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Politics : American Presidential Politics and foreign affairs
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To: TimF who wrote (44903)8/17/2010 8:09:55 AM
From: DuckTapeSunroof  Read Replies (1) of 71588
 
You are right, the 'Moral Hazard' argument is a powerful one, and certainly the most powerful and valid argument that can be raised against bailouts of private enterprises with taxpayer money or guarantees or assumptions of risk.

I also believe that the Moral Hazard argument acquires it's greatest strength and salience when it is applied to the LONG-TERM outlook.

Just as I believe that the strongest argument in favor of the GM bailout applies mostly only to the short-term and the mid-term: that the COST TO THE GOVERNMENT (lost revenue from taxes, unemployment and training and health expenses from millions put out of work for an expended period of time at the height of the Great Recession, cascading business failures throughout the economy, etc.) would have been significantly LARGER over the one-to-two-to-three-year horizon then the direct expense of the bailout funding.

(Especially considering that nearly all of the funding is likely to be recaptured for the Treasury.)

So, to my way of thinking it comes down mostly to that dynamic: short-term pain or (possible) long-term pain.

And, I believe that circle can be squared, if appropriate legal changes are adopted to wall off public policy from the possibility of ever 'having to do' similar bailouts in the future.

Changes to kill "too big to fail" and "private profits and public losses"....
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