Corporate Bailouts: the REAL Trickle-down Economics

Advocates of corporate welfare often claim that when governments privilege a handful of firms, the rest of the economy somehow benefits. This is how the Bush Administration sold the bank bailouts. It’s how the current Administration sold the auto bailouts. And it’s how the U.S. Chamber of Commerce is trying to sell the Export-Import Bank.

Mounting evidence, however, suggests the opposite is true: economies whose firms sink or swim based on political patronage grow slower and are less stable than those in which firm success depends on an ability to meet the market test.

That’s me, writing at Real Clear Markets. I’ve always thought that if there were any justice in the English language, “trickle-down economics” would not refer to general tax cuts, but would instead refer to any scheme to privilege particular firms or industries in hopes that their greater prosperity will somehow trickle down to the rest of the economy. I was glad that the editor took my suggestion for the title. Click here to read more.