Robert Reich surveys the bailout mania (plus the myriad actions by the Fed intended to prop up or loan money to failing firms) and concludes:
Put it all together and at this rate, the government — that is, taxpayers — will own much of the housing, auto, and financial sectors of the economy, those sectors that are failing fastest.
Consider too that the government already finances much of the aerospace industry, which is still doing reasonably well but depends on a foreign policy that itself has been a dismal failure. And a large portion of the pharmaceutical industry and health care sector (through the Medicare and Medicaid, the Medicare drug benefit, and support of basic research). These are in bad shape as well, and it seems likely the Obama administration will try to reorganize much of them.
What’s left? Most of high-tech, entertainment, hospitality, retail, and commodities. So far, at least, we taxpayers are not propping them up. And when the economy turns up — perhaps as soon as next year, most likely later — these sectors have a good chance of rebounding.
But the others — the ones the government is coming to own or manage — are less likely to rebound as quickly, if ever. If anyone has a good argument for why the shareholders of these losers should not be cleaned out first, and their creditors and executives and directors second — before taxpayers get stuck with the astonishingly-large bill — I would like to hear it.
It’s called Lemon Socialism. Taxpayers support the lemons. Capitalism is reserved for the winners.
If a smart liberal like Reich can figure this out and raise the alarm bell, one wonders why the new administration seems oblivious to both public opinion and sound advice on the dangers of the federal government acting like PAC-Man — gobbling up each bit of junk they find strewn in the wake of the economic crisis. Is there an overarching sense of where the cumulative impact of the bailout structure is leading us?
It is not surprising we haven’t heard much in that regard. The Treasury Secretary-nominee is a bureaucrat, albeit a skilled one, not a big picture economist who is going to put all the component parts together. But Larry Summers or Paul Volker are at the ready — and might take a break from the constant bailout activity to look at the portrait Reich paints.
Do we really want a mass of government-owned and directed businesses? And how do we pay for all the losses when the faltering firms finally go under? When the new administration comes up with comprehensive answers to these sorts of questions they’d do well to explain it to the public and the markets. That’s what the new “transparency” is all about, right?