After a number of U.S. banks began to collapse, many/most politicians including the Bush administration called for an enormous ($700 billion) bailout. An even larger bailout is in the works to be added, for a total of more than 10% of our GDP. In a speech on Feb. 5 to rally Democrats, Obama said "What do you think a stimulus is?" adding that "[spending] is the whole point" of a stimulus.
Aside from the expectation that government spending could accomplish anything but distortion and economic inefficiency, what I find most frustrating is that politicians everywhere justify the need for government aid because the financial crisis was caused by free markets. Hang on. What free markets? The financial sector is perhaps the most regulated sector of all, and specifically banks were forced to lend to risky people who would likely renege, while the riskiest loans were guaranteed by the government. This created an incentive structure that doomed banks to collapse and inevitably rely on government aid.
Economists can be hired by politicians to tell you what you want to hear, but at both my undergraduate and graduate institutions I've heard faculty predict this result of government manipulation for the past 5 years (no doubt longer than that, but that's when I started taking econ classes).
This article does a good job of explaining the decision process a Chief Financial Officer (CFO) faced in recent years:
http://www.campaignforliberty.com/article.php?view=12
I highly recommend reading it.
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