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How they think vs. how I think

The White House is trying to argue that the bailout isn’t so bad, it might not really cost $700 billion because some of the assets will appreciate in value.

I guess if you’re a politician, the biggest thing you worry about is that if the government has to spend a lot of money on assets, that means that there might be pressure to cut back somewhere else (rather than increase borrowing.) So when they say that the assets might end up appreciating, they’re looking at the silver lining from a budgetary perspective as well as encouraging voters to think that they really don’t have to cut back as much as $700 billion because, hey, we might even make money. If we make money we can even justify some new expanded government spending.

But from my perspective, the budgetary gains and losses are a trivial part of the story. Those are a transfer from taxpayers to the current holders of the assets. My real concern is the incentive effects for future prudence (reduced) and the weird misallocations of capital that will inevitably result. I also am deeply concerned about the rule of law and how such a program can possibly run in a non-arbitrary way.

If the government makes money on these transactions, it actually depresses me all the more.