Stop the Madness: No More Bailouts!

In the few short weeks since Congress passed the $700 billion bailout bill we have watched helplessly as our tax money was diverted to everything but its intended use which was to save CRITICAL institutions from bankruptcy. We witnessed recipients take billions of dollars of bailout money to fund six figure executive vacations, line executive pockets with billions in bonuses and purchase other businesses with funds that were intended to reduce the red ink in their accounts. We, then, learned that, instead of buying up "troubled assets" from these institutions as promised, the government decided merely to purchase stock in the troubled institutions because, according to Treasury Secretary Henry Paulson, the original plan was "too difficult" to execute. He, then, addressed the country and told us that he was unilaterally changing the strategy, arrogantly stating, "I make no apologies..." for the change.

As soon as the election was over, House Speaker, Nancy Pelosi, and colleagues met and promised bailout money for everyone. And her words did not go unnoticed. Every group from realtors to credit card companies to the Big Three automakers began lining up for a piece of the action. President-Elect Barack Obama, showing a total lack of understanding of the economic effects of his plan, stated that the economic bailout would trump the budget deficit. In a recent "60 Minutes" television interview he stated the following:

The consensus is this, that we have to do whatever it takes to get this economy moving again, that we have to -- we're going to have to spend money now to stimulate the economy. And that we shouldn't worry about the deficit next year or even the year after; that short term, the most important thing is that we avoid a deepening recession.

Well, folks, there are potentially disastrous consequences to this plan that will, actually, DEEPEN THE RECESSION. First, our economy cannot handle the debt this bailout will cause. What was to be a $700 billion bailout has already become well over a TRILLION DOLLARS in a matter of weeks! And there is no end in sight. We are looking at, literally, TRILLIONS more dollars before this crisis is over! Once we start this process, we will have to continue bailing out companies when they ask for more because, then, we CAN'T allow them to fail. AIG has already petitioned the government for more bailout money because the funds they received did not do the trick. And, now, the Big Three Automakers are petitioning the government for another $50 billion! They already quietly received $25 billion the same day the $700 billion bailout package was approved and burned through it. This money was IN ADDITION to the $700 billion in the bailout package. And, as they sat before Congress with their request, they implied they would need more bailout money later on.

So what is the danger in providing trillions of dollars in a bailout? It will, very simply, bankrupt the government, leading to a TOTAL ECONOMIC COLLAPSE. Since we don't have that kind of money, the government will have to PRINT more. That will lead to RUNAWAY INFLATION and a WORTHLESS DOLLAR. How would you like to spend $50 or $100 for a cup of coffee? Sounds impossible, doesn't it. Well, in early October, the country of Iceland experienced a TOTAL ECONOMIC COLLAPSE. It CAN happen here!

The second dangerous consequence of a bailout is that it rewards incompetence and discourages businesses from instituting difficult cost-cutting measures and developing competitive new strategies. They remain fat, inefficient and void of initiative, expecting the government to continue to support and keep them going. This method has been tried and failed miserably in Europe. When a government supports businesses they lose the incentive to improve. FREE ENTERPRISE, the concept on which this country was built, demands that businesses stay competitive or be replaced by those that are.

The US Auto Industry is a perfect case in point. In 1979 Detroit owned the world. At that time, anywhere in the world you went, virtually all the automobiles on the street were made by the Big Three. The Big Three began to get fat. Chrysler developed financial problems and faced bankruptcy. Lee Iacocca secured $1.2 billion in loan guarantees from the Federal Government which saved Chrysler. Today, it turns out that was not a favor. Had Iacocca not secured those guarantees Chrysler would have had to reorganize and would have emerged much leaner and able to compete in the world market. Instead, it remained fat and began producing inferior cars in order to remain profitable. In order to compete with Chrysler, Ford and GM, which had also become fat, followed Chrysler's lead. Their production of expensive, inferior cars gave foreign auto manufacturers entrance into a world automobile market previously exclusively owned by Detroit. The rest is history. Today, as we know, the best cars are not produced in the US. Instead, Toyota, Honda, BMW and others have taken over the world market, and the Big Three have been struggling ever since. This crisis was NOT caused by the current financial meltdown. The Big Three have been slowly going out of business for the past 30 years! This week their CEOs traveled to Congress, asking for billions of dollars to support them with no plan to improve, cut back compensation or become more competitive. Despite their plight, their executives reward themselves with huge compensations (salaries and bonuses), fly on fleets of corporate jets, pay their employees $75 per hour and give them up to four years pay after a plant is shut down. If we bail out the Big Three now, they will be back in a few months with their hands out again. And behind them will be every other industry that has lost its ability to compete. There is no end to this kind of program!

So what is the answer? We need to let businesses (and people) sink or swim on their own. The Federal Government cannot not be the parent that bails out fat, inefficient industries or individuals that have lived far beyond their means. Industries and people must take responsibility for their own financial survival. Bankruptcy does not mean a company will go out of business. Most likely it will result in debt relief, restructuring and cost-cutting under the supervision of a bankruptcy court. The result will be a more viable company that is much better able to compete in the world market. Unlike the recent restructuring at UAL, to be fair, the bankruptcy judge must ensure that executives and management share in the cost-cutting and don't reap windfall profits while the rest of the company sacrifices to ensure the company's survival. And individuals who spend beyond their means must follow the same path and become responsible for their actions. Filing for bankruptcy will provide debt relief as they tighten up and learn to live within their means as the vast majority of Americans do.

There is no painless way out of this financial crisis. Let's not precipitate total economic failure by instituting measures that fool us into thinking there is. If we do not change our course, the consequences for this country and everyone in it will be disastrous. In the long run, a return to FREE ENTERPRISE will, both, save and create jobs as most businesses will survive and, then, become more competitive.