Companies taking handouts are destroying themselves and society.
In her timeless book Atlas Shrugged, author Ayn Rand chronicled the fictional doings of many great industrialists who were dealing with the greedy hand of government, including Hank Riordan. In an early chapter, Riordan was asked by a relative who his man in Washington was, but he had no answer.
A productive person driven by his own self interest, it never occurred to Riordan to look to Washington for help in growing his business, or for handouts meant to keep it afloat. Success for him resulted from being profitable, and profits were the certain signal that he was giving customers of his massive steel corporation what they wanted.
The story of Riordan takes on greater meaning today as evidenced by the return of Atlas Shrugged to the best-seller lists. Many Americans intuitively understand that our collectivist shift toward bailouts of companies and individuals is exactly what Rand warned us about over 60 years ago. Simplified, if the government allows the unproductive to partake in the gains created by the productive, the productive just might disappear.
By now, most are quite familiar with the actions of General Motors ( GM - news - people ) and Chrysler in this regard, not to mention the many banks that were recipients of TARP money after their cash on hand dried up. Unable to survive on their own, certain corporations have used their Washington connections in order to survive on the productive gains of others.
Sadly, the story doesn't end there. With Washington having signaled that it is open for business through various "stimulus" measures and corporate aid programs, all manner of private entities have lined up for handouts.
Two weeks ago, the U.S. Treasury announced that life insurance companies will be the latest recipients of TARP funds. Having "gamed" the system through the purchase of banks, insurers are now eligible for their own government funding.
Having seen how successful the housing industry has been in terms of procuring government subsidies, the commercial real estate industry is presently trying its hand. With the Federal Reserve already offering short-term loans through its "TALF" program, commercial real estate firms are now lobbying for the Fed to offer longer-term low-interest loans in order to avoid a wave of commercial property defaults.
Aluminum giant Alcoa ( AA - news - people ) just announced a 41% drop in sales, but it doesn't fear the future, thanks to the allegedly benevolent existence of the federal government. As Alcoa President Klaus Kleinfeld told the Wall Street Journal, the federal government's "current stimulus programs that target infrastructure and energy efficiency will create a demand" for aluminum.
Perhaps most disappointing: Even companies historically known for their entrepreneurial ways, such as Intel ( INTC - news - people ), Cisco ( CSCO - news - people ) and Microsoft ( MSFT - news - people ), are getting in on the act. As Reuters reported last week, demand for the semiconductors made by Intel is down, but Intel Chairman Craig Barrett told reporters that stimulus packages being rolled out by governments around the world should lead to recovery in the next 6 to 18 months.
Gregg Stahl, a technology administrator for the North Carolina Court System, has lately had to suspend a $9 million project that would have given its courts a Cisco phone system. No problem there: The company employs grant writers skilled at crafting applications for federal stimulus funds. Stahl told the Wall Street Journal that "companies like Cisco have a tendency to spend time with lobbyists."
According to the same article in the Journal, over the last four weeks "Microsoft has trained its U.S. education sales staff to identify eligible stimulus funds and apply for them." This month Oracle ( ORCL - news - people ) plans to "hold an event for customers offering advice on how to tap stimulus funds."
What's not being discussed enough is that when it comes to applying for grants, skillful people with knowledge of how the government works take their hammers and go looking for the proverbial nail. Rather than finding customers with problems and solving them, these rabidly entrepreneurial firms of the past are basically trying to figure out how to get equipment purchases funded by the government.
What must be remembered by the firms searching for growth through government largesse is that this is a fool's paradise. These government programs funded by tax revenues cannot last forever. Ultimately the federal government will have to claw its money back to pay down the very debt issued to keep these technology giants afloat. In that case, the beneficiaries of excessive spending today would be naïve to assume they ultimately won't give it back in spades.
Moreover, to the extent that firms devote resources to the procurement of government contracts, they must be taking resources from the innovative processes that made their products appealing to begin with. Political regimes are a moving target, so the very government spending cushioning them now won't always be there. In that case, many companies will wake up from a government-funded hangover absent the innovative skills necessary to survive in a true meritocracy.
Most chilling, however, is the basic truth that government spending is a hidden tax on the present. What this means is that for every dollar spent by the government that's one dollar less for tomorrow's innovators that may never get off the ground thanks to our federal minders' hogging available capital.
Much ink has already been spilled by commentators on the economic paralysis being caused by a bailout culture that seemingly has no endpoint. What's unknown, however, is the kind of destruction massive government outlays will bring to the healthy companies in our midst. The answer is still to be determined, but if our best and brightest firms increasingly author their growth through connections to the state, they'll have nothing to show for it when the truly productive shrug and the once-generous state ceases to be generous.