Imagine, if you will, the wealthiest and most powerful nation in the world hurtling towards the brink of financial ruin. Imagine a corrupt mass of government leaders and corporate executives who, out of sheer stupidity or selfish indifference, have recklessly plunged the future health of their economy into a morass of uncertainty from which there is no clear path to emerging at all, let alone emerging unscathed. Imagine that those same politicians, bankers and corporate fat cats take every opportunity to smugly deride MMT (Modern Monetary Theory, the theory of economic illiterates which holds inter alia that a government that issues its own currency can never face the risk of insolvency, because it can always print ever-more money to pay off its debts), while they themselves rack up unprecedented sums of government and corporate debt with no plan to ever pay it down, much less pay it off. Imagine a system of government that is supposed to be of the people, by the people and for the people, but instead is comprised of the rich, is dominated by the rich, and operates for the rich – a system that features, during times of prosperity, privatized gains which mainly benefit the wealthy; but, during difficult times, socialized losses that must be borne by tax dollars, taxpayer debt, and central banks chipping away at the value of the dollars in your bank account. Imagine, if you will, the United States of America in the year 2020.

Many readers may already be experiencing knee-jerk objections to my sorry characterization of the present state of our great nation. The facts, however, speak for themselves – as they are wont to do. The ongoing COVID-19 pandemic, and specifically the fiscal and monetary policy reactions of our all-too-powerful government and all-too-existent central bank, have once again thrust the corruption of our economic system under the spotlight. Hopefully this time the American citizenry will not be as collectively blind as it has been in the past to the creeping stench of cronyism and corruption overtaking our capitalist system. But let us now part from generalization and dive into specifics.

It is no secret that in the years and decades preceding coronavirus’ campaign of terror on American soil and throughout the world, governments and corporations – particularly those in the United States – had embarked on a theretofore untested economic experiment fueled largely by public- and private-sector debt. Over the past 20 years America’s federal government has stumbled into an unsustainable path of least resistance, routinely running massive budget deficits in years both good and bad, subsidizing current taxpayers and market participants on the backs of future Americans. Consequently, the US federal debt has ballooned from $5.7 trillion at the turn of the century to $10 trillion in 2008 to a jaw-dropping $24.5 trillion today. Corporate balance sheets have not fared much better, as US business liabilities swelled from $6 trillion a decade ago to over $10 trillion today – in spite of the record profits achieved by corporations during the intervening period of economic expansion. Instead of using any of these profits to shore up their companies’ balance sheets, business executives instead borrowed trillions of dollars to finance not only business investments and shareholder dividends, but the purchase of trillions of dollars’ worth of their own stock shares in order to boost shareholder earnings and the value of their own bloated compensation packages. As a result, corporate debt comprised a record 48% of US GDP by July of 2019.

Do I have any problem with overleveraged corporations borrowing funds from willing lenders? Not really, that’s between the borrowers and lenders. Nor do I have any objection to companies’ Boards of Directors spending such borrowed funds on shareholder dividends and stock buybacks. That’s the corporations’ business. But when those same corporations, which dished out many trillions of dollars in profits and debt to their shareholders over the last decade, come sheepishly crawling to the US taxpayer for a bailout at the first sign of trouble, that catches my attention – as it should yours. And that is exactly what happened when coronavirus struck, maiming large swaths of the global economy and catching by surprise the great bulk of corporations that were woefully unprepared not only for a so-called “black swan event” like coronavirus, but for any rainy day at all.

In order to prop up American enterprise and save corporations large and small (but mostly large) from the consequences of their own risky practices, the federal government has gone into overdrive to throw free money at struggling entities. Congress has already allocated over $2 trillion to bail out our failing economic system, and politicians no less powerful than Speaker of the House Nancy Pelosi have suggested that a lot more bailout money may be on the way. This obscene bailout binge on the taxpayer dime has led experts to predict a federal budget deficit of as much as $4-5 trillion this year (that’s $4,000,000,000,000 to $5,000,000,000,000), which would mean up to $15,000 in brand new debt for every man, woman and child in America – primarily to bail out corporations that for the most part did little if anything to prepare for tough times as they experienced the greatest economic expansion in US history over the past decade. Each American family of four is about to take on $50-60,000 in new debt to save the corporations.

To put these 2020 deficit projections in perspective, a $4 trillion deficit would be twice as large as any annual deficit since the end of World War II not only in objective terms, but even as a percentage of GDP. But that doesn’t bother politicians, because their fiscal recklessness over the last 20 years has already made it impossible for these criminal sums of debt and deficits to have any effect on the American consciousness. As left-wing activist Saul Alinsky astutely observed in his classic Rules for Radicals, “The moment one gets into the area of $25 million and above, let alone a billion, the listener is completely out of touch, no longer really interested, because the figures have gone above his experience and are almost meaningless. Millions of Americans do not know how many million dollars make up a billion.” To millions of Americans, $25 trillion in taxpayer debt is just a number that is entirely divorced from their frame of reference – at least until the bill comes due.

