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Tuesday, September 30, 2008

Bailout or Bankruptcy

Here is a link to a column that Rush Limbaugh shared on his program today. While it is funny to listen to Rush defend the Republicans and demonize the Democrats, I do think this column helps us understand why the bailout plan is a bad idea. Author Jeffery Miron writes:
In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

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