Acton Commentary: The Moral Bankruptcy Behind the Bailouts

by Brittany Hunter on Wednesday, February 4, 2009

Amid the Washington clamor for more and bigger bailouts, a few brave voices among elected officials and government veterans are being raised about the moral disaster looming behind massive government spending programs. If we ignore these warnings, writes Ray Nothstine in today’s Acton Commentary, we may be “continuing down a path that may usher in an ever greater financial crisis.”

Read the full commentary here and share your comments below.

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Jim Nothstine

I agree whole heartedly with Gov Mark Sanford, Representative Gene Taylor and Ray Nothstine, the author of this commentary. Spend much less as a nation, state and community, surrender less freedom to our government and live our own lives humbly.
AnaMaria Conley

Jim, while I agree in principle with Gov Sanford, Representative Taylor, and Mr. Nothstine, it is important that we focus on the objective of the stimulus package. We’ve made promises to ourselves (e.g., Medicare, Social Security) which we won’t be able to keep. These spending programs are part of our long-term fiscal problem. However, our immediate problem is stimulating spending. If the government’s stimulus spending is of the sort that will promote future growth (e.g., spending on infrastructure), we will benefit both in the short term and in the long term. If, however, the stimulus package takes the form of more spending that doesn’t help create future growth, we may (or may not) stimulate spending and job creation in the short term but we will add to our fiscal malaise in the long run.
Neal Lang

I find it utterly amazing that at a time when the retirement accounts of most Americans (whether stocks or real property) have been effectiviely halved, that the Federal government would push “hell-bent” to “Stimulate Spending”. The obvious answer to our immediate financial crisis is not “spending” but “thrift”.

The quickest way to strengthen our financial institutions is to promote savings in the form of cash or investments in stocks or real properties. The best way to do “stimulate” savings and investments is to improve the return by reducing the governmental “dis-incentives” in the form of taxes on interest; investment appreciation; earnings; dividends; etc. The potential for higher returns will help ameliorate the risks of such savings in these challenging economic times. Instead of absorbing the available cash in our economy in the form of taxes and borrowings to finance these government “Stimulus” programs, such a Fed fiscal policy will incentivize the entrepreneur instead of the government bureaucrat.

The true job creation engine of our ecomony is business, especially the small businesses. By having government absorb a trillion dollars from our economy in order to apply it to the failed ideas of the “New Deal” is possibly the very worse solution to our current down economy. Remember, every dollar spent by the Federal government on the so-called “Stimulus Pckage” must be taken from the “private sector” in the form of taxes, borrowing, or inflation by printing more valuless script. Now is the time for government to promote entrepreneurship by reducing taxes on the risk-takers and helping finance them by promoting thrift instead of spending.

“If the government’s stimulus spending is of the sort that will promote future growth (e.g., spending on infrastructure), we will benefit both in the short term and in the long term.”

Governmental expenditures on NECESSARY infrastructure improvements should stand or fall on their own merits. Unfortunately, most of the infrastructure “pork” in the “Stimulus Package” will purchase about as much “future growth” as the “Bridge to Nowhere”.
Lane Rogers

This pork bill is a joke, one doesn’t even have to have a moral compass to figure that out. Good points and good article though.
sedonaman

Think bailouts are only for big businesses? Think again. From the IRS:

“July 18, 2008 – Summertime Tax Tip 2008-06 – Mortgage Workouts, Tax-Free for Many Homeowners

“There is now tax relief for struggling homeowners. If your mortgage debt is partly or entirely forgiven during 2007, 2008 or 2009 you may be able to claim special tax relief by filling out Form 982 and attaching it to your federal income tax return for that year.

“Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from tax up to $2 million of debt forgiven on your principal residence. The limit is $1 million for a married person filing a separate return.

“Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. The debt must have been used to buy, build or substantially improve your principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.”

So not only is imprudent judgment [borrowing more than you could afford] rewarded by debt forgiveness, it is doubly rewarded by exempting the forgiven debt from taxation. We all know that, “Activity that is rewarded is likely to be repeated.”