Digging a Little Deeper

The first thing we think of when we think of bailouts these days is debt: what the bailouts are costing our country and what they are doing to our taxes. It is a natural thought process, but I want you to dig a little deeper and really think about what these bailouts are costing you, besides your precious tax dollars.

The government bailouts are essentially blending private finance with the government. What does that mean? Arnold Kling, an economist for EconLog, explained this on September 25, 2008 in his post; "when you blend finance with government, the firms have an incentive to manipulate the government and government has an incentive to meddle with the firms." When a company is expecting support from the government, the government then has the capabilities to sway internal managemnet decisions. This also gives our government advantages on who can survive in our economy- they are going to give support to those who will return the favor. Some might chalk it up to survival of the fittest, but this could be the governments way of picking and choosing who remains on top and who falls behind.

In the end a failed business plan is still a failed business plan. A perfect example of this are the banks that are essentially failing, but our government has deemed them too important to come up short. Simon Johnson, an economist with a degree from MIT, posted on October 13, 2009, "Banks failed due to their own mismanagement but how those failures were handled—bankruptcy vs. bailout—was a conscious official decision. This administration deliberately chose to be very nice to the biggest banks and to the people who run them." So it appears that we, the average people of America, the taxpayers, the people who keep this country running, are getting the short end of the stick once again. And what does this do? We are keeping companies who are poorly ran at the top of our economy and leaving the smaller companies in the dust; this diminishes their chance to succeed further and potentially develop a stronger economy in the end.

Government involvement in our private companies are having detrimental effects. We are losing the rights to make our own choices over our country's free market. We are supporting companies that are failing and making it harder for stronger, yet smaller, companies to come forth. When it comes down to it, government blending with our financial sectors is hindering our future progress. So maybe we should think about that the next time bailouts make their way into conversation; the consequences are a little heavier than what we initially conclude.