Column: Let the economy fix itself

By: Matt Zimmerman/Columnist

Posted: 12/2/08

The American economy is in crisis and so the American taxpayer is on the line for more than $8 trillion. This includes everything from the AIG bailout to the $300 billion in debt guarantees to Citigroup. Theoretically, now having huge stakes in a number of companies, the federal government should be able to turn a profit. Those have been the soothing words being fed to us after each bailout. Color me skeptical.

The justification for the massive $700 billion bailout last month was that it was needed to buy troubled assets from lenders. Now, Secretary-Treasurer Hank Paulson has said that they will instead buy stock in these companies to shore up their balance sheets.

While I am glad to see they are no longer under the illusion that the federal government could somehow manage troubled assets in such a way as to make money, it still troubles me how easy it was to take on such a burden when they clearly did not know what they were doing.

Unfortunately, it looks as though America has stumbled head first down the slippery slope of government-first solutions to our problems. Not being a total purist, I don't deny that something had to be done. There are necessary evils, we have had bailouts before, and have made money on those deals. Maybe we can again.

However, politicians today seem to be marked by an obsessive need to spare us economic discomfort. We have spent hundreds of billions on stimulus checks in the past eight years. The Democratic leadership is now talking about spending $700 billion on a new stimulus package that may be on President-elect Barack Obama's desk when he takes office.

Of course, this will temporarily help, but this is also the reason we are in this mess in the first place. Years of artificially low interest rates, repeated stimulus packages and other government manipulation of the markets, especially in housing, created the bubble that is now deflating. We can keep adding debt in an effort to stop it, but those decisions are only delaying the inevitable. What will we do then? Engage in more deficit spending and bailout out other failing sectors of the economy? Almost anything can be justified with the words "too big to fail." What is next?

The highs and lows of the economic cycle are inevitable and it's necessary to do away with pieces of the economy that do not fit. The country cannot afford repeated deficit spending with the effect of reinforcing the dependence millions of jobs on failing sectors of the economy and only temporarily postponing, and ensuring a worse, recession.

In order for the free market to work, which it will, it must be allowed to correct itself.

If it is not, it will not, and will cause more trouble in the long run. While the government has a regulatory role, and must do something to temper the current crisis, it must tread more carefully in the future.

Matt Zimmerman is a senior political science major. He can be reached at 581-7942 or at DENopinions@gmail.com.