Harvard economist Jeffrey Miron has an insightful piece about why bailing out Greece is a mistake. Among other things he says this: “Bailout merely transfers resources from other nations to Greece. This is presumably beneficial for Greece in the short term because it postpones painful adjustments like lower salaries for government employees. But a bailout harms the citizens of these other countries, who did not live beyond their means. And a bailout harms Greece in the longer term by delaying adjustment of the fundamental flaws in its economic policies.”
Funny, but if you change the names you could apply this sound thinking to many current crises. The housing bubble and foreclosure mess “a mortgage bailout harms those citizens…who did not live beyond their means.”
Or how about “a bailout harms Greece in the longer term by delaying adjustment of the fundamental flaws in its economic policies.” Just replace Greece with US auto-makers.