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More Companies Want Bailout   November 11th, 2008
The floodgates have been opened and more companies want a piece of the pie       


More observations...

Conservatives were opposed to the financial bailout last month as a matter of principle. But the floodgates were opened and now more and more companies want a piece of the bailout pie that was originally intended only to prop up the failing financial sector.


First it was the financial sector... then the realtors wanted a $100 billion bailout to prop up their market claiming "We think the price tag for this will be roughly $100 billion. That's a huge sum of money. But given the $700 billion bailout package recently passed, $100 billion sounds very reasonable." (In other words, sure, $100 billion is a lot of money, but since you're giving $700 billion to the financial sector, $100 billion is pocket change). Now the auto industry is seeking a bailout on top of the $25 billion they already received from the government to help them build more fuel-efficient vehicles.

And the AIG bailout started at $85 billion in September... then another $38 billion in October. Now they want another $30 billion.

"The bailout continues, and essentially exemplifies the notion of `too big to fail,' said Anthony Sabino, a professor of law and business at St. John's University. "But the question must be asked: Where does it end?"

Indeed. Once the floodgates are opened and the government starts bailing out companies, where does it end? Once the government opens its pocketbook, everyone that is stressed wants a piece. Is the auto industry too big to fail? What about McDonald's that employs 390,000 people? Where do you draw the line?

And this is also why we have to be very careful about the idea of refundable tax credits to people that don't pay taxes. Individuals are no different than companies: Once the government starts offering free money, the recipient is going to want more and more--and more and more people are going to want to get in on the free money.

It's not sustainable.

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