Taking Statism Global

Having now poured stimulus upon stimulus into their respective National economies, and begun the long and arduous process of setting said economies on the road to bankruptcy, the leaders of the world's greatest economies have spent the last several days gathering to see if they could strike a deal to take their failed policies supra-national. And so they have. We are now set to get a new $1 trillion global stimulus package to complement the, now, $10.5 Trillion that the United States has already appropriated/spent on various bailouts, stimulus, and TARP projects over the last half-year or so.

(For those of you keeping score at home, our national GDP was $14.3 trillion last year - meaning that, if President Obama gets his wish and we do get a 'TARP II', we'll have kindda spent our whole, entire economy in order to, uh, save it. Because that clearly makes sense.)

Apparently TANSTAFL has been replaced as the one, hard-and-fast economic rule by a new one, which rests on a firm belief in the ability of deficit spending to cure all ills - the actual numbers be damned!!

As far as this new, global stimulus is concerned, its basically an extension of all the quasi-socialist/genuinely statist bullshit we've been getting here in the United States. We're going to give some more government bureaucrats the ability to regulate and restrict bankers' pay and bonuses - because, damn it, if some red-meat populism is good, more is even better. And nothing stokes populist fires (and poll numbers...) like hating on evil corporations, bankers, etcetera.

Nevermind that it's actually counterproductive as an economic policy.

Of course, having already gotten on the 'regulation' bandwagon with the banker stuff, it only made sense for these folks to take that a step further with other institutions. Thus, we are also going to get a new set of stricter and tougher regulatory policies for hedge funds and credit agencies. Because, again, nevermind the actual relationship between government regulation and economic growth, let's do it anyway.

We're also going to give more power to the IMF; because, clearly, what we need in order to solve these economic problems, and prevent them from happening ever again, is more input from international government bureaucrats whose own chain of command is somewhat murky. Finally, in this time of economic hardship and ballooning deficits, we're also going to take $100 billion and give it to poor countries; in other words, all the little tyrants running fake democratic countries in sub-Saharan Africa are having trouble in this economic climate too, so let's give them some cash.

And that's about it, more bullshit spending that inches us further away from a free-market system and transfers power and money from people to bureaucrats. Only this time, it's gone global. Change, indeed.

This Is Your Government...

...and this is your government on stupid. Ahh, yes, nothing like the sweet smell of government takeovers to start your week off right, huh? Indeed, having decided that Chapter 11 was too harsh for it to accept and that 'bailout' was its only option, GM now gets to find out the hard way what us free-marketers were warning them about all along - that public funding for your business also means public management of your business.

Not that the folks at GM have any illusions about what they're getting into though, Rick Wagoner was happy to go, and he'll take the $20 Million dollar retirement package that comes with termination of his job to go with him thank-you-very-much, and the new CEO has already said he knows that he's not going to be the one who's actually in charge.

The result is that President Barack Obama, the man who is a lawyer by training and a Law Professor/Community Organizer/Professional Campaigner by vocation is now fully and totally in charge of running, nay saving, the 9th largest corporation in the entire world. Oh yes, and he'll be accompanied in this task by a Treasury Secretary who can't properly fill out his tax returns and has an entire staff of people who are....yet to be appointed by the President. (And likely Congress too, but you really don't want us to get started on those fuckers right now.)

Anyone else really wish a guy like Mitt Romney, who, you know, understands this kind of shit, was President right about now? Of course, Mitt suggested, way back in December, that we shouldn't have bailed these bastards out in the first place because, shocka, by not making them file for Chapter 11 we were 'bailing them out' of the serious internal restructuring that they needed to do to remain viable. Instead, with bailouts, we would just be turning them into another welfare recipient (albeit an insanely expensive one).

Here's the thing though, as the nice little parting gift that former CEO Wagoner got helps to demonstrate, by bailing these assholes out we have subsidized their bad decision-making process. Instead of being forced to account for the $38 billion in losses they took last year by doing things like eliminating bad Union deals, cutting out their CEO's golden parachute, or generally figuring out what the hell they were doing so terribly wrong that it cost them $38 Billion, they're going to simply sit around and wait for whatever the government's next batch of instructions are. Moreover, how can we possibly blame them for doing just that?

Afterall, by giving them this bailout(/subsidy) we've now incentivized this corporate laziness; because now the company's money isn't coming from it's ability to sell automobiles, but rather its ability to grovel like a cheating husband at the feet of its new Government overlords. In other words, we're expecting this company to be able right the metaphorical ship despite having eliminated the incentives that might make it profitable again, and having turned its management over to people who have neither a direct financial stake in its future profitability nor the proper credentials to hold such positions.

