The recent government bailout of Wall Street may hurt our economy. Whenever there's some kind of crisis politicians always rush to pass new laws, create new programs and increase government spending, sometimes just for the sake of image and the appearance of doing something even if that 'something' might be a bad idea. How unfortunate for us that many legislators don’t think about the effects of their actions on the American economy before they pass new laws or spend our money.

Bailouts represent a transfer of wealth from taxpayers (otherwise known as those that produce products and services and create jobs) to everybody else (including non-producers or low income producers who pay little taxes). Ultimately this is simply redistribution of wealth punishing hard work and rewarding waste. This is a bad thing in a recession since it further discourages work and decreases the incentive to produce goods and thus there is less left to consume. The recent bailout is really, in the best case scenario, a zero sum game. An overall income tax rate decrease would be much better since it would encourage work and productivity.

There are a lot of reasons for the financial crisis but the most easily identifiable one is too much government interference in the housing market. The Community Reinvestment Act requiring banks to make a certain amount of loans to low- and middle- income people even if they might not be able to pay it back is but one example. The low Federal interest rate, which caused a speculative frenzy and caused people to buy properties with very cheap loans which became unaffordable when interest rates increased, was another factor. Governmental restrictions also played a role. For example, the trend towards "New Urbanism" or "Transit Oriented Development" in certain real estate markets on the West Coast, in the North East and some areas of Florida, required developers to build high cost-high density apartment blocks and banned or restricted the construction of low cost single family housing on the city fringes.

The United States government should not be in the finance nor mortgage business. The government bailout puts trillions of taxpayer dollars at risk and does nothing to rectify the underlying problems of the nation’s economy. And interference in the economy, however will intentioned it may be, is a recipe for financial disasters like the one we're going through. Despite Washington's best intentions, the lack of political will to deal with these problems will have us dealing with the worst of continuing consequences for years to come. How hard is it for us to understand that, the government, like any business or family, must learn to live within its means? Government intervention has failed us time and again... will we ever learn?

-GIR-

Kristian Somi is a recent graduate of Hawaii Pacific University where he studied economics. He's currently a public policy intern at the Grassroot Institute.