Arianna's Moment of Clarity: TARP Bailout Profitability Claim 'Economically' Flawed

So more government isn’t the answer to all of our problems? For a brief moment, that seemed to be the message Huffington Post editor-in-chief and co-founder Arianna Huffington was conveying.

On CNBC’s Oct. 5 broadcast of “Squawk Box,” Huffington, author of “Third World America” explained what she thought the role of government should be in an American economic system. Now whether she was playing to the CNBC pro-capitalist audience or not remains to be seen, but she did depart with the so-called progressive/liberal view of government’s role in the economy, and criticized the Obama administration.

“[S]o when it comes to the Obama administration’s policies, the problem has been rewarding people for taking excessive risks, which is not at the heart of capitalism,” Huffington said. “You and I have talked about that before. At the heart of capitalism is the assumption that if you take excessive risks and you fail, you’re on your own. The taxpayer is not on the hook. And we still have left the systemic risk in the system despite the financial reform bill that was passed. ‘Too big to fail’ has not ended and that really is the potential problem in the future.”

However, “Squawk Box” co-host Joe Kernen asked Huffington for some clarity – if she preferred the European economic model or the American economic model as a means for providing the best opportunities for upward mobility.

“Well first of all, we need to define our own system,” Huffington said. “It’s not about borrowing a system from anybody else. We need to tap again into our own spirit of innovation and that is really what is missing right now.”

Fill-in co-host Michelle Caruso-Cabrera, author of “You Know I'm Right: More Prosperity, Less Government,” pressed Huffington on whether she was in favor of a free-market system or one with more government intervention.

“There’s no question that for private enterprise, capitalist system is the best,” she continued. “In order to deal with people’s excessive attempts to make a short-term profit at the expensive of long-term profit and long-term stability, I mean you saw how that worked – that’s really where you need government intervention.”

According to Huffington, the TARP bailout, which has been hailed by some since it won’t be as costly as previously estimated and may even turn a profit, isn’t necessarily a good thing. In fact she said, it sends the wrong message about what the relationship between free enterprise and the government.

“Right now, government has done a terrible job,” she said. “That’s why there’s so much opposition to it. It has not operated in a way that has made people be pro-government. I mean, the bailout is very unpopular and the fact that now people are saying the bailout may turn out to make a profit is really economically not something that makes sense because we are not counting the opportunity cost of what could have happened if that money had been used for something else.”