A Lemon of a Bailout

When you get gemons, “make lemonaide” the saying goes.  But when spending taxpayer billions for a fiscal and economic recovery plan or “bailout” that almost nobody likes, a lemon can get in the way….

By Charles Krauthammer
The Washington Post
Friday, November 14, 2008; Page A19

Finally, the outlines of a coherent debate on the federal bailout. This comes as welcome relief from a campaign season that gave us the House Republicans’ know-nothing rejectionism, John McCain‘s mindless railing against “greed and corruption,” and Barack Obama‘s detached enunciation of vacuous bailout “principles” that allowed him to be all things to all people.

Now clarity is emerging. The fault line is the auto industry bailout. The Democrats are pushing hard for it. The White House is resisting.

Underlying the policy differences is a philosophical divide. The Bush administration sees the $700 billion rescue as an emergency measure to save the financial sector on the grounds that finance is a utility. No government would let the electric companies go under and leave the country without power. By the same token, government must save the financial sector lest credit dry up and strangle the rest of the economy.

Treasury Secretary Henry Paulson is willing to stretch the meaning of “bank” by extending protection to such entities as American Express. But fundamentally, he sees government as saving institutions that deal in money, not other stuff.

Democrats have a larger canvas, with government intervening in other sectors of the economy to prevent the cascade effect of mass unemployment leading to more mortgage defaults and business failures (as consumer spending plummets), in turn dragging down more businesses and financial institutions, producing more unemployment, etc. — the death spiral of the 1930s.

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One Response to “A Lemon of a Bailout”

  1. Holly Says:

    Petition Congress at:



    Nancy Pelosi, with the help of Barney Frank, wants to bail out yet another failed sector of the economy. It is not government’s role to reward incompetent, overpaid executives pursuing a failed and anachronistic business model. The American auto industry is in trouble because it produces a shoddy, polluting, gas guzzling product at noncompetitive prices driven by trade union benefit packages. It is a waste of taxpayer money to try to shore up an industry that needs to be radically restructured. The Big Three should be allowed to fail and file for reorganization under Chapter 11 of the Bankruptcy Code. They will not cease to exist, but will be restructured under the supervision of the bankruptcy courts. Congress cannot do a better job than the courts. The courts will supervise the reorganization of the industry without being tempted to reward lobbyists, campaign contributors and unions for their political and financial support.

    Congress must allow the economy, existing laws and judicial bodies to resolve the Big Three’s financial problems and not throw more taxpayer money away under a hasty and ill conceived bailout.

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