As Crisis Deepens, Government Officials Are Speaking Gibberish
As the economic crisis worsens, public officials have resorted to ever more nonsensical statements to describe what they are doing or propose to do in response to it. The dollar is not the only currency that is depreciating; the medium of communication, the English language, is taking a beating, too.
In a letter to Treasury Secretary Henry Paulson last Saturday, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, urging speedy government action to bail out the Detroit automobile companies, said: “A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector’s work force.” One need not be a master linguist to appreciate that this statement does not make good sense.
Speaking as an economist, I would say that it makes highly unwarranted claims. Does “restoration of financial market stability” really require “a healthy automobile manufacturing sector”? Why does it? Can the U.S. economy not enjoy prosperity without GM, Ford, and Chrysler as they currently exist? Why can’t it? Are the workers now employed by these companies incapable of working in any other capacity? What makes them so hyper-specialized? Does it make economic sense to prop up companies that have demonstrated that they cannot compete effectively and probably cannot operate in the long run without incurring chronic losses?
You’d think that someone skilled in special pleading could have written a more compelling pitch.
On another bailout front, where the Treasury is now steering several more shiploads of dollars to AIG (the whole bailout package for this giant company is now valued at $152.5 billion), an unnamed Treasury official was quoted as saying: “The Treasury determined AIG was a systemically significant institution. Bringing more equity to the company puts AIG in a better position to dispose of its assets, and it was done to protect the taxpayer.”
“Systematically significant institution”? Why? If AIG were to receive no more taxpayer money, would that cutoff entail the end of civilization? And how exactly does giving the company assets (cash) help it dispose of its assets (rotten securities)? It sounds more like trading something for nothing. To say that this make-believe “investment” will in any way “protect the taxpayer” only insults our intelligence.
Everyone can see that the taxpayers are being ripped up one side and down the other in these emergency government actions and that the Treasury and the Fed are bailing out and inflating as if there were no tomorrow. If they keep up these horrendous overreactions to a largely bogus crisis much longer, they may eventually ensure that there won’t be one.