Bailouts benefit mostly shareholders and creditors rather than workers

What Was Pelosi’s Taxpayer Ransom’s Goal? by Veronique de Rugy. Letter to The WSJ.

"In your otherwise excellent editorial “Pelosi’s Taxpayer Ransom Demand” (Oct. 7), you write that “aside from money for beleaguered industries like airlines, there was very little stimulus at all.” This is a terrible mistake. You assume that the airline bailout would be stimulative. Yet, as you have noted in the past, and as academic research also shows, bailouts benefit mostly shareholders and creditors rather than workers. If this bailout were about workers, it would cost less than $2 billion—$50,000 (for six months of payroll) times 32,000 furloughed employees—not $25 billion. Bailouts create disincentives to restructure industries efficiently, and they create many moral hazards.

In short, bailouts spend taxpayers’ money not merely wastefully, but also destructively.

Veronique de Rugy

Mercatus Center

Arlington, Va."