Brilliant.

Of course, that, in a nutshell, is why the Government shouldn't run businesses - because their intervention, particularly on this massive of a scale, screws up the profit motive that is the driving force of capitalism. And honestly, if you don't understand why that's a bad thing (or why Capitalism is a better corporate manager than the effin Government), then you're either a hippie, a fascist, or a communist - in which case you'd be too far gone for me to give a damn about you at this point anyways.

Now, with apologies for all the cussing above, and in an attempt to make you feel even worse, here's the internet's newest viral video star, Daniel Hannan, a Conservative Party member of the European Parliament for England, on how, in addition to spending ourselves into oblivion, the Anglo-Saxon world now has to endure the additional humiliation of having the Germans and the French being the ones telling us that we must step away from the bailout trough:

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(For those of you who have, sadly, missed out on the Daniel Hannan craze, please, for the love of God, go watch this short video of the speech he made eviscerating Gordon Brown (and bailouts) at the European Parliament last week. I promise it'll make your day.)

***Update***

Irony alert: the new CEO of GM now says that Chapter 11 actually looks pretty good. It only took them a few months, a government takeover of their management structure, and a few billion taxpayer dollars, but at least they might finally be on the right track...

If At First You Don't Succeed

...then try, try again, right? And hey, if it just so happens to involve a few billion dollars of (yet to be earned) taxpayer dollars, well, so be it. Alas, while this attitude probably doesn't behoove folks like you and me, who will have to pay for all of these bailouts (plus interest!!) at some point in the future, it seems to be working out fabulously for the fine folks struggling to run AIG; who, it was announced today, are set to get a second round of bailout money from our Federal Government.

So, let's recap, shall we? Last fall, under the watchful eyes of President Bush and Secretary Paulson, we decided to sink billions of dollars in AIG because it was "too big to fail" and we needed it to turn around. Now, after we gave them all this money, they have come back to us to report $61.7 billion in 4th-Quarter losses, the largest loss ever reported by an American company. And, naturally, we decided it would be a really good idea to reinvest another $30 billion in this failing business.

Well, at least now we know why all the former Wall Street people now working in D.C left Wall Street - as the kinds of business decisions they're making on behalf of the government would have gotten them fired in the business world.

Seriously though, at what point does all this bailing out finally end? Hell, after we've gone in and bailed out AIG once, why shouldn't we go in and do it a second or third or even fourth time? Better yet, when do we reach the point where a company failing is finally less important than our government's checkbook failing?

Of course, such rhetorical questions help indicate the problems this kind of government intervention inherently entails; namely that, if you do it once, there's nothing to keep you from doing it again. Indeed, given the rationale that you used the first time around (i.e. 'too big to fail'), you're pretty much compelled, rationally at least, to repeat the bailout the second time around, too. Afterall, if it was too big to fail the first time, how can it not be the second (or third, or fourth) time around as well?

So how do we escape from this trap that our political logic has led us into? Well, as I see it, there are only two ways: either the company is fundamentally restructured so that it becomes, metaphorically speaking, small enough to the point where it can fail; or it ceases to fail and, once again, becomes a successful company. Unfortunately, by bailing out companies like AIG in the first place, the government makes it unlikely that either of these things will happen. That's because, through the bailout, the government has absolved AIG of its financial losses; losses which were incurred because of poor business decisions. In other words, somewhere along the line AIG took a risk that didn't pan out - which is o.k, because risk taking (and, yes, the occasional failure) is a part of business. Now, normally, AIG would be forced to take those losses, which would, most certainly, cause serious problems for the company.

Through the bailout, however, the government has decided to prevent AIG from having to go through the painful process of dealing with its bad business decisions. The problem is that companies, like people, aren't going to learn from their mistakes if they don't have to deal with the negative consequences of them. Screwing up and taking big-time losses are what cause companies to restructure and come up with a new business plan. Consequently, by using the government to bailout an AIG, you make it more likely that this company will fail again in the future because you've eliminated the gusto, if you will, of the market forces that would normally force it into severe restructuring.

And that, of course, means more bailouts - ad infinitum, I suppose - and also indicates to us that the bailout, like so many government programs that came before it, is self-perpetuating. Proving once again the validity of Reagan's maxim that government doesn't solve problems, only subsidize them.

All You Need To Know...

