Cardoza on Government Intrusion: Obama’s Bailouts and Regulations

4 Mar

I think a big problem with what is going on in the US Government today is that most people don’t really understand what’s happening.  That’s because it’s complicated and because lots of jargon (technical language from different fields) is used that further complicates things.

One issue that is going on today is that of Government Intrusion– the government getting involved with things in the wrong ways.  I’d like to use the recent financial bailouts in the US and the issue of “deregulation/regulation” to explain why this matters.

Understanding “Regulation” and “Deregulation” (Big Government Intrusion)

Whereas Republicans and Libertarians and many Independent voters are in favor of SMALLER government, Democrats and Socialists are for BIGGER government—that is a crucial distinctive to understand.  Let’s first look at Capitalism.

Capitalism and Deregulation in Plain English

In Free Market Capitalism, the government allows supply-demand (business) to govern whether companies win or lose—whether they succeed or fail.  In other words, in Free Market Capitalism, the government’s job is to create laws that ENABLE businesses to succeed and that “deregulate” them so no artificial barriers cause businesses to fail.  That way, if a business fails it is because the idea was wrong or the leadership was poor, or the timing for the business idea was wrong: They win or lose on their own, and they bear that responsibility for their success or failure.

Socialism and Regulation in Plain English

On the other hand, in a more Socialist approach, Marxist ideas of economics are used.  What happens is a few things.

(Photo: Karl Marx)

First, the Government chooses winners and losers.  Instead of allowing businesses to fail, government decides who fails and who does not. So it chooses who will and who won’t get bailed out.  So, instead of allowing businesses to fail or to force them to make hard decisions to change course and become successful, the government uses tax payer money to bail the business out.  The companies it bails out then essentially become INCAPABLE of failing because they are funded with limitless supplies of printed money.  But other businesses don’t get that bailout money, and are in danger of going under.  That’s the problem with government bailouts.

Second, the Government begins to control private businesses by ‘owning’ them.  When federal financial bailouts occur, businesses become (partially or entirely) publically-owned (owned by taxpayers or the government).  And when government controls them, because a company needs capital/money, the government gets ‘shares’ of that company and may then have a “controlling interest” in the company.  That’s another way of saying they get to call the shots.

One recalls when the US Government bailed out General Motors recently.  Rival companies Ford, Toyota, Honda, and others got no money—and could have failed. But then, since the government bailed GM out, the President of the United States was able to fire the GM C.E.O., set salary limits, and help decide which brands (Buick, Pontiac, Saturn) died—affecting thousands of US Workers.  So the government chose winners and losers. It controlled businesses by owning them. And one wonders—no matter HOW BAD General Motors might perform in the future, now that it is essentially owned by the government, almost without question there is no circumstance under which the government would even ALLOW GM to fail, but no other car companies have that same guarantee.

The Point? Government was never supposed to get into the business of owning private industries.  When it does, it becomes unfair to other private businesses and the government ends up using taxpayers money to help some taxpayers and to hurt others, which affects persons, families and their futures.  That’s not right.


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