It is now policy for the federal government to bail out large corporations. While the bailout of Chrysler in 1979 seemed egregious from a position of federal policy, the $4.2 billion (calculated for inflation) spent to save it seems like pennies compared to what the government is planning on spending this time around.
Adding up the $1.4 trillion expected to assist the FDIC, the $2.4 trillion used by companies to pay bills and other short term commitments, and the $3.18 trillion to bailout the financial institutions, the total bailout comes just shy of $7 trillion. Now we have to add another $300 billion because of the bailout of Citigroup which brings the total to about $7.3 trillion.
Never has Congressman Everett Dirkson’s words been so accurate when he said, “A billion here, a billion there, and pretty soon you’re talking about real money.”
$7.3 trillion. That’s $7,300,000,000,000. That’s $24,000 for every man, woman and child in the United States. That’s 50% of our GDP. That’s 12 times the cost of the Iraq war. And, surprisingly, it’s probably about $6 trillion shy of what the total bill is going to be if this bailout strategy is used for the totality of the economic losses suffered.
This strategy of curbing an economic decline through inflation and taxation by making the entirety of the public pay for the mistakes of the few is not limited to our borders. Japan, China, Russia, Germany, UK, France and others are all engaged in bailouts of their own. And while I can talk at great length about the legality or constitutionality of such a bailout being preposterous, the overarching point is that the government is going to do this, whether we (or I) like it or not.
An interesting ramification of this policy is that businesses now have a reason to become giant conglomerations more than ever before. If Google, Microsoft and Yahoo merged to form an information-age mega-giant, and a sudden economic downturn jeopardized their success, precedence has now been set forth that the American people will pick up the tab.
Hopefully you can all see that a company in which their profits where private and their debts were public is going to be rocked by malfeasance and corruption. No doubt, this is exactly what happened to Fannie Mae and Freddie Mac and is exactly the catalyst for this whole debacle.
It also sends the message that it is in the public’s best interest not to buy products and services from industry leaders. Helping the big companies become bigger gets them one step closer to having the ability to purge your earnings through taxation upon making incredible financial blunders.
While the concept of the federal government bailing out a company isn’t exactly new, the scale of which it is occurring marks a decided change in the purpose and relationship of the federal government to the public sector. The total implications of such a change cannot be accurately forecasted or ever reversed.