Lots of hand-wringing and finger-pointing out there today, after the failure of the House to pass the bailout bill. Certainly all the doomsayers might be right, but I'm more persuaded by folks like Iain Murray:
There are all sorts of people today who normally talk about free markets but who have got themselves into a tizzy over the failed bailout. We need to get one thing straight - the bailout was the wrong answer to the wrong question.Also commenting in the same vein: Kip Esquire (with lots of links and pithy quotes); Michelle Malkin; Harvard econ prof Jeffrey Miron; Steve Chapman; Mark Levin.
Relevant points, summarized from the above, adding some of my own:
The bailout was designed by people who either (a) didn't see the crisis
coming, or (b) had an active role in causing it.
Those same people predicted a 30% drop in the stock market
unless their panic-driven emergency plans were enacted posthaste.
As bad as things were, that didn't
happen, casting further doubt on their powers
of accurate prediction and competence.
Those same people also have a vested interest in promulgating the myth that
the government is able to step in and "rescue" markets that are too
stupid to properly value their assets. (Cue the Mighty Mouse theme:
Here I come, to save the day! I understand Barney Frank sings that in
front of the mirror every morning.)
But in fact, the government has only one relevant super-power not
possessed by the market: the
power to coerce, including the
ability to demand tax dollars to fund its schemes, and debauch the
There is zero, nil, nada, reason to expect they'll do that wisely.
There's no incentive for them to do so. The political incentives
- evade (probably deserved) blame;
- be perceived as "doing something" (even if it's pointless or counterproductive);
- take (probably undeserved) credit for whatever things go well;
- exchange goodies and perks with well-connected friends.
Market corrections are painful, but sometimes necessary.
That's almost certainly the case here.
Government action might
delay them, but that just pushes the pain down the road and
makes it bigger.