Forget for a moment such antiquated criteria like reason, logic, and common sense. Forget also personal experience and general economic policy. All of these frameworks suggest – and often loudly proclaim – that any bailout is indeed throwing good money after bad. It’s bad business supporting bad business.
If all of that weren’t enough, a foundational approach based upon the Constitution renders the bailouts of private corporations by the government absurd, destructive and incompatible with original intent.
 As Jefferson noted in his autobiography:
“It is not by the consolidation or concentration of powers, but by their distribution that good government is effected. Were not this great country already divided into States, that division must be made that each might do for itself what concerns itself directly and what it can so much better do than a distant authority. Every state again is divided into counties, each to take care of what lies within its local bounds; each county again into townships or wards, to manage minuter details; and every ward into farms, to be governed each by its individual proprietor… It is by this partition of cares descending in gradation from general to particular that the mass of human affairs may be best managed for the good and prosperity of all.”
And again we return to this persistent matter of balance; of the division of powers. How then should domestic matters such as bailouts be addressed? In short, and borrowing tongue-in-cheek from that great moral question captured on wristbands across America, what would Jefferson do?
The bailout of a private corporation would be vehemently opposed, foremost; risk and reward, after all, go together for a reason. Yet, if popular sentiment suggested that such a remarkable intervention was required, Jefferson – and any principled party – would suggest that such relief must come from the community in which this entity operates. If it is the loss of jobs that evokes calls for “saving” a company, then naturally one would expect that the affected community would be the one to ante up.
What makes this conclusion all the more glaring in its departure from how these problems are being addressed is this: the affected communities and individuals have the power to save the automakers, for example. It’s a rather simple solution. Simply disband the union, for starters, which has extorted an hourly wage of close to $70.00 per hour, and accept the market pay rate (which is by competitive measures approximately $47.00 per hour). This would begin the process of conserving cash that is essential to the survival of an organization in the midst of a turnaround.
Yet, we’re told by Congress (and, regrettably, the Executive) that a bailout is necessary, and they’re the only ones who can do it. And through an inappropriately aggressive interpretation of “the general welfare” we’re staring down the prospect of American citizens rewarding poor executives, bad decisions, and union greed with good money. I might add: largely against our will.
Have the American people been wholly conned into believing that central planning might actually work? How far has this infection spread?