AIG has close to $180 billion of our money and may still fail. We are bailing out the previous bailouts. When is enough enough? Days after AIG reported losses upwards of $60 billion the government responded by sinking another $30 billion into the insurance giant. The party line is that AIG is too big to fail. Federal Reserve Chairman Ben Bernanke echoed this sentiment today telling lawmakers that AIG’s failure would send shockwaves through the insurance industry. If this is the government’s position there can’t be an end in sight.

The real question isn’t whether AIG is too big to fail or how big will the shockwaves be if it is allowed to fail. No, what we really need to know is when will taxpayers no longer be responsible? Is there a plan? There doesn’t appear to be one. The government continues to throw our money down the drain. The Dow continues to spiral downward. A new wave of workers is sent to the breadline every week. The government’s response is a bit naïve. We are like a third world country that responds to an economic crisis by printing more money. Do we realize that the system is beyond the point of fixing? We need an entirely new system.

My solution is to let AIG implode and let someone else in the insurance industry take its place or an entirely new industry will emerge. Their funeral would be much cheaper than the cost of life support. The government has offered no concrete examples of what will happen if AIG fails. Their position has been merely fear mongering—If AIG fails you will all be worse off but we won’t tell you just how bad it will be. No prudent private investor would sink $30 billion into a company days after it announced a quarterly loss of more than $60 billion? We have created a situation where a failed American company has it better than a successful one in another country.

Our government suffers from an irrational escalation of commitment. What this means is that once the government committed to the position of AIG, it decided to stick with this position regardless of the risks associated with that position. Giving AIG an additional $30 billion is a sign that the government is wedded to its position, no matter how irrational that commitment becomes no matter how risky it becomes. They can’t walk away now because they’ve already put too much into it.

To personalize the theory, think of a bad relationship you’ve been in. How much time did you spend trying to save it after you knew it was ultimately doomed? It’s likely that because you had already invested so much time in your relationship you tried to save it long after it would have been better to walk away. This is the position the government is in with AIG. Walking away is harder than wasting more of our money.

We shouldn’t consider nationalizing. This would make taxpayers liable for its obligations and no one knows what those obligations are. Let AIG implode and let a phoenix rise from its ashes. Microsoft, MTV, CNN, FedEx, Intel, Hewlett-Packard, Burger King each opened in a period of economic downturn. Instead of sinking more money into yesterday’s Texaco and Pan Am Airlines let’s invest in tomorrow’s Google. Let’s sink the bailout funds into startups. I like Thomas Friedman and Linkedin CEO Reid Hoffman’s idea. Let’s invite startups to Washington to present their ideas and have the government pick the best of the lot. If they succeed the government gets a stake in a healthy successful company. If they fail we try again. But they won’t fail; anyone with government funds is too big to fail.