Please, just let markets work!

Forget the intro; I’ll just cut right to the chase. Businesses that cannot survive without government aid should not survive. It’s really that easy. People that cannot afford to live in a house should not live in that house. Again, it’s really that simple. Forget the $800 billion pork-barreled-up-the-whazoo ‘stimulus’ bill. Taking the tax dollars of those businesses that make prudent decisions and operate with sustainability in mind, and using them to give as a hand out to the irresponsible businesses who either knowingly or ignorantly took blatant risks in the name of short term results is the epitome of inequity. Taking the tax dollars of those homeowners who break their backs and sacrifice everything discretionary in order to pay their mortgage on time every month to spend them on keeping the irresponsible people who bought houses they knew they couldn’t afford, or who would rather spend their income on a new BMW lease, in their houses is unfathomably sickening. Businesses: if you take risks, assume the responsibility for the result. American citizens: if you bought more than you can afford; assume the responsibility for your decisions. The government is not some generous bad parent who rewards blatantly irresponsible behavior by eating the loss so you don’t have to. Unfortunately, that’s exactly what this ‘stimulus plan’ garbage is. It’s also what all these ‘our top priority is keeping people in their houses’ programs are. This is atrocious. Seriously, what kind of message does this send to the youth of our nation? “Do whatever the hell you want son, live far above your means, max out your credit, bet on the long shots, because in the end you will reap the rewards and someone else will cover all the losses.”

Before you start posting enraged comments, obviously there are those businesses that made prudent decisions and are still facing bankruptcy. There are obviously homeowners that didn’t buy above their means, but rather lost their jobs or something similar and are now facing foreclosure. Well, unfortunately there will always be these outlier cases, no matter what the economic environment. What about everyone losing their jobs? We are in a contraction period in the business cycle. No one thinks anything out of tune with the labor market when it’s easier to find a job than your car keys. During times of major economic growth when firms all balloon up their employee base getting a job is quite easy; competition for those positions is not too bad. But when growth turns into contraction, and these same firms proportionately reduce their labor costs everyone is so shocked at the heartlessness of ‘Corporate America’. Only the best candidates get the jobs, all those non-top performers who got hired during the growth phase are no longer sustainable. This is what happens in a downturn. It is exactly the opposite of what happens in an upturn; but no one is paying attention when times are good. I’m going to need to supplement this with a subsequent post outlining the serious problems with the American labor market.

So what about those businesses that didn’t take any risks but are still getting beat down and out? When John Doe opened up his (whatever) business, how would he have known that the economy was about to tank and demand for his (whatever) would seriously decrease or disappear? It is this type of mentality that’s the problem. There is risk involved with starting a business. There is risk involved with operating a business. There is a business cycle; it is well documented. Just because someone is ignorant of history and economics does not mean that they should be excused from the consequences of their actions. Telling the judge, “But how was I supposed to know that in China pedestrians always have the right of way?” will not get you out of Chinese prison for vehicular manslaughter. In economics, just the same as in the judicial system, ignorance of the law is no excuse.

Opening or running a business does not guarantee success. Seeking or getting a job does not guarantee you indefinite employment. Investing your retirement money in a mutual or index fund does not guarantee you positive returns. This is how the world works. If you do not have the foresight to see the downturn coming, and/or have not adequately prepared for the lean years, your business will and should fail. If you are living near, at, or above your means and have not adequately prepared for the lean years, you will and should lose your house and assets. If you are not the most qualified for your job position, and/or are being paid more than the equilibrium wage for that position, you will and should lose your job. I’m not some heartless bourgeois; this is simply the real world, this is reality.

It is only after this reality is realized and accepted that we will stop trying to ‘fix’ the inevitable, with more misappropriated tax dollars which in turn only delay and exaggerate it, and embrace this correction as a much needed consolidation period from which increased efficiency, growth, and prosperity will emerge.