But it gets worse. The staggering sums of corporate welfare recently made available by Congress pale in comparison to what the Federal Reserve (unaffectionately known as the Fed), America’s allegedly independent central bank, has been doing to keep many of the weakest (and worst-prepared) American businesses solvent during this period (again, primarily the large ones). First, the Fed – which kept interest rates low over the last ten years in a short-term bid to artificially juice economic growth – slashed interest rates to zero to make it easier for overleveraged companies to saddle themselves with even more cheap debt. Next the Fed, led by its brilliant Chairman Jay Powell, began an asset-buying program to “shore up capital markets” which the word unprecedented does not begin to describe. In just six weeks beginning March 8, the Fed has printed trillions of dollars in fairy tale money, pouring it into corporations in the form of debt – as much as in the four years following the Great Recession. But the central bank is not close to done, as Powell and other Fed officials have made clear, going so far as to indicate that there is no limit to how much money the Fed is prepared to pump into the economy to preserve its short-term prospects. (Powell made remarks to this effect during a March 26 TV interview with NBC News’ Savannah Guthrie.) The Fed’s asset-buying program is also assisting the US Treasury (from which it is supposedly independent) by purchasing substantially all of the new bonds being issued to fund the federal government’s aforementioned spending spree. Some estimates hold that the Fed will stimulate the debt markets to the tune of $10 trillion this year when all is said and done. That’s nearly half of 2019 US GDP. Surely piling more corporate and government debt on top of already-record US debt figures will help the American economy emerge stronger from this crisis! Now there are even whispers in the financial press that Congress may authorize the Fed to purchase stocks in order to artificially juice the stock market with an influx of fake demand. After all, the American economy (as measured by Jay Powell’s 401k) must be saved at all costs. How the Fed will ever manage to unwind a $10 trillion+ balance sheet is anyone’s guess. But enjoy your $1,200 stimulus check.

Don’t get me wrong, I am the most bleeding-heart free market capitalist you will ever encounter. But the system we are describing is not capitalism. The markets we are describing are not free. The government and its central bank have drained the freedom from our markets by bailing out corporate shareholders on the risks of their own investments. As to a lesser degree during the last recession, the powers that be are using your tax dollars to save corporate America, perpetuating the moral hazard that incentivizes large corporations to pile on record amounts of debt and make imprudent risky decisions, knowing that the taxpayers will likely bail them out if things go south.

Fear not, water-carriers of big government, I can already hear your righteous howls of wounded indignation. “BUT,” you are insisting, your metaphorical index finger jabbing the metaphorical air, “the nature of this CRISIS is simply UNPRECEDENTED. It’s not COMPANIES’ fault that they’re in trouble. They couldn’t have PREDICTED coronavirus. This is a ONCE-IN-A-LIFETIME event!” And I will grant you that the economic impact of coronavirus has been both unforeseeable and devastating in its impact. However, an eventual recession (of unpredictable severity) was inevitable. Moreover, any particular industry could have been paralyzed by any “unpredictable” event. If companies as a whole had put any substantial portion of their recent trillions in profits aside for tough times instead of taking the risk of living “paycheck-to-paycheck,” the economic landscape would look very different today. As consumers, we are advised to always have 4-6 months of expenses set aside in an emergency fund. So why don’t companies have enough reserves to make it through a few difficult weeks? Because they have acted recklessly and irresponsibly, and they chose short-term wealth over long-term health. And now it’s our job to bail them out? The rich have rigged our economic system for their own benefit, such that they get to keep corporate profits when times are good and taxpayers are granted the privilege of picking up the tab for corporate losses when times are not so good.

Moreover, let us suppose that racking up a record 48% of GDP worth of corporate debt was in fact responsible, and that companies truly bear no fault for the situation they find themselves in today. So what? When investors found corporations or invest therein, they take on many risks – including those that are out of their control. When investors make fortunate investments, which happens all the time, they get to keep the proceeds of their good fortune, as they should. The government doesn’t step in and say, “You didn’t know when you invested in that facemask company that the coronavirus outbreak was going to quadruple its market value, so please fork over those gains to the taxpayer.” Likewise, the government should not subsidize the losses of investors whose investments run into unexpected risks. That’s not how capitalism works. As an aside, the suggestion that corporate bailouts and Fed monetary easing are a one-time thing is also laughable. I wonder what the “once-in-a-lifetime” justification for corporate welfare will be during the next recession. Or will we already have become so conditioned to it at that point that no justification will be needed?

