Posted by
Always To The Right on Thursday, January 08, 2009 7:28:23 PM
It seems like just a year or so ago that deficit spending was evil,
irresponsible, and an attack on America’s future. In fact, it was
just a year ago, when Democrats and the media excoriated George Bush
for cutting taxes to stimulate growth while increasing federal spending
after 9/11 and during the war on terrorists. Now, however, Democrats and the media cheer as Democrats demand a rate of deficit spending unlike anything seen since World War II
Part of this gets driven by panic. A few years ago, Alan Greenspan
famously criticized what he called “irrational exuberance” on Wall
Street, causing a brief market downturn. What we have now could be
called “irrational despair,” the notion that this recession will be
greater than anything ever seen since the Great Depression. Barack
Obama today offered the reversal of FDR in his speech, in which he
seemed to say that the only thing we don’t have to fear is fear itself.
All of this hysteria goes to one purpose: to create a sense of panic
that will make any government intervention seem rational and
reasonable. Instead of taking policy one step at a time, schemes and
plans get made only to be eclipsed by even more grandiose schemes and
plans without ever having tried anything else first. The TARP plan was
never even given the chance to work, thanks to a panicked Secretary of
the Treasury who literally begged for its funding and then used the
money to start nationalizing private enterprises.
What gets built in a panic will not get dismantled when the hysteria
ends. We are creating a baseline of expected government costs that the
Wall Street Journal warns will endure as an expectation. America saw
this after FDR’s New Deal and LBJ’s Great Society. Once Congress
establishes a new level of confiscation and spending, it never reduces it — and only on occasion has kept it from growing.
Perhaps we have gone too long between recessions to understand how
to handle them. We had much worse economic prospects in the 1970s and
had much less panic involved at the time. We saw then what massive
government intervention produced — inflation, stagnation, and
regulatory paralysis. Instead of drafting massive amounts of
investment-capable capital out of the markets, we should be clearing
the way for its use. Let’s hope it doesn’t take another decade like
the 1970s for people to remember that.