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As the GOP Presidential primary continues, the amount of Tea Party infused, economic Dogma that is mandatory for GOP candidates to accept, but that is wholly unrelated to economic reality, continues to grow like Pinocchio's nose. In saving Capitalism Part 2, we discussed how the Stimulus actually worked and saved between 2-3 million jobs.
This week, we will discuss how TARP and the bailouts of GM, Chrysler, and AIG, literally saved American Capitalism as we know it, prevented the loss of over 1 million jobs, stopped a depression from occurring, and since the loans are being repaid with interest, will make the taxpayers a profit.
In this entire Light of Truth series, my goal is to frame good economic policy in accordance with Mainstream Capitalism, not by the current misguided notions of Tea Party driven Laissez Faire Capitalist Dogma. Mainstream Capitalism is defined by what works in the real world, not by what is good dogma. GOP Dogma today is that Capitalism is always good. Therefore, any government interference with Capitalism is bad. The historical reality is quite different. Smart government actions can save jobs, save industries, and if done properly make taxpayers a return on investment.
Recent GOP Statements Against Bailouts
- Mitt Romney: "They [GM/Chrysler] needed to move into a managed bankruptcy process rather than getting money up front by President Bush or President Obama. They wasted a lot of money."
- All 8 GOP Candidates at recent debate: Answered in the negative "Is there anyone here who, given that prospect, and President Bush started the program, given that prospect, anyone here who would have stepped in and said, 'I don't want to do this, but this is the backbone of American manufacturing, I'll do something?'"
And the truth is ....
REALITY CHECK ON TARP and the BAILOUTS
Capitalism is Not Divine; Government Intervention is a Part of Mainstream Capitalism
Even though Capitalism is the best economic system the world has ever known, it is merely a man-made system. It is not divine The reality is that the flaws of Capitalism are many, and well known. The goal of a government in a Capitalistic economy must be two-fold.
First, in a Capitalistic society, it is the economic and moral duty of government to create the infrastructure needed by Capitalism that Capitalism cannot or will not provide for itself in an efficient manner (roads, justice, police, education, fire, social safety nets.
Second, it is the economic and moral duty of government to intervene in the market place to prevent the unnecessary and socially unwanted extremes of unregulated or Laissez Faire Capitalism. These extremes include boom and bust cycles, depressions, banking instability, monopolies, trusts, and yes- entire industries facing economic failure when the business cycle has temporarily failed.
Past and Current Bailouts Were Effective, Saved Jobs, Turned Profits, and Were Bi-partisan
What is most amazing about these bailouts is that although being initially bipartisan, and are successful by almost any measure (often making a profit for taxpayers), they remain politically unpopular in many circles - especially in the Dogma-driven GOP. Indeed, despite savings jobs and industries, and despite a past history that shows they have become necessary about once a decade in the past 50 years, future bailouts appear to be politically untenable unless Mainstream Capitalists start speaking the truth.
(Below the fold is detailed data on how the current Auto and AIG bailouts, and the past bailouts of Airlines in 2001, of the S&L industry in 1989 and of Chrysler in 1979 were succesful and often made money for taxpayers).
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