Even those who understand that basic free-market principles should preclude the government and the Fed from taking the actions they are presently taking are likely to be troubled by the idea of letting insolvent companies fail. You may be concerned about the employees and customers of those businesses, who certainly are not deserving of the economic carnage that will ensue if dozens of large corporations and hundreds of small businesses fail in one fell swoop – as you should be. But propping up a failed debt-fueled system in the short term, which among other negative repercussions will all-but-ensure an even more epic collapse when the next recession hits, is surely not the right answer. Why dish out trillions of taxpayer dollars to corporations when for a lower price you can assist people directly while gaining the benefit of letting the free market cleanse itself of bad capitalization practices and deter those practices from being repeated in the future on the taxpayer dime?

So again, let’s get into specifics. The (truly) once-in-a-lifetime bailout package I would propose is similar to that advanced by Rep. Justin Amash (I-Mich.). Every American household should receive a tax-free check from the government of $10,000 per adult and $7,000 per child. That’s a lot of money for the average household, which would help the innocent bystanders of corporate recklessness make it through this recession in relatively decent shape. The total cost of this proposal? Approximately $3 trillion. Compare that with the combined efforts of the Fed and the federal government, which are likely to total 4-5 times that amount. It’s a lot more costly to save a failing system than to actually help the people who need and deserve to be helped.

The advantages of this proposal are obvious. For one thing, as we have established, it would be far less expensive than what the government is currently doing. Furthermore, if the government is spending trillions of borrowed dollars to help American households through this period of economic malaise, isn’t it preferable to actually give it to those households rather than giving it to corporations in the hope that its effects will eventually trickle down to the intended beneficiaries? Moreover, and most importantly, unlike what the Fed and Congress are doing, this stimulus proposal would not perpetuate the moral hazard incentivizing companies to take irresponsible risks on the taxpayer dime. When companies see that they can no longer depend on Uncle Sam and Aunt Fed to bail them out when the going gets rough, they will be forced to act responsibly and maintain healthy balance sheets – or run the risk of extinction in the next recession. This will not only leave our economy far healthier in the long term, but will also ensure that the distasteful practice of the government stimulating the economy in any form will not need to be repeated on a regular basis.

Let me add one additional point about corporate insolvency, because a lot of people don’t seem to understand how a typical corporate bankruptcy works. When an airline, for example, goes under due to its excessive debt load and diminished revenues, the bankruptcy court doesn’t drown its planes in the ocean. The bondholders (to whom debt is owed) take control of the company from the shareholders (the owners of the company), and they monetize the company in whichever way makes the most sense. That may entail selling off the planes and other assets to competing airlines or restructuring the company – but in any event, when the crisis ends and air travel resumes, those planes will be back up in the sky. And they will need pilots and flight attendants and all the other employees they previously needed to operate while under a different corporate umbrella. The point is that demand in a free market is dictated not by the corporate entities in existence, but by the market itself. Thus, once the economy recovers, furloughed employees will go back to work and consumers will have all the options they need for air travel as well as all the other goods and services they require. And where weak companies have disappeared or stumbled, stronger companies will step in to fill the void – in the beautiful symphony of old-school American capitalism. The only people worse off in the long-term will be the shareholders who did not get bailed out on their investments gone sour. The rest of the country, however, will be far better off by letting a bad system suffer the consequences of its deficiencies rather than exacerbating those deficiencies through market-defying stimulus and thus kicking the can of debt-fueled economic devastation further down the road.

Under ordinary circumstances, I would not support any government stimulus of the free market at all – both because it is a slippery slope to the kind of intervention we are now seeing and because manipulating the free market is immoral on its own merits. However, I agree with the popular sentiment that these are no ordinary circumstances. After all, the government and corporations have, through their own imbecilic temerity, created a no-win situation where the only way to save the great tradition of American capitalism is to let corporations suffer the unexpected double-whammy consequences of the market’s dictates and their own foolish actions. Because the government helped create this problem by creating the moral hazard referred to previously, we are now in a situation where a total lack of intervention could lead to a full-blown depression. And that should not be an option. It is therefore necessary to provide stimulus funds to keep average Americans afloat in these tumultuous times – but not a single taxpayer dime should end up in the hands of the businesses that contributed to getting themselves (and the rest of us) into this mess in the first place.

Sadly, all of the above discussion is purely theoretical. Jay Powell and members of Congress are going to continue to do whatever it takes to bail out their corporate cronies at the expense of the American taxpayer – and more precisely, future American taxpayers, who will inherit many tens of trillions of dollars in debt that will never be paid off. As a result, corporations will continue to act with escalating wantonness and reckless disregard for the basic tenets of intelligent free-market participation, because our markets are no longer free. The government will continue to socialize the losses of industry in times of recession. Year after year, the rich are unabashedly gorging themselves on our grandchildren’s financial future, enabled by our own government leaders, and We the People are too complacent (and complicit) to do anything about it.

(TLS welcomes your opinions by submitting them to letters@thelakewoodscoop.com)