It doesn’t matter if government bailouts are profitable

Every once in a while, a debate arises about whether or not a given government program — the Export-Import Bank, federal student loans, Quantitative Easing, or different kinds of bailouts — was profitable. These debates, unfortunately, are all basically nonsense.

Here’s the thing about the federal government — it can print dollars, a highly profitable activity. You can’t print dollars. I can’t print dollars. Vox Media can’t print dollars. The state of Tennessee can’t print dollars. These are the kind of kind of entities that need to worry about whether their activities generate more dollars than they cost, because they need to worry about lack of dollars. Of course there are lots of things to worry about with loan guarantees and bailouts and other things, but profits and losses is never the issue. The government always could make arbitrary amounts of profit if it wasn’t to.

Consider the penny. Every once in a while people get upset about the fact that pennies contain more than one cent worth of metal.

The reality, though, is that this is irrelevant. There is less than 25 cents worth of metal in a quarter, and much less than $50 worth of paper in a piece of paper with Ulysses S. Grant’s portrait on it. The problem with the penny, if there is a problem with the penny, is that it’s a waste of zinc, not a waste of money. Every once of zinc trapped in pennies is an ounce that’s unavailable for other industrial uses. The question to ask is whether the convenience of being able to carry very small quantities of change is better for American society than being able to use zinc for other things. Since pennies are obviously useless, it’s an easy question to answer — basically anything would be a better use of zinc.

For AIG it’s a tougher question. The question is something like, did bolstering the financial system do lots of social good by keeping credit flowing or did it do lots of social harm by preventing a corrupt and decadent banking industry from burning to the ground. Your mileage may vary.

¯\_(ツ)_/¯

But either way, profit or loss isn’t relevant.