The Old Slippery Slope

We're on thin ice here. Not to mix too many metaphors, but this rush to give private companies public money to keep them afloat is another example of allowing what seems necessary and logical at the time to obscure the long-term consequences and precedents. The camel's nose is under the tent.

Let's take AIG. Too big to fail, so we give them a chunk of public money to keep them in business. But then, of course, we don't like what they did with the money, and since it's our money, we should have some say about it, right? So now, unable to recover the bonuses given to AIG executives under pre-existing contracts of which those in Congress were aware, Congress has passed what amounts to a (unconstitutional) Bill of Attainder to, in essence, confiscate them thru taxation directed specifically at them, and after the fact, to boot. This is purely and simply Congress covering their own behinds after having granted the money in the first place. All the posturing about protecting the public's money is just that -- the dollars don't amount to a hill of beans in the overall, but it makes those who voted for it look bad. Some in Congress are probably too dumb to understand that there is no way this will hold up to the legal challenge which is certain to be forthcoming, or at least think their consituents are (the Speaker of the House comes to mind, who I suspect generally understands little of what's going on these days).

This is the kind of thing that goes on in Third World countries and is part of what continues to keep them there: ad hoc, arbitrary disregard for laws and due process when convenient or attractive at the moment. Who's going to invest in a system the fruits of which can be expropriated at will? So now we're going to have a legal fight (with additional public money) over what is clearly an illegal action by Congress passed purely as a sop to public outrage to cover Congress' own mistake.

Same thing with the banks and auto manufacturers. It seems reasonable that, if the government gives them money, the government should have a share in how the money is spent or, in other words, how the company is run, right? So this puts the government directly in the banking and auto business, competing with those not yet taken over? Hello? I'm sorry, but it's a short step to total government takeover of both. If you don't like Detroit products now, have a look at the Lada or the ZIL to see what your government-designed and built ride of the future will be. You may need the camel whose nose is under the tent for transportation, so give him a treat.

Now you know who's buying up all that sprinkler pipe

One of the requirements of having a free market capitalist system is that you must be willing to take the bad with the good. This requires the belief, borne out by history, that the good will overall outweigh the bad. You cannot wish, legislate, or buy you way out of the bad when the system has given you a cushy life which makes you unable to bear any downturn. If you want to go down this path, you must be willing to also give up the good.

This is but the latest example of what I discuss in "A Brief History of Panic" elsewhere on this Blog; like adding cannon to the Vasa, each step taken is seen as logical and necessary (even urgent) at the time, but the sum total of them sinks the ship.