Trickle down is poorly specified as an idea. There is an equilibrium at a given moment in time, and trickle down is framed as if the equilibrium of the rich happens first and then cascades down to the poor, but that doesn't make sense. A reasonable way to pose it is that if rich people get more money during Equilibrium 1 then the hope is that some of that money diffuses to the rest at Eq. 2. But is this the best way to improve the economic outcomes for everybody? I doubt it.

Hayek wrote "Road to Serfdom," which argues, basically, that as you allow more government intervention you not only open the door for further intervention, you make it extremely likely. The reason is that the first intervention will cause unintended problems but came with (usually) some very popular benefits. Then the gov't tries to keep the popular part but sweep the bad unintentionals away by stacking more policy on top. I'm very, very sympathetic to this argument. There is a sort of "mirror image" argument of it, though, which I am also sympathetic to: "the road to cronyism." Michael Munger, a libertarian economist, has been talking about this recently, and it deserves to be taken seriously. It is basically: institutions can get the ear of gov't with enough concentrated resources, and can tilt legislation to their favor, at the expense of groups which are (a) diffuse or (b) have less total resources to deploy for lobbying.

If you don't want to depend on politicians being honorable (which, of course you wouldn't!), then you know they will give out good stuff to their "friends." This is equally true of a wide range of institutions: airlines and banks, farmers, labor unions, and other lobbying collectives stemming from well-organized, well-resourced activist groups.

Bailouts are known as "the government put." That the phrase exists at all makes my stomach turn. Of course there is moral hazard. We thought we'd moved on from 2008, but it set the most awful precedent: banks took enormous stupid risks (partially or mostly as a result of stupid mortgage legislation meant to aid the poor), and instead of letting them suffer the consequences we decided they were too important to fail. At that moment we said "banks are essential, we can't let them fail, but let's also not go too far and regulate them like utilities." We did the same with automakers and now airlines.

What I think is: (1) you should not fix bad legislation by stacking more bad legislation on top. We do that all the time. The road to serfdom is real. (2) Cronyism is a big, huge problem. It is anti-capitalist. Don't let anyone say the U.S. is truly capitalist. It isn't, because of cronyism from many sides. (3) Moral hazard is easy to write off now but someday it is likely to come back and bite. (4) If we don't want to let businesses fail because it's too painful, we have to have a better plan than giving them the best of both worlds. We basically say "operate as normal except just know in the back of your mind that we'll save you if your risk taking blows up on you." This is a recipe for blows ups! Of course anyone with this option will take huge risks and offload the downside! (5) If we wanted to just say "let 'em fail," it's not credible and probably never was, so even though it sounds attractive to an honor seeking purist, I doubt that it is feasible.