Posted by
Always To The Right on Monday, November 17, 2008 11:10:42 AM
Mark Sanford has an unusual request, at least these days, in his Wall Street Journal column over the weekend. He asks the federal government not
to bail out South Carolina, the state he governs. Sanford probably
feels comfortable that his request will be granted, since states run
with prudence and responsibility are the ones that will get ignored
anyway
Community bankers tell me that they are now at a
competitive disadvantage for being careful about who to lend to,
because others that were less disciplined will get a federal bailout.
This is also true for states. Those that have been fiscally responsible
will pay for or lose out to the big spenders. California increased
spending 95% over the past 10 years (federal spending went up 71% over
the same period). To bail out California now seems unfair to fiscally
prudent states.
Sanford expresses some curiosity at how an institution with at least
$10 trillion in debt can suddenly afford to start writing checks with
twelve digits to the left of a decimal point. In fact, Sanford
calculates the current national debt somewhat north of $50 trillion, as
he counts the liabilities of Medicare and Social Security, while the
government conveniently continues its bookkeeping amnesia on those
liabilities. Who bails out the Chief Bail-Outer?
At a certain point — and we have probably passed it already — not
even the taxpayers can do it. We’re entering the realm of imaginary
numbers, a place where the bill has gone so high that no one can
credibly calculate how to repay it. And these same taxpayers just
elected an administration and a Congress that wants to create even more
entitlements, making the crisis even worse, rather than finding ways to
extricate the American government from the financial trap set over the
last few decades.
Michelle
notes that a few voices in Congress want to put an end to the bailout
mentality on Capitol Hill, including a new effort by Senator James
Inhofe to reverse part of the bailout bill
The only reason for federal intervention at all was to
recover the damage created by the initial government distortion of the
lending markets by providing some value to the mortgage-backed
securities issued by Congressional mandate. That was what infected the
financial markets and turned a cyclical recession into a potential
global meltdown. TARP would have provided limits to government
intervention, had Paulson stuck to that plan — but Paulson now won’t
use any of the money to undo the MBS damage. Instead, he’s buying bank assets and touching off a bailout free-for-all.
Why? After two weeks of literally begging
for TARP, Paulson has supposedly suddenly discovered it wouldn’t work.
Why should we trust Paulson with a single dime of money after that?
Inhofe has the right idea. We need to cut off the money spigot
now. As Sanford notes, it’s only producing long-term debt when we
haven’t figured out how to pay off the loans we’ve already taken.