...about the stimulus, you could probably learn from this chart, right here:


Based on my reading of that chart, I get:

Reagan - more-or-less budget neutral: 0% change
H.W. Bush - same as Reagan: 0%/-0.5% change
Clinton - slightly budget positive: +4% change
W. Bush - slightly budget negative: -4% change
Obama without stimulus - slightly budget negative: -5% change
Obama with stimulus: significantly budget negative: -10% change

Either with or without the stimulus, President Obama has already negatively affected the budget deficit, as it relates to GDP (what Democrats bragged about during the Clinton years), to a greater degree than any of the last 5 Presidents.

To be fair, of course, President Obama hasn't had a full term yet, and both Reagan and H.W. Bush started out increasing these deficits but finished by decreasing them. However, in their worst years, Reagan and Bush, Sr. increased the budget deficit by 2% and 1%, respectively; Barack is not only working on between 5% and 10%, but is well on his way to creating the biggest one-year increase in the budget deficit over the last 30 years.

These new heights of deficit spending come, naturally, at the same time that the long term deficit is also reaching new heights (depths, really...), and the future costs of programs like Medicare, Medicaid, and Social Security are beginning to increase exponentially.

Now, I'm no economist, but I am a young, budding taxpayer - and I'm pretty sure all this means that I'm about to get screwed.

Happy Birthday, Ronnie

The Gipper would have been 98.

He won the Cold War and vanquished the "Evil Empire" without firing a shot, revived a stagnant U.S Economy and lead it into the modern age, restructured our tax code for the better, and made the United States, once again, the Greatest and most Free Nation on Earth.

He was the Greatest President of the 20th Century.

One can only imagine what he would have thought of the horrific "stimulus" packages the current President and Congress are trying to pass. And while those folks continue to try and hash out the final details of how, exactly, to spend the next few generations of American taxpayers' dollars, all for the stated goal of helping us "Ordinary Americans" in this time of recession, I think it appropriate to remember some of the wisdom of Ronald Reagan:

"The 9 most terrifying words in the English language are: I'm from the Government, and I'm here to help."

"The Government's view of the economy can be summed up in a few short phrases: If it moves; tax it. If it keeps moving; regulate it. And if it stops moving, subsidize it."

"Government doesn't solve problems - it subsidizes them."

Indeed.

We miss you, Mr. President - and we sure could use some of your principled leadership these days.

Doing Stalin Proud

Well, it seems more or less official at this point, the Federal Government of the United States has decided to dip into the treasury fund your tax dollars and offer up $1 Trillion to help bail out all of these companies that have been floundering over the last few weeks. That's right, $1 Trillion - the same amount we've spent over the last 5 years fighting the War in Iraq - all in just a few weeks.

I know, not what you voted for either, huh?

Well, I was going to write a little blurb on why I don't like this massive bailout plan, but then I came across this audio of Judge Andrew Napolitano, of FOX News, ranting on this very topic. So I'll just have you listen to his rant instead - it's brilliant:



Indeed. However, before I go, let me just put in one quick word of my own. It should be noted that part of the reason all of these companies have been failing in the first place is because of the idiotic policy of what amounts to corporate welfare. In recent years, big American companies have gotten used to government bailouts - whenever they go just a little bit to far, the government is there to help them out, and make sure they don't totally collapse - what we're seeing this week is new only in the sheer scale on which it's being done. The problem is that by continually bailing out companies, big or small, the government creates a welfare net that these companies can (and have) come to rely on.

As a result, these companies have become fairly certain that, if they screw up, the government will be there to offer a helping hand. Consequently, they can continue to take bigger and bigger risks, risks that they probably wouldn't take if they had to operate entirely on their own, which result in them getting into massive financial messes like the ones taking center stage this week.

It is, if you will, Corporate America's replica of the catastrophe of the European welfare state.

Just as increasing social services to the point of absurdity (a.k.a Europe) causes one to lose a sense of responsibility about one's own life, this kind of corporate bailout program causes companies to forget what it's like to have to be responsible for one's own decisions and to have to deal with the consequences of poor ones. Bailing out people who make stupid choices, be it the crack addict on welfare or AIG, is not a solid foundation for economic prosperity; it is socialism, pure and simple.

In fact, come to think of it, AIG et. al. are a lot more like that welfare crack addict than you might think - the only difference is that AIG's drugs are legal.

A "Political Stimulus Package"

Once again, Jim DeMint gets it right:



Indeed. It's just too bad that no one else in our government seems to have the guts to stand up and say this kind of stuff. But, I suppose that's just the wacky world of the welfare state - once you start giving people money from the public treasury, you just can't stop; everybody loves 'free' handouts. Besides, most of these people begging for 'stimulus packages' are too stupid to realize they're bankrupting the Country anyways.