October 21, 2008
Bush's Bailout Justification
President Bush noted, in a speech Monday, that "we would get our money back." True enough. When the government sells bonds at 3.5 percent and buy preferred stock at 5 percent for five years (and then ten percent thereafter), the government makes money if firms pay the dividends. The market demands 12 percent, but the government, with a lower cost of borrowing money and a very long time horizon for returns, can demand much less. But this is always true, in good times and bad. Why does the government decided to make such money now; why not always take advantage of such a money making strategy, lowering our tax burden??? The answer is in political economics. It is socialism and socialism, in all countries that try a public company ownership strategy (even a partial ownership strategy) over an extending period of time do not do as well economically as those that rely on capitalism for economic growth. Government officials cannot resist the temptation to reward political cronies and not performance. Performance suffers and everyone suffers. Can we keep the genie in the bottle with this "temporary program." Milton Friedman said that no government programs are ever "temporary." Hope he is wrong on this one.
October 21, 2008 | Permalink
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So, economic growth is the Pantheon of human greatness? The bailouts are obviously favoring the rich, but do not drag the other socialist countries into this argument. What these bailouts symbolize actually is the corporate subsidies that exist in your highly vaunted capitalistic order. Rather than provide services for the people in taxes (as is the case in socialist countries all around the world), capitalistic countries provide breaks for the corporations. The free-market economy in America has never existed in its purity, and thus it should be abandoned as the paradigm.
Posted by: True | May 22, 2009 7:04:29 AM