Bailouts: A Slap In The Face To The Honest And Productive Mark Crovelli lewrockwell.com March 31, 2014
As the owner of a construction company, I am all too familiar with the concept of insolvency. Any company that assumes irresponsible risks, makes poor judgments, or that mismanages its cash flow, (in the sense that its current liabilities exceed available cash), is or will shortly be bankrupt. I’ve seen it all too many times, and I am all too familiar with the negative ramifications of such an event for every other entity doing business with such a company. I’ve personally been stiffed by insolvent companies more frequently than I care to remember or admit. While I am familiar with bankruptcy, insolvency and corporate overreach, I am completely unfamiliar with the concept of a “bailout.” In the real world, where cash flow and debt are irrevocable entries in an accounting ledger, there is no miracle “bailout” waiting in the wings, and there are no angelic figures or agencies waiting to step in to help out the incompetents. In the world in which I live and work, people who make forecasting or accounting errors are ruthlessly punished by the market. Those of us who can forecast accurately, satisfy customers, and manage cash flows survive and possibly even prosper, if we work hard enough. Those who cannot are relegated to bankruptcy or some non-ownership position in a company that shields them from risk and responsibility. There is no third alternative. I am thus seriously perplexed and enraged to read about government “bailouts” occurring on a regular basis all over the modern world. The Ukrainian junta is apparently going to be “bailed out” with money stolen from men like me, because the previous Ukrainian government racked up enough debts to render the entire society insolvent. Goldman Sachs, GM, and AIG were all effectively “bailed out” because their previous executives were so outstandingly incompetent and corrupt that they rendered their institutions insolvent by orders of magnitude. The morons at the U.S. Postal Service were once again “bailed out” by the federal government because they are so completely clueless and worthless that they cannot profitably move folded pieces of paper around. The same holds true for Social Security and
Medicare, which are both being rewarded for their insolvency by being “bailed out” with tax money from the U.S. government’s general fund. The list is almost endless: Citi, Chrysler, Long Term Capital Management, Mexico, Fannie and Freddie, the ECB, Greece, Spain, China’s shadow banks… What the hell is a “bailout,” other than a reward for incompetence or criminality and a slap in the face (and the wallet!) to honest and responsible people all over the world? I literally cannot fathom what would occur to my industry if every moron, crook and gambler was gifted underserved money or credit as a reward for his disservice to the global market, yet this is national and even global policy at the moment. The more criminal or incompetent you are, to more “bailout” money you should expect. The hideous immorality of government “bailouts” has been obscured by the professional apologists of the state: the academics and the policy wonks. To a professor of political science or economics, stealing money from honest, hard-working men in order to rewarding crooks and morons is labeled “moral hazard.” This lofty-sounding word is used as a cover for a massive crime, in the same way that academics use the innocuous sounding term “rent-seeking” to refer to voracious robbery by the political classes. “Moral hazard” in common English means that it will cause massive problems down the road to reward idiots and criminals for being idiots and criminals. Duh. Concealing this obvious truism with the ambiguous term “moral hazard” allows the academic and journalistic classes to endlessly debate whether or not the so-called costs outweigh the so-called benefits, freeing up room for politicians and their cunning advisors to dabble in the practice whenever profitable or convenient. Meanwhile on Mainstreet, owners of construction companies and landscaping companies warily eye their cash flows in the hope of avoiding insolvency. Owners of restaurants and bars battle every day to retain and serve their customers and keep their doors open, because they know they lack the political clout to get a “bailout” from the state legislature, the U.S. congress, or the Fed. And owners of every other imaginable type of company across the country struggle every day to keep afloat in the beautiful and honest part of the economy that is still relatively free. Their reward for their hard work, thrift and sound business acumen will be to fork over a part of their earning to “bail out” the Ukrainian junta, of all people. If that doesn’t demonstrate for once and for all that taxation is theft, and that government is nothing but a marauding gang of thieves, then nothing will. If that doesn’t demonstrate to the American Working Man that he is nothing more than a draft horse for the parasitical political classes, then
nothing will. Think about that tomorrow morning when you get saddled up to earn money, not for yourself or your family, but for the Ukrainian junta and the U.S. Postal Service.
The Real Welfare Queens: Corporations Have Gotten Billions In Government Subsidies BY David Sirota March 31, 2014
Remember when President Obama was lambasted for saying “you didn't build that”? Turns out he was right, at least when it comes to lots of stuff built by the world’s wealthiest corporations. That’s the takeaway from this week’s new study of 25,000 major taxpayer subsidy deals over the last two decades. Entitled “Subsidizing the Corporate One Percent,” the report from the taxpayer watchdog group Good Jobs First shows that the world’s largest companies aren’t models of self-sufficiency and unbridled capitalism. To the contrary, they’re propped up by billions of dollars in welfare payments from state and local governments. Such subsidies might be a bit more defensible if they were being doled out in a way that promoted upstart entrepreneurialism. But as the study also shows, a full “three-quarters of all the economic development dollars awarded and disclosed by state and local governments have gone to just 965 large corporations”—not to the small businesses and startups that politicians so often pretend to care about. In dollar figures, that’s a whopping $110 billion going to big companies. Fortune 500 firms alone receive more than 16,000 subsidies at a total cost of $63 billion. These kinds of handouts, of course, are the definition of government intervention in the market. Nonetheless, those who receive the subsidies are still portrayed as free-market paragons.
Consider Charles and David Koch. Their company, Koch Industries, has relied on $88 million worth of government handouts. Yet, as the major financiers of the anti-government right, the Kochs are still billed as libertarian free-market activists. Similarly, behold the big tech firms. They are often portrayed as self-made success stories. Yet, as Good Jobs First shows, they are among the biggest recipients of the subsidies. Intel leads the tech pack with 58 subsidies worth $3.8 billion. Next up is IBM, which has received more than $1 billion in subsidies. Most of that is from New York—a state proudly promoting its corporate handouts in a new ad campaign. Then there’s Google’s $632 million and Yahoo’s $260 million—both sets of subsidies primarily from data center deals. And not to be forgotten is 38 Studios, the now bankrupt software firm that received $75 million in Rhode Island taxpayer cash. The company received the handout at the very moment Rhode Island was pleading “poverty” to justify cuts to public workers’ retirement benefits. Along with propping up companies that are supposedly free-market icons, the subsidies are also flowing to financial firms that have become synonymous with never-ending bailouts. Indeed, companies like Goldman Sachs, Bank of America and Citigroup—each of which were given massive taxpayer subsidies during the financial crisis—are the recipients of tens of millions of dollars in additional subsidies. All of these handouts, of course, would be derided if they were going to poor people. But because they are going to extremely wealthy politically connected conglomerates, they are typically promoted with cheery euphemisms like “incentives” or “economic development.” Those euphemisms persist even though many subsidies do not end up actually creating jobs. In light of that, the Good Jobs First report is a reality check on all the political rhetoric about dependency. Most of that rhetoric is punitively aimed at the poor. That’s because, unlike the huge corporations receiving all those subsidies, the poor don’t have armies of lobbyists and truckloads of campaign contributions that make sure programs like food stamps are shrouded in the anodyne argot of “incentives” and “development.” But as the report proves, if we are going to have an honest conversation about dependency and free markets, then the billions of dollars flowing to politically connected companies need to be part of the discussion.
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