Part of the legacy of George W. Bush and the Republican Congress

Under George W. Bush and the Republican-controlled Congress there was an explosion in the growth of big government on virtually every front. Large increases in spending were accompanied by huge deficits and a doubling of the national debt. Corporatism exploded, too, in the form of bailouts and there was increasingly centralized power in education, expansion of Medicare and rapid growth in government regulation.

George W. Bush did not veto a single spending bill in his eight years in office.

Abandoning Capitalism to Save Capitalism?

Over the past few months we’ve seen the most extensive government intervention in the economy since the 1930’s. In fact, today’s interventions sometimes make those of Franklin Roosevelt look tame by comparison.

Depending upon how you calculate the numbers—and that is made particularly difficult because neither the Federal Reserve or the Treasury is being particularly transparent about what they are doing—the Federal government is already on the hook for around $8 Trillion to address the current economic crisis. The CATO institute puts the number at $8.4 Trillion.

Much of that money has gone to direct investments in the financial industry, which has been partially nationalized. All indications are that soon the taxpayers will become part owners of one or more automobile manufacturers, and that the next President will be appointing a “car czar” to direct the restructuring of the auto industry, as if a government appointee can devise a magic formula for making the car companies profitable again.

This is nuts.

It would be one thing if there was any evidence that all this mucking about in the economy was doing any good, but in the months since government intervention in the economy went into overdrive the economic slump has only gotten worse. Much worse, in fact.

George Bush says that in addressing today’s financial crisis he has had to “abandon free-market principles to save the free-market system." Well, the President has certainly succeeded in abandoning free market principles, but it’s hard to see how doing so has succeeded in saving the free market system.

All this government activity has been driven by an illusion that is shared by most politicians: that somehow, some way they can control the economy. That illusion has caused more harm over the past century than all the recessions that are an inevitable part of a capitalist economy.

There has been a growing consensus among economists that the great depression became “great” precisely because of a series of policy mistakes made by Hoover, Roosevelt, and the Federal Reserve. Japan experienced a “lost decade” of economic decline after its own real estate bubble collapsed because its government tried to prop up “zombie” banks and businesses long after it was clear that they needed to go out of business. Japan blew so much money on useless “stimulus” packages that their national debt makes ours look responsible by comparison (so far). Sound familiar?

The shortest path out of the economic mess we are in is to allow the markets to correct, however painful that might be in the short run. The alternative—abandoning free market principles and the long-term benefits of free markets—promises not just a difficult recession, but a permanent slowing of economic growth and a huge increase in the national debt.

The best way to “save the free market system” is to allow it to work.

By David Strom, Senior Policy Fellow at the Minnesota Free Market Institute

It's All About Your Money?

On Sunday, 26 October 2008, the Star Tribune (Minneapolis, MN) published in its "The Wall Street Journal Sunday" section an article by Shelly Banjo entitled "Obama vs. McCain: It's All About Your Money". I do not doubt that this article by Ms. Banjo sets forth a reasonably equitable presentation of the candidates' positions on

• Short-term Economic Relief,
• Income Taxes,
• Estate Taxes and AMT,
• Health Care,
• Investments, and
• Retirement and Social Security.

What troubles me is what the article does not say!
Remember, although the Democrat party has, throughout this election cycle, sought to hammer home the concept that this economy belongs to George W. Bush, the real downturn in the economy has occurred in the last two years. These are the two years during which the Democrat party has controlled both the House of Representatives and the Senate.
But the issue of our economy goes much deeper than this. The devastating blow to the U.S. economy was delivered by the collapse related to sub-prime mortgage market. This is a market that was conceived, originated, and advocated by the Democrat party and managed by Democrat party appointees to Fannie Mae and Freddy Mac. It was also almost exclusively party-line votes that thwarted attempts by John McCain and President George W. Bush to apply new controls and investigate the risks associated with the growth of the sub-prime mortgage market.
Today's economy is a product of Democrat party politics and does not belong to George W. Bush!
Want proof of this assertion? Ask yourself why the Democrats are not clamoring for hearings on Capitol Hill to investigate the causes of the greatest collapse in the U.S. economy since The Great Depression. More importantly, ask yourself why you are not writing to your Congressmen and Senators pressing for an investigation of these matters.
However, I digress. Return with me to "The Wall Street Journal Sunday" article.
What is missing from this analysis are questions like these:

• Just how much good will Obama's planned short-term economic relief do if Democrat fiscal policies and controls more broadly applied continue to discourage capital formation and job creation?
  
  
• Just how much good will Obama's income tax cuts for the "middle class" do if broader Democrat fiscal polices lead to increasing layoffs and driving more U.S. companies to seek lower-cost off-shore production capabilities?
  
  
• Just how much good will Obama's health care initiatives do for those who have been laid off from their jobs due to Democrat fiscal policies that disincent job creation while simultaneously leading to other economic declines in the U.S.?
  
  
• Just how much good will Obama's fight to keep Social Security in the hands of the federal government -- rather than allowing investors the choice to privatize their retirement funds -- if the Democrat party remains utterly unwilling to address core issues in Social Security that will inevitably lead to its demise?

All the apparently "good" things proposed by Obama's economic proposals are dependent on other economic factors remaining the same. However, we have many years of history to demonstrate that Obama's declared approaches to the economy (in general) lead to negative -- not positive -- outcomes for everyone.
Obama may not believe in "trickle-down economics", but I can assure you that if business investment risk is not rewarded via appropriate market-based returns, we will all see the effect of "trickle-down poverty" resulting from massive unemployment and more and more corporations moving their operations to nations that offer a more favorable tax and investment environment.
-- Richard