relationship between consumer and producer? For those of you who don't know and for the Democrats reading this, there is no incentive anymore. Government's attempts to "fix" the problem have wound up ripping apart the fabric of our economy. And in the immortal words of Egon Spengler, that would be bad.
Now that we have the auto industry and several banks asking for handouts, we've opened Pandora's box and let out everyone who has made a bad financial decision looking to get some green from the government. Of course, government itself doesn't have any money...until we give it to them in the form of taxes. As long as producers keep lining up for our money, they'll keep being artificially propped up, while the consumers keep extending themselves out further. And once the consumers get to a point where they can't buy any more, those producers will fail. The bailouts only delay the inevitable and reward incompetence.
And in the end, it will destroy both producers and consumers.
The current economic situation is like a leaky boat. If you keep bailing water out of the bottom of it without fixing the holes, you're wasting time and energy while not making headway in getting the water out of the boat. Throwing good money at companies that have made bad financial decisions won't suddenly make them fiscally responsible. All it will teach them is what they need to do to get more money from government. In fact, the only people more fiscally irresponsible than some of the nozzleheads who are begging for bailout money are the morons in Washington who think the bailouts help.