On Pelosi’s faith in government as an economic engine

House Minority Leader and former Speaker Nancy Pelosi (D-CA) said on Thursday that Republicans in Congress may hold out on raising the federal debt limit until a severe downturn in the markets wakes them up. “The Republicans may need to see the markets drop 400 points,” she said, and “[the markets] should encourage Republicans to raise the debt ceiling.”

This way of framing the issue speaks volumes about Pelosi’s concept of how an economy functions. She may well be correct that a market downturn would spur Republicans to compromise their position on the debt ceiling, as they are certainly known for caving under pressure. But what remains to be understood is precisely why Pelosi believes that American businesses rely on the government continuously going deeper and deeper into debt in order to function. She does not explain for our benefit what connection exists between capping the government’s debt and spurring a dramatic market downturn.

The truth is that most businesses in America earn their profits by producing goods and services that people want to buy because it benefits every party involved. For the minority of businesses that really do depend upon continuous government spending as their core economic engine, it’s unclear why anyone outside of narrow special interests should want these companies to survive. Surely the execs of the Citigroups and AIGs of the world have already gotten plenty of taxpayer money through the controversial TARP bill. The taxpayers needn’t shoulder the burden of more bad business decisions.

An economy of businesses dependent upon government handouts isn’t sustainable. Any companies that can’t stand on their own two feet should be allowed to fail.

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