In light of the recent government bailouts of several high profile companies, some pundits are rushing to attempt to correct the idea that taxpayers are paying the tab. Some analysts are trying to push the idea that the billion dollars’ worth of bailouts are merely structured as loans or investments by “the government” and thus don’t cost taxpayers anything… which is fair enough except that “the government” isn’t some enigmatic entity, nor is its funding. Government dollars are largely tax dollars. They belong to you and I. Our tax dollars are footing the bill for the bailout whether or not you believe that those dollars are actually at risk (and I believe that they are).
And yes, I realize that the cash that is generated to fund these bailouts is not funded by an immediate tax increase. No one will come knocking on our doors tomorrow looking for more cash. I know that most of this type of funding comes from money in the government’s portfolio (um, guess where most of that comes from?). And I realize that doesn’t immediately add to the deficit.
But just as when you or I raid our reserves, less money in the bank means less more for both existing and unexpected expenditures. What happens when you can’t pay your bills? You either search for ways to generate more revenue (raise taxes), borrow more (adding to the deficit) or make cuts. All of those options affect taxpayers.
Does this mean the bailout isn’t a good idea? I’m not saying that at all. But let’s call a spade a spade. It’s our money being offered up, so stop pretending that it’s not.
One of the commenters at MyMoneyBlog recommended a terrific piece on This American Life explaining the process for the mortgage collapse. It’s basically what you already know, but in extensive detail… very intriguing.
Check it out on thislife.org, episode 355 (5/9/2008). You can stream the audio for free, or podcast(?) it for $0.95.
Who’s our government? (you ask). If we keep this up, our government will be a subsidiary of some foreign government b/c these artificial lifelines are just poo-pooing our currency.
While the gov’t is on this streak of generosity, i wonder if Paulson would consider helping me shore up my Balance Sheet by “buying” my student loan debt.