It turns out all those 2008/2009 bailouts may not have been such a bad thing. There were quite a lot of them, and they had many Americans understandably concerned. It was, after all, their tax money going to prop up companies that were failing, and many felt (still do) that they should be allowed to fail. The arguments for and against the bailouts were relatively straight forward. Opposition was centered around the ideas that A) government bailouts amount to government takeovers. A socialist concept anathema to our free market self image; and B) any business should be left to face the consequences of its own decisions, not rescued at everyone else‘s expense. Support was built upon the notion that the economy was facing no ordinary downturn and that so many large companies failing simultaneously would plunge an already contracting economy into the 2nd Great Depression.
Philosophically, there will probably never be agreement on whether or not the bailouts should have taken place. Hard core conservatives simply do not want to believe anything other than the bailouts were the Obama administration taking advantage of the economic situation to advance an already planned socialist agenda of government intrusion into the free market. Never mind that many of the bailouts actually occurred in the waning days of the Bush administration. They do not appreciate or accept that even the bailouts’ supporters did not really WANT the action, but rather accepted it as necessary to avert disaster. In terms of public policy, the conservative mind easily grasps military threats and responses, but not so much economic ones. It gets bogged down with the principle of "the government should always stay out", and damn the consequences. It does not help that we really have no living memory of the Great Depression, which puts us at risk of under-appreciating what nearly happened these past 2 years. Suffice it to say that in the absence of intervention to stabilize the economy, a 9.6% unemployment rate might actually look pretty good right now compared to the depths it could have plunged to.
Financially, now that we are a little further away from those scary days of imminent doom, where we were all either going to plunge into an economic abyss and die, or morph into a socialist tyranny and die, the results of the government’s intervention are becoming a little clearer. Though it will admittedly still be some time before the final chapters are written. In terms of cost to the taxpayer, predictions of bailout money being lost forever are being proven wrong. The $700 billion TARP program has been whittled down to a mere $50 billion loss, with the good chance that that last $50 billion may even be recovered and the taxpayer may make a profit. Many banks have already paid back their bailout loans, and are posting profits again. Likewise, the auto industry is staging a comeback, with GM just this week reporting its best quarter in over a decade, and Chrysler also posting quarterly profits. Not bad considering the cascading effect on unemployment that would have occurred if these companies had been allowed to collapse in the midst of the financial crisis.
Reposted from my blog.