In Focus: Government’s help not all that helpful

April 11, 2014 

There is a great myth alive in the world — that government ultimately does what’s best for the people. The reality is government serves the most politically powerful, whether they’re the ethnic majority, oil companies, labor unions, banks, or whoever plays their political cards most skillfully. The more powerful the government, the better it serves its political sponsors — much less the people. In his March 30 In Focus column, Mark Mansperger claimed that the remarkable economic expansion that began in the 1980s (encompassing the Clinton years) was actually a period of steady decline, indebtedness and creeping plutocracy. The decline was caused by supply-side economics and should prompt us to return to the Keynesian economic policies of 1930s-style government authoritarianism. The 1930s through the 1970s were the good old days — “the most impressive period of societal development in world history.” Really? Some of us who were adults during the ’60s and ’70s have a different recollection. In Europe and the United States, Keynesian ideas exhausted themselves in an unfolding disaster of crushing unemployment, runaway inflation and the prospect of a new depression. This was only reversed with the shift away from Keynesianism toward supply-side ideas. (Not that Keynes would have recognized the perpetual deficit spending and wholesale nationalization of European industries that has come to bear his name.) And what of that Golden Age, the 1930s? Government activism took a sharp recession, which should have lasted three years, and turned it into a decade-long debacle. The incalculable human suffering laid the groundwork for World War II. Economists still argue about which governmental misbehaviors caused the Great Depression to persist for so long, but misapplication of government authority was clearly at the root. Misguided manipulation of the money supply by the Federal Reserve was a factor, but so was the government punishing now politically weak businessmen, popularly believed to have caused the 1929 crash. This discouraged businesses from expanding, further delaying the recovery. We still are trying to recover from the Great Recession, and some of us worry that we are nowhere near out of the woods. Politicians exploit popular misconceptions about the causes of the housing crash to gain political advantage for themselves and their sponsors. Several excellent histories explain what really caused the housing crash. The most remarkable is Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon, by Gretchen Morgenson. Morgenson is a Pulitzer Prize- winning columnist for the New York Times. Morgenson does an excellent job of describing the political corruption at the root of the disaster, providing us with an ordered list of the felons, political operatives and feckless regulators who created it. No. 1 on her list is James Johnson, who transformed Fannie Mae into a political tool and cash machine for the Democratic Party. Johnson, Barney Frank, Chris Dodd and others pressured the banks and regulators to abandon sound banking practices to better support their political sponsors. This was the necessary prerequisite and driver for the crash. Morgenson notes the irony that the two politicians most responsible for the mess have their names attached to the law that is supposed to fix it: The Dodd–Frank Wall Street Reform and Consumer Protection Act. Great. Yes, government has a role in regulating the economy. But will a stronger, more manipulative (Keynesian) government do a better job of helping the people? Government’s first priority is serving its political supporters, and that’s not going to be you. The less government does to “help” us, the better off we are. w David Brown is a nuclear engineer who lives with his wife in Richland.

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