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Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.The larger thesis is that the Bush administration has fully botched this economic crisis, and will be rightly remembered as the heir to the Hoover administration. Meanwhile, according to Laffer, Clinton was the true heir to Reagan!
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Laffer is persuasive, perhaps even right in theory.
In practice, the fall-out from the demise of Lehman Brothers suggests that letting Merrill and Citi and Bear Stearns and a dozen big regional banks fail would have staggered the U.S. economy and triggered similar failures worldwide. Our folly could have nuked the capitalistic system around the globe.
As it is, our fun and games caused a major money-market fund to "break the buck," resulting in the freezing of over $3 billion belonging to China's sovereign fund.
The good news comes from poor old Richard Nixon. The great thing about the U.S. economy, he once observed, it that even politicians can't destroy it, no matter how hard they try.
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