Bail Now, Sink Later

”I am concerned about taxpayer money being provided to those companies that may not survive.” — President Bush

How far should taxpayers go to rescue an ailing industry? — Reuters

The chairman of the US Federal Reserve, Ben Bernanke, has recommended the use of more taxpayer funds for new efforts to prevent home foreclosures – The Sydney Morning Herald

To paraphrase Aristotle and Confucius, if you wish to have good government you must begin by calling things by their right names. And the notion that the American taxpayer is paying for things such as the financial-industry bailout, the automotive-industry bailout or even the war in Iraq is not right. It would be closer to the truth to say that the Chinese government is paying for these things.

If the American taxpayer really were paying for, say, the war in Iraq, then the famous Congressional resolution that authorized the President to use force against that benighted country would have included a surcharge on the income tax paid by all Americans to pay for it. (The cost — $12 billion a month this year, well over half a trillion dollars so far — would have required about $7500 so far in additional taxes from a single taxpayer earning $35,000 a year.) Then the onus would have been on the administration — as the Founders intended — to convince Congress and the people that going to war was important enough for everyone to bear an economic sacrifice. As it was, all anyone in public office had to approve was the sacrifice of other peoples’ money and of the lives other peoples’ kids. This was accomplished by the use of the country’s seemingly bottomless credit card.

Similarly, when the time came to rescue, bail out or buy the financial companies who trashed our economy, how would it have changed the discussion, and affected the outcome, to have said we can help them if everybody pays more taxes this year? A lot more taxes, as the eventual net cost of the multiple bailouts in play — estimated at something like $400 billion — approximates that of the Iraq War. Add another $2,000 a year to the tax bill of the average American worker to pay for that. [For valuable reporting on and analysis of these numbers, see The Muser.] As it is, with no actual taxpayer penalty in sight, polls show the American people against bailing out the auto industry by two to one.

I say no penalty in sight because eventually, of course, the taxpayers will pay. Different, future taxpayers will pay the interest on and repay the principle of the loans that have been taken out to pay for our wretched excesses (interest on the national debt runs around $37 billion a month now). Of the individuals, companies and governments buying US Treasury notes to finance the wars and the bailouts we’re putting on our national credit card, China is number one, with over half a trillion dollars in hand.

The interest on the national debt consumes an ever-larger share of the budget, so that future taxpayers will also pay the penalty of having to do without government functions and personal equity that will be the casualties of our profligacy. Call it by its proper name: that is theft

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