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Bailouts are the problem

March 25, 2009 | By Nathaniel Ward

Big-government policies are at the root of the AIG bonus controversy, explains Heritage Foundation expert Brian Darling. "Conservatives are outraged by the bonuses, but know that bonuses aren't the problem—the bailouts are."

Darling blames the bailouts, which were first implemented under President Bush, for increasing government's belief that it is entitled to own and direct much of the economy. For instance, the federal government now owns 80 percent of AIG's stock. What's more, the bailouts have been used to further encroach on private sector prerogatives.

Unfortunately, it doesn't look like the intrusion of government into the private sector will end with the bailouts. The budget contains massive new taxes and spending that would further expand the size and scope of the federal government.

Ironically, many of President Obama's budget policies resemble President Bush's, except that they'll cost taxpayers even more. "President Obama's only real divergence [from his predecessor] is his proposal to raise taxes steeply," argues Heritage budget expert Brian Riedl. "Yet all these tax increases would go toward expanding government. None would reduce budget deficits even back to President Bush's levels."

Riedl highlights just a few of the new President's costly and expansive budget objectives:

  • $1 trillion — the expansion of government under the President's budget proposal, a figure which does not include spending on the "stimulus";
  • $646 billion — the cost to consumers of the cap-and-tax energy plan, which could cost each household from $650 to $2,000 annually;
  • $634 billion — the size of the new healthcare reserve fund; and
  • $8,000 — the increase in Washington's annual spending per household, which will rise from $24,000 to $32,000.

And how do we pay for it all? "Anyone who believes all these costs can be paid by the wealthiest 2 percent of taxpayers is dreaming," Riedl says. "We'll all be paying this tab for decades."

Yet the Left continues to prescribe more government — and more bailouts — for the nation's economic woes. If these pricey policies are enacted, the American people can expect little change, in any sense of the word, from the Obama administration.

—Amanda Reinecker

Watch Karl Rove tonight

Karl Rove, a former adviser to President George W. Bush and now a political commentator, explains how conservatives can recover from political setbacks at an event sponsored by the Minneapolis/St. Paul Committee for Heritage.

Watch the event live online on MyHeritage.org tonight at 8:50 p.m. Eastern

Other Heritage work of note

  • A half-measure war is "the kind of war that cannot be won," argues Heritage homeland security expert James Carafano. Carafano urges the Obama administration to avoid the mistakes President Johnson made in Vietnam and avoid "half measures." Instead, they should develop a sound strategy and commitment to the war in Afghanistan, despite its unpopularity.
  • In response to the recent confirmation of an arms contract between Russia and Iran, Heritage Russia expert Ariel Cohen urges the Obama administration to "use extreme caution in negotiating Russian cooperation on Iran. While the White House is understandably preoccupied with Russian policy, it should balance it with boosting missile defenses, engagement with America's European allies, and ongoing involvement in Eurasian and Caspian affairs."
  • Margaret Thatcher Senior Research Fellow Ted Bromund warns that an under-armed Britain "tempt[s] predatory powers to take chances." Bromund, a Heritage expert in international affairs, outlines a "sensible defense policy," advising Britain to increase its defense budget, emphasize efficiency in procurement, and to take conventional defense more seriously rather than relying solely on nuclear weapons.
  • Talk radio host Hugh Hewitt broadcast his program from The Heritage Foundation on Monday. Heritage makes its Robert H. Bruce Radio Studio available to visiting talk radio hosts when they are in Washington.

In other news

  • While campaigning, President Obama rightfully promised transparency in government, especially with regard to its dealings with the economy. Unfortunately, Politico reports that there have been no reports of meetings or progress of any sort from the 16-member Economic Recovery Advisory Board.
  • German Ambassador Klaus Scharioth has proposed something silly: "If we decide missile defense is necessary, we should give it to the NATO-Russia Council," in hopes of sending a positive message to Iran.
  • The Obama administration has introduced a $1 trillion proposal purchase "toxic assets" that endanger the financial system. Many investors are wary of participating, however, given the government's recent punitive proposals.   
  • North Korea faces international sanctions in its preparation to launch a satellite into space next month. The launch would violate 2006 U.N. Security Council resolution prohibiting North Korea from ballistic missile activity.

Coming up at Heritage

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Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation. Amanda Reinecker contributed to this report.