Propping Up a Failed System

Near the end of my recent therapy appointment, my therapist and I were discussing our current bad economy. My therapist is rather conservative, and I asked him if he thought we'd ever get out of this funk. He responded that we probably would, if we put the right policies into place. Instead, our President is propping up the current system with his bailouts, when sometimes the proper medicine is to let the economic problems clear the dead wood. Then, we can start to recover.

I told my therapist that George Will had said something similar on a recent episode of This Week. George remarked that we should let Chrysler go under, since that's a part of capitalism. In response to the counter-argument that Chrysler is "too big to fail," Will responded that people would still want cars after Chrysler went under, so jobs in the automobile industry would still be created.

I thought about these things as I watched this week's episode of Bill Moyers' Journal. Bill was interviewing Robert Reich, who was Bill Clinton's Secretary of Labor in the 1990's. Reich stated that, although the U.S. government is propping up businesses with its bailouts, the companies are still running the same way that they did before the economic collapse. Here are his thoughts (click here for the full interview):

Wall Street does not need help. I mean, Wall Street, in fact, has pulled the wool over the administration's eyes and over the public's eyes. A lot of these toxic assets are still on the books. You know, Wall Street has made, basically, wangled the system right now where it's beginning to show profits not because it's got rid of the toxic assets but because it's gotten an accounting change that enables it to paper over these toxic assets.

You know, a lot of what happened in the--on Wall Street had to do with the fact that, number one, you had people who could make gigantic bets with other people's money. And if the bets turned out great, they would make a great deal of money. If they turned out badly, too bad. Well, their compensation was based upon making the big bets rather than being responsible. You also had all kinds of conflicts of interest. You had the credit rating agencies who were rating the issues coming out of the very companies that were paying the credit rating agencies to begin with. That's all still there. It's all still there.

It looks like elements of both the right and the left agree that the current bailouts are only propping up a failed system. And, because this system has powerful lobbyists, politicians on both the right and the left are failing to do anything about it.