03/18/2008 11:14 am ET Updated May 25, 2011

What Happened to the Bootstraps?

For as long as I have been alive Republicans have been saying that government hand-outs make people lazy and give them all the wrong incentives. Instead the better approach is for people to pull themselves up by their bootstraps.

So, now when the financial industry is in trouble because they took too much risk in trying to get too rich too quick, I'd like to ask one question -- what happened to the bootstraps?

Why didn't the Fed toss Bear Stearns a couple of bootstraps and tell them to piss off? Oh wait, could it be that Republican ideology only applies to the poor and the middle class? If you have a problem in your life that you need some temporary help with, you're out of luck. But if a massive company needs that same help, well, of course, the government is going to step in. It would be irresponsible not to!

Incentives matter. I agreed with welfare reform because if you give someone an incentive to take a check (even if it's a small one) for not working, you're going to produce a result where people will take that check rather than work much harder for maybe a little more money. It wasn't just a slogan when Bill Clinton said that welfare should be "a hand up, not a hand out."

If you give unchecked and unlimited welfare (unlimited in time, I know the checks were never huge), you encourage people to stay on welfare for too long. If you have no welfare, then you don't pick decent people up when they need a hand in their lives. We need balance in how the government handles this.

But the same has to be true of regulating giant companies in the financial industry. The Republicans claim to be laissez-faire - until it comes time to bail out their rich friends. Then they're knee-deep in government intervention. So, they won't bail regular folks out when they need a little help, but will jump right in to bail out some of the richest people in the country.

Don't get me wrong, I'm not a class warfare guy and I understand why the financial industry had to be stabilized in the short term. The problem isn't the bailout; the problem is what led to the need for the bailout. The government took away almost all of the regulations of the financial industry, and then is surprised when they acted in a way that needed to be regulated.

Without the government watching over their shoulder, the banks made far too many loans to investment vehicles that were far too risky. But the more loans they made, the richer they got. Except for one thing -- all that risk. But what did they care? If it all crashed, the government would have to bail them out anyway.

It's all a mater of incentives. If you give people incentive to risk too much without giving them adequate disincentives, you will get too much risk. And, of course, now, we'll get the typical Condoleezza Rice line, "No one could have seen it coming."

So, what are the answers? First, if the government is going to bail you out, then the government should be regulating you to make sure you're not going to need a bailout. I'm not a fan of over-regulation (but we're nowhere near that), but no regulation at all is just as dumb, if not dumber.

Second, shut the fuck up about bootstraps. If you're going to keep bailing out the largest companies in the world, you better be prepared to do the same for the average American when they run in to some trouble. Laissez-faire my ass. This is rank hypocrisy.

Third, you need balance, whether it's a hand up for the common guy or a regulation for big business. Too much of anything provides the wrong incentives, but too little leaves people hanging in the wind. We need some welfare and some regulation. Not too much, not too little.

Finally, when someone tells you about their ideology of free markets unfettered by any government intervention, they better not come crying home to mama when they need help from that same government they've been bashing for the last sixty years.

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