Life is a Series of Bailouts, and Then You Die

Reading Tim Fernholz’s excellent article on the successful Build America Bonds program and the fuzzy thinking that’s imperiling it made me want to write once again on the topic of bailout-rhetoric, which I think has become really dangerous and counterproductive to understanding. I last thought of this reading an email discussion about Joe Gagnon’s monetary policy ideas that objected to his proposal as a “backdoor bailout.”

And of course in other quarters we can’t appropriate funds to prevent teacher layoffs because that’s a “bailout.” Or we shouldn’t let the IMF prevent a fiscal meltdown in Europe because that’s a “bailout.” But, heck, economic growth is corporate bailout! Growth is a bailout for feckless state and local politicians! Everything is either a bailout or else it’s collapse.

Obviously, there’s frustration about the difference between the solicitude the political system shows to problems in financial asset markets and the solicitude shown to problems in the labor market. But people should just say that! It’s not that policymakers have some proclivity for “bailouts” but refuse to do worthy virgin-pure “jobs” bills. It’s that policymakers have been willing to do just enough to halt asset price crashes and prevent unemployment from really whacking the college educated set. This is bad. It’s very bad. More can and should be done. But obsession with the evils of “bailouts” is only muddying people’s thinking.