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Commentary

Patriotic Shopping Sprees


     
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“Spend more. It’s your patriotic duty.”

I haven’t seen these exact words, but it’s the message a lot of pundits are sending this holiday season. Since we’re officially in a recession, according to the National Bureau of Economic Research, do we need to add the obligation to spend for its own sake in order to help the American economy to the normal stresses of the holiday season? Should the government bail out everyone who asks in order to increase spending?

Forgive me, but this deserves a hearty “Bah, humbug.”

One wag commented that urging people to spend to prop up the economy is about as sensible as urging people to eat cholesterol-rich foods so cardiologists can keep their jobs.

People don’t just save for saving’s sake. They save because they want to consume later. A Christmas bailout increases consumption today, but it makes us poorer tomorrow. The long-run political cure—bailouts and spending—may be worse than the short-run economic disease.

Consider the proposed giveaways to Ford, Chrysler, and General Motors. Expectations about the future investment climate are very important, but instead of allowing bankrupt firms to fail, which would free up capital and labor that can be used in more productive ways, the federal government has decided to give billions and billions of dollars to powerful special interests.

The case demonstrates the illusion of permanence in a competitive economy. Through the late twentieth century, the looting of the Big Three automakers by unions and the government was tolerated because no one could imagine that these massive industrial concerns would ever find themselves in financial trouble. They were enormous. They were profitable. Surely they could afford to pay their workers more. Surely they could afford to pay higher taxes.

But Japanese automakers began beating them at their own game. Instead of retooling and trying to beat Japanese manufacturers on the bases of price and quality, the Big Three increased their political activities. Big Business teamed up with Big Labor and Big Government, and for decades they combined to shake down consumers and taxpayers.

Big Business earned higher profits, some of which they shared with Big Labor and Big Government in exchange for protection from competition. Big Labor earned higher wages, which they shared with Big Government and Big Business in exchange for protection from competition. Big Government earned higher tax revenues and payments from special interests. Everybody won.

Everybody, that is, except consumers and taxpayers, who were bilked out of vast sums because they had to pay higher prices and higher taxes. The automakers and labor unions asking for government handouts spent years earning high incomes by shaking down taxpayers and consumers. Because of their decades of obstruction, we are all poorer than we would otherwise be. As for whether they deserve of even more government handouts, I am reminded of the old story of the boy who murders his parents and then begs the court for mercy because he is an orphan. The automakers, the unions, the government, and their supporters made their beds. If we really care about our fellows and about our children’s futures, we will insist that they lie in it.

Lost in discussion of whether government handouts are essential to the health of the economy is an important ethical point. In the early nineteenth century, Davy Crockett opposed government relief payments on the grounds that the money requested was not his to give. It is time to recover this understanding.

I am glad I live here, and I remain optimistic about our prospects for the future. After all, a country in which an iPod can be had for less than a day’s labor for an average worker is a country in which anything is possible. Nonetheless, I worry that we will sell our children and ourselves short by capitulating to demands for handouts. We can continue putting up with impositions and wasted resources. Or we can say “enough is enough.” It’s time to choose the latter.
Art Carden is a Research Fellow at the Independent Institute in Oakland, California, and Assistant Professor of Economics at Samford University.
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