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Maybe it was necessary, this establishment-endorsed, fear-driven, hastily constructed $700 billion bailout gamble meant to avoid a devastating credit crunch. But whether it was or wasn’t, it is towing something politically perilous in its train.
Again and again, this Wall Street package will be used as an excuse to try to take freedom out of our markets, to throttle them with excessive regulation and leave them shorn of the innovation and energy that add up to prosperity. It will be used as an excuse for something else, too — the creation of a European-style welfare state.
We’re already seeing Barack Obama and other leftists yelping about deficient regulation, not just of those financial institutions that seemingly went bonkers, but of our system as a whole, as if there are too few rules and too little enforcement, as if the discipline of the market is a fiction and as if wealth creation is finally the consequence of blessedly wise, even omniscient bureaucrats.
A chief argument on behalf of a commercial police state will be that it was regulatory laxity that gave us the moment’s pandemonium when, in fact, the main instigating factor was Democratic-sponsored social engineering abetted by the Federal Reserve’s easy-money policies, ultimately leading beyond a doubt to irresponsible executive behavior in private institutions.
Vociferously and loudly, Democrats and some Republicans sought for years to push banks to give more mortgage loans to people who could not afford them, even going so far as to twist arms at quasi-governmental Fannie Mae to let up on the credit constraints of mortgages it would later acquire. The policies were big-hearted but small-brained, as some critics were pointing out years ago, saying that the government might eventually have to ride to the rescue.
Contrary to Obama mythology, the Bush administration has been trying since 2001 to bring Fannie Mae and Freddie Mac under control, warning about some of the very problems we are now seeing. As a Heritage Foundation analyst tells us, the administration was also increasing the country’s regulatory burden, though we are hardly bereft of rules and regulators. James Gattuso reports that more than 50 agencies are presently charged with enforcing 145,000 pages of the dictates.
Some rules of the road are obviously needed to keep traffic moving and avoid collisions, and it would have been nice if we had had the foresight to keep our financial institutions from doing what they did, although you can bet none of them is going to engage in similar behavior anytime soon, regulations or no regulations. The bigger question is whether we are going to ignore the Heritage and other studies that have shown how low levels of economic freedom have constant company — low standards of living.
Besides the call for regulatory vengeance against the corporations that mostly serve the common good, we are already hearing that if you can bail out the Big Boys on Wall Street, you can initiate all manner of new social programs. The first and most obvious point in response is that any program ought to be evaluated on its own merits, not by making reference to some other policy intended to save us all from catastrophe, and the second is that expensive, new social programs can be antithetical to the welfare of those they are intended to help.
Obama wants all manner of such programs on top of the $40 trillion in unfunded liabilities owed to Social Security and Medicare. As another Heritage analyst recently pointed out, that obligation could eventually bring us to the equivalent of a yearly Wall Street bailout. The financial bailout necessitates economizing, not spendthrift merriment that could bring us to economic ruin, but it also gives the left a pretext for social action.
Watch out, everyone.
(Jay Ambrose, formerly Washington director of editorial policy for Scripps Howard newspapers and the editor of dailies in El Paso, Texas, and Denver, is a columnist living in Colorado. He can be reached at SpeaktoJay(at)aol.com.)