End the Bailouts

The Obama administration's decision to effectively convert much of the U.S. auto industry into a subsidiary of the federal government illustrates the worst aspects of the bailout mentality. Billions in taxpayer dollars continue to flow into troubled industries -- and government control of those businesses is expanding faster than the budget deficit. We're pleased to see that the administration is considering bankruptcy for GM. But it's hard not to wonder if that time-tested approach for dealing with insolvent companies should not have been applied sooner to automakers -- and to at least some of the failing financial giants.

Bankruptcy judges seek the most equitable solutions for creditors, companies, customers, and employees. They wield enormous influence over the bankrupt corporation -- but they are also largely shielded from political pressure. And, unlike the U.S. Congress, judges do not enjoy unfettered access to the taxpayers' wallets and the borrowing power of the federal government. A judge's job is to help a company return to financial health as quickly as possible. Or if that is not possible, to liquidate the business' assets in a fair and timely manner. Politicians are sorely tempted to maintain control over private industry for as long as possible. It increases their power, after all.

The government has a duty to oversee the tax dollars pouring into private enterprises. But the urge to allow oversight to become de facto ownership is too strong for many elected officials to resist. We suspect most businesses would find Tony Soprano to be a better partner than Barney Frank.

The financial system is less fragile than it was in the fall, when emergency measures were necessary to prevent a meltdown. In that respect, former Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke were successful. But the unintended -- yet entirely predictable -- consequences of their actions now threaten to undermine the free market system that has brought Americans such healthy helpings of prosperity and liberty.

It is time to slow the flow of bailout money, with an eye to ending it soon. And it's time for businesses to begin paying back federal handouts. That's especially true of the healthy banks that took money because the government told them it was their patriotic duty. We need an economic declaration of independence.