Opinions

Coming to terms with the unfairnes of bailout logic

In print | February 19, 2009

Bailing out. It’s a funny term, really. It could refer to anything from leaky rowboats on a summer day to Kiefer Sutherland parachuting out of the plane right before the suitcase bomb explodes. So what are we doing here? That question is on everyone’s mind. The issue is not so much the necessity of the bailout measure, but rather its intricacies and implications. Anybody can tell you that aggregate demand needs to be dramatically increased and that the only big spender at the moment is the federal government.

And these people are right. So far the government has bailed out many banks and propped up insurance and auto companies, and these have been largely necessary actions. But what do bailouts — of companies, of economies — do to us mentally?

Besides the “shovel ready” stuff (financial crises really bring out the most evocative phraseology), one of the most immediate results of the government’s response to the economic meltdown has been for everyone to check his or her wallet and ask, “What about me?” Because the fact is that bailing out, whatever its connotations, has got us feverish.

The illogic of it all is that you have to support the “bad guys” because we depend on them even while we condemn them. This paradox throws a wrench in the system, and suddenly there are no rules.

If the guys who shifted around the sub-prime mortgage bundles and the people who purveyed overwrought SUVs get bailed out, then how about my car payments? The inherent injustice of bailouts, coupled with their supreme necessity, screws up our basic tenets of responsibility and fairness, and we’re left with unbridled self-interest because what’s good for me is good for everyone.

Of particular interest to Swarthmore students is a Facebook group called “Cancel Student Loan Debt to Stimulate the Economy,” with more than 65,000 members. Their proposal suggests that if educated debtors had their loan obligations forgiven, they would inject into the economy the money that they send each month to banks. Or, as the group’s statement puts it: “Instead of funneling billions, if not TRILLIONS of additional dollars to banks, financial institutions, insurance companies and other institutions of greed that are responsible for the current economic crisis, why not allow educated, hardworking, middle-class Americans to get something in return?”

Now, as a debtor myself, I have nothing but empathy for these grumpy yuppies. I too would like my Stafford slate to be wiped clean in the name of America’s economic well-being; I would love to take part in the conflux of patriotism and selfgain. But the basic premise of aiding a segment of society that in all probability will do very well for itself financially seems rather dubious in a time when others are losing their homes and jobs.

Or to think of it another way, should the government be forgiving loans at a time when aspiring students are having trouble simply taking out new college loans? And yet, viewed from afar, the argument put forth by the group’s members is essentially the same as the argument behind hundreds of billion of dollars already approved by Congress. An interest group is claiming that it is hurting and that its pulse is one and the same with the greater economy’s. The holistic approach that we must take when evaluating a rescue bill compels the government to spend money in sectors that do not seem to need it on face value.

And that’s the trouble with bailouts: they don’t adhere to the reason delivered to us in nursery rhymes and aphorisms. Fairness steps aside for efficacy and, although Tuesday’s bill has some very good aid directed at needy people, other aspects of the government’s response like the Troubled Asset Relief Program have had to eschew all talk of deservingness. The main considerations are how effectively the government’s borrowed dollar will carry the economy and what political accoutrements are needed to ensure the bill’s success.

Furthermore, bank bailouts defy yet another basic idea (that of “purchasing”) when the government neglects to take any directorial role in the private institutions it effectively owns. The thought of “nationalization” is so scary that we’d rather have taxpayers’ money be controlled by bankers with recently shoddy records than admit that the system has, in this case, failed.

Like it or not, that’s what bailing out our economy is going to look like. Necessity governs the day. It’s going to require a lot of coolheaded understanding and the resignation that your particular interests may not be addressed as directly as the next guy’s.

And, hopefully, when all is said and done, we will be able to return to our normal rules of fairness and propriety that we have been compelled to disregard in the name of “bailing out.”

Will is a first year. You can reach him at wglovin1@swarthmore.edu.