> but there are then restrictions on issuing more in dividends or buybacks than you have in profits, and borrowing isn't considered profit. So they can get the money back into the US and use it for wasteful empire building but they can't give it to the shareholders
The argument has been subtly shifted here, from businesses not being able to return capital in the form of dividends due to taxes to business not being able to do so due to loan covenants. Irrespective of the latter point, it is clear that given low interest rates, repatriation tax policy has no effect on incentives for capital repatriation. The biggest most profitable companies that pay out large dividends and do share buybacks make frequent use of this.
As for the loan covenant restrictions, from an economic stability perspective, it's very poor incentive design to allow companies to repay dividends when they're not profitable. This is in effect what you mean when you say "restrictions on issuing more in dividends or buybacks than you have in profits". A business thus impacted should focus on getting profitable. Liquidation is also an option. Dividends and buybacks should not be.
> This is why "bailouts" should be distributed uniformly without regard to risk of failure
This policy sends a message that foresight doesn't matter and reinforces a short-term oriented time horizon. Not only is that worse for society, it's worse for business in the long-run due to investment disincentives. Providing temporary support to individuals or local small businesses to preserve communities, especially vulnerable ones, is a different story and this is not an argument against it. Bailing out large well-managed businesses on the other hand makes no economic sense, these businesses can easily be restructured, sold, and given a new lease on life under new ownership. Antitrust concerns should be handled by courts, not by bailouts.
> increase investment or consumption, which is what you want in a down economy anyway.
Not all investment is equal, some investments have a much better return than others. Good policy incentivizes the latter as opposed to incentivizing indiscriminately. Investment for the sake of investment leads to waste and is bad for the economy in the long-run.
> and is too efficient to have enough slack to bridge the gap. The inefficiency wasn't caused by the business occupying space it couldn't use, because at the time nobody could use that space -- the loss was a sunk cost to society at large.
This is very oversimplified. Larger businesses can tap into financing, working capital, and have many other tools available to deal with this. And if they can't, that's not efficiency, that's poor operational discipline. Since the owners stand to gain when such a business does well, they should be ready to lose when things go poorly. It shouldn't matter if the cause is one akin to a force majeure.
> Blockbuster's product wasn't as good as Netflix and now they're gone.
Netflix had a much lower cost of capital in the beginning and also a much lower fixed expense. In their case not having storefronts improved the product but that's not a fixed relationship. One can come up with many cases where the opposite holds. Therefore it only applies to that particular case and doesn't support the general argument. Similar nuances exist for the other anecdotal examples listed.
F.A. Hayek provides great arguments against government intervention in the economy. There can be a role in providing assistance to individuals or communities, Hayek was famously supportive of both, but it's important to not let that bleed over into market dynamics which must remain competition-based.