Kira Davis: We Need Help, but Bailouts Are Not the Answer

(AP Photo/Charles Krupa, File)

FILE- This June 15, 2018, file photo shows U.S. currency on a counter in East Derry, N.H. Most financial planners advise never tapping retirement savings to pay for your kid’s education. Even as college costs climb, there are still options to borrow that cash, whereas it’s often noted that you can’t borrow for retirement. (AP Photo/Charles Krupa, File)


These are unprecedented times.

In the scary days directly following 9/11, our government responded with brute force, legislation (some of it warranted, most of it not) and a stimulus package aimed at bailing out major industry. Back then many political pundits warned about the dangers of handing out money to big business instead of letting the free market correct the problem, however painful that may have been. The concern was that bailouts would become normalized and we would only drift further and further into crony capitalism.

Now here we are in 2020 and a global pandemic no one seems to understand is bringing economic stimulus back to the forefront of American politics.  There is no doubt that some kind of action needs to be taken to protect what is left of our economy. While I have faith in the ability of the American economy to recover and thrive, it is silly to think we won’t need the government to do some things differently to dig us out.

I just don’t think “stimulus” is the way to do it.

I share the fear of a lot of other free market economists and conservative pundits. If we allow ourselves to normalize the idea of economic stimulus packages every time we’re in a crisis, we are making way for inevitability of these things becoming permanent. Not only that, corporate stimulus packages breed bad service and hobble economic activity and consumer care down the road.


We need only look to the airline bailouts of 2001 to see that. Baggage fees, cramped seating, inflated prices, reclining wars…none of these things existed before the bailouts. When the government stepped in to “save” the airline industry, all they did was reward failure. As a result, service plummeted. Customers were removed from the equation. When that happens there is no incentive to please the customer, improve service or cut costs. Even without the annoyance of new TSA rules, air travel became increasingly unbearable. Now people get into fistfights over whether or not one can recline their chair 1 inch.

The bailouts didn’t rescue the industry, they crushed the customer.

That’s what coronavirus bailouts will do, both for individuals and for companies. If we bailout industries like airlines (again?), movie theaters (seriously?) or Hollywood (for real, you guys…just stop) we will see a significant drop in customer service. When a company knows they can depend on government to pick up the slack when things get rough they have no incentive to innovate in order to fill the vacuums left by this unholy point in time. Hollywood wants a bailout because after this no one is going to be too keen on supporting the Chinese entertainment industry. They picked the wrong horse and now they want us to pay for it. Nope. Hollywood, the airlines, movie theaters, Joe Schmoe down the block…everyone is going to have to figure out how to pivot and innovate. No, it won’t be easy but it will make us all more prosperous down the road.


For individuals, the danger of acclimating general American society to regular welfare payments is very real. We are already grossly overburdened by a broken entitlement system. Even as I write this the Democrats in Congress are rejecting a taxpayer stimulus bill because they want to to slip in new entitlements. In the midst of a pandemic that is crippling our nation, the Democrat party wants to codify nationalized welfare and bolster unions. It is unconscionable, but also unsurprising.

If we are to resist such nefarious attempts we have to be willing to take on the burden of letting the free markets play out.

Does this mean I think nothing should be done? No, of course not. I am not oblivious to the suffering right now. I live in a state where almost everyone – even the rich – lives paycheck to paycheck. I am watching all of us experience the fear of not knowing what next month will look like at the bank. The federal government has a role to play here. Instead of spending trillions on cash stimulus, the government should forego those trillions on their end. Cut unnecessary spending, close useless departments (we can start with the Department of Education, but that’s another op ed for another time), and lift the federal income tax for the next 12 months. We can also end interest payments on tax debt for an indefinite period.


And if anyone is saying “How will the government function without all those taxes?” my response is, “How are you functioning without all those jobs and all that income?”

The answer, of course is – we all figure it out…because we’re Americans and what do Americans do when we are faced with new and formidable obstacles? We beat a new path.

*For more of my thoughts on bailouts, check out the latest edition of my podcast Just Listen to Yourself. JLTY is available wherever you find your podcasts. Please consider leaving a rating and/or review. It’s a free kindness you can offer right now. 



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