To the editor:
Since Franklin D. Roosevelt first employed Keynesian economic policy in 1934, the federal government has found ways to GIVE people money under the allusion of regulating the economy. At first it began small. The government created jobs, displacing businesses in the process and providing consumers with a seemingly endless stream of money. This process is referred to as demand management economics and produces the inevitable increase in prices with no corresponding increase in production.
At first, a few displaced workers were the recipient of these monies. Today, it has spread to businesses such as giant insurance companies, AIG, and brokerage/investment companies such as Lehman Brothers, quasi -governmental behemoths, Fannie Mae and Freddie Mac, as well as the big three auto-makers, General Motors, Ford, and Chrysler and countless banks. Now, low and behold, states officials have appeared, hat-in-hand, wanting their share of the giant tooth-fairy's hand-out.
I don't like the trend. Giving money to jumpstart the economy or bail out an industry or salvage the housing debacle simply will not repair the problem. Moral Hazard indicates that by giving money, more money will be demanded. We will have more failures, because regardless of the bad choices and irresponsibility, each will continue to expect contributions from the government. Whatever happened to fiscal responsibility?
Fiscal responsibility is a choice. If we choose to be responsible, these issues never surface. On the other hand, if we choose to be irresponsible, no amount of money can resolve the problems. Once money has been given to a single individual, a queue forms for the next handout. "Free anything" draws a crowd. The reasons for the need are as varied and numerous as there are people, businesses and local governments.
Within itself, handouts or bailouts are not the problem, albeit, they encourage more irresponsibility and more handouts. The real questions are "What problem does it solve?", and "How can we do it fairly?" More money generally creates inflation given, some constraints. If we make more money available to everyone, then everyone is equally better off as well as maintaining the same relative position as before. If we are selective as to whom the government chooses to favor, then some are better off at the expense of the others that did not receive favor. This is a real problem in that we now must choose who should be favored and who should not. And, by what standard? Why should the government favor GM and not favor the airline industry that has also struggled during the same period? Or, why should the government favor one state that has chosen fiscal irresponsibility over another that has not? The list is endless.
All of this seems shallow. Quite frankly, I do not think this is what J. M. Keynes meant when he indicated that the government should fine tune the economy from time to time. We have gone way beyond fine tuning and may be teetering on the abyss beyond which there is no return. Maybe, it is time for the good ole Classical economics philosophy, fiscal responsibility, and sound policy.
William H. Moon
Chair, Department of Business and Social Science
Georgia Perimeter College, Newton Campus.