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As we return from summer, let’s reflect a bit on a disturbing trend – the socialization of risk and politicization of return.
In the 2008 financial crisis, the government bailed out the “systemically important” banks with the TARP program and unprecedented monetary easing. This was galling to American’s who rightly perceived the banks as the cause of the subprime mortgage crisis.
While no one wants a repeat of the bank failures of the Great Depression, we now have deposit insurance, and putting at least some of the losses on the people who caused the problem, rather than on the taxpayers, would have made sense.
From this experience, our political class seems to have learned that they can bail out any corporate or political constituency that they can claim is “systemically important.” How do we define which businesses or “oppressed“ groups are important enough for bailouts? It seems like a question of lobbying money, campaign funding, and vote buying. During the COVID pandemic – our government chose to bail out the airlines. The Washington Post claims it was to “stave off economic calamity and keep the nation’s aviation system alive.”
I say B.S.. Airlines are very different from banks. If an airline goes bankrupt, the pilots are still trained, the airports are still there, and the computer systems still function. All that happens is that shareholders, bondholders and aircraft leasing companies take losses. In fact, 64 US airlines, including Braniff, Continental, Frontier, Eastern, Pan Am, TWA, US Airways, Northwest, Delta and American, have gone through Chapter 11 bankruptcy since 1979. Yet we can still fly to the destination of our choice. Why did we spend $54 billion on airline bailouts, including full pay for their employees for 18 months? Perhaps the real reason for the bail out is that airline lobbying was running between $25 – $29 million per year leading up to the pandemic?
The $280 billion CHIPS bill, passed in August, will provide $52 billion of subsidies to the semiconductor industry, with $20 billion going just to Intel. Intel spent over $100 million on lobbying since 1998, and Intel employees gave $62,000 to Chuck Schumer, so far in 2022. Along with the corporate hand-outs, there has been a great deal of insider trading by members of congress and their families. 71 members of Congress have recently violated insider trading laws.
This is not a partisan issue, members of both parties are on the naughty list. Even the politicians families are in on the game – Nancy Pelosi’s husband, Paul Pelosi, avoided a 20% loss on a position in Nvidia, during discussions of the CHIPS legislation. You can track congressional stock trading here.
Collusion between government and big business is a worrying trend. It can only be halted by exposing the corruption and holding both parties accountable.
Vote buying handouts seems almost as prevalent. President Biden’s recent forgiveness of $10,000 of student debt for those making under $125,000 for single people and $250,000 if married, is anathema to fairness. Why should people that never went to college have to pick up the bill for those who took advantage of that opportunity? There are some borrowers that truly cannot repay their loans and deserve some relief. The simple and correct solution is to make student debt dischargeable in bankruptcy, like all other debts. This way people who truly can’t pay don’t’ have to and those that can don’t get a free ride on the taxpayers.
Lots of people say that government spending and deficits don’t matter. But never forget that we all eventually pay, one way or another. If taxes aren’t increased to pay for government spending, we pay the hidden tax of inflation, which most deeply impacts those least able to afford it.
James Miller
Lyme, CT