Bailout Mania As Miracle No Diet, No Exercise Weight Loss Drugs

Peter Schiff, writing in the Wall Street Journal, aptly describes our policymakers’ current fascination with bailouts as a desire for a pain-free solution to our economic woes that’s not unlike the desire for a magic weight loss pill that would make you skinny without you having to diet or exercise.
He calls it the culture of pain avoidance.

Individuals, companies or cities with heavy debt and shrinking revenues instinctively know that they must reduce spending, tighten their belts, pay down debt and live within their means. But it is axiomatic in Keynesianism that national governments can create and sustain economic activity by injecting printed money into the financial system. In their view, absent the stimuli of the New Deal and World War II, the Depression would never have ended.
On a gut level, we have a hard time with this concept. There is a vague sense of smoke and mirrors, of something being magically created out of nothing. But economics, we are told, is complicated.
It would be irresponsible in the extreme for an individual to forestall a personal recession by taking out newer, bigger loans when the old loans can’t be repaid. However, this is precisely what we are planning on a national level.
I believe these ideas hold sway largely because they promise happy, pain-free solutions. They are the economic equivalent of miracle weight-loss programs that require no dieting or exercise. The theories permit economists to claim mystic wisdom, governments to pretend that they have the power to dispel hardship with the whir of a printing press, and voters to believe that they can have recovery without sacrifice.

The perfect solution, right?
Maybe for the short term, but in the long run we can hardly continue to expend billions upon billions of taxpayer dollars propping up businesses that can’t or won’t be run solvently. It’s a recipe for disaster.
There is a cure for our economic woes available of course, as Schiff points out later in his column. It’s called a recession. It’s called letting bad businesses fail so that better ones can replace them. That’s how our free market is supposed to work. Economic Darwinism runs its course, and the best-run businesses rise to the top.
Unfortunately, few of our political leaders seem interested in free market principles these days. As President Bush put it the other day, they had to kill the free market in order to save it.