Acton Institute Powerblog

Pols Behaving Badly

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Last week an email newsletter from Sojourners featured a quote from U2 rock star and activist Bono (courtesy the American Prospect blog):

It’s extraordinary to me that the United States can find $700 billion to save Wall Street and the entire G8 can’t find $25 billion dollars to saved 25,000 children who die every day from preventable diseases.

The quote is pretty striking given the current shape of the debate over the Wall Street bailout. Bono’s insight is instructive: Once the government takes upon itself tasks that fall outside its regular purview, how do we rightly adjudicate between all the different needy causes? It simply becomes a game of which special interest can hire the most lobbyists.

Indeed, the $25 billion that Bono points out would be necessary to save 25,000 children a day is the same amount that the US government just paid to bailout the domestic auto industry over the weekend.

If the feds are willing to dole out $600-700 billion in corporate welfare for Wall Street, it only seems right that poor families and individuals get their own relative share of government redistribution.

The size of the government bailout relative to the critical debate about the execution of these policies is positively shameful compared to the fiscal cost of the war in Iraq (roughly $560 billion on the upper end) and the critical attention that the war has and continues to receive. Of course dollars aren’t the only costs we’ve incurred in the Iraq war, but they are one salient measure.

On the one hand conservatives often point out that government involvement in provision of welfare should be sharply curtailed or eliminated because it isn’t primarily the government’s task to directly offer assistance to the poor. Rather, that’s the job of institutions of civil society, like church ministries, non-profit charities, and groups promoting individual giving. So it seems inconsistent to claim this and at the same time assert that it is the government’s responsibility to bailout overextended (and therefore irresponsible) corporations with taxpayer money.

UPDATE: A HuffPost blogger takes this logic to its political terminus (emphasis original):

The Democrats, if they truly constituted an opposition party, which they prove every day they do not, could demand that if monies are going to go to bail out Wall Street, at least an equal amount would go to bail out average Americans in the way of health care, full funding for social security and medicare, mortgage and rent protection, infrastructure repair, decent public transportation, investment in green jobs and technology, etc.

One great virtue of the market is that over time it tends to punish bad players. Those who engage in unsustainable business practices will eventually get what’s coming to them. Debt catches up with you and you go bankrupt (unless in an election year cowardly politicians aren’t willing to let companies pay the due penalty for their error).

There’s been some talk about the moral hazards associated with the bailout. One moral hazard is that bad business practices aren’t going to be appropriately punished, and so such short-sighted and unsustainable behavior will be incentivized by reduction or elimination of risk. There’s now going to be an implicit government guarantee of corporations that are “too big” or too important to fail. The cost of this bailout may be $700 billion, but it sets a precedent for future bailouts whose costs are inestimable.

But enough hasn’t been said on another moral hazard that has to do with the good players, people who didn’t take out gimmicky mortgages to finance half-million dollar homes or rush into home ownership when they should have been renting. That’s the flip-side of bailing out bad players…good players get punished and are less likely to continue responsible behavior. And in the face of a government and businesses that are telling us to spend all we can, why should we be financially responsible?

Jordan J. Ballor Jordan J. Ballor (Dr. theol., University of Zurich; Ph.D., Calvin Theological Seminary) is a senior research fellow and director of publishing at the Acton Institute for the Study of Religion & Liberty. He is also a postdoctoral researcher in theology and economics at the VU University Amsterdam as part of the "What Good Markets Are Good For" project. He is author of Get Your Hands Dirty: Essays on Christian Social Thought (and Action) (Wipf & Stock, 2013), Covenant, Causality, and Law: A Study in the Theology of Wolfgang Musculus (Vandenhoeck & Ruprecht, 2012) and Ecumenical Babel: Confusing Economic Ideology and the Church's Social Witness (Christian's Library Press, 2010), as well as editor of numerous works, including Abraham Kuyper Collected Works in Public Theology. Jordan is also associate director of the Junius Institute for Digital Reformation Research at Calvin Theological Seminary.