It’s long been my view that the most significant sentence in President Ronald Reagan’s first innaugural address was when he said “but if no one among us is capable of governing himself, then who among us has the capacity to govern someone else?” I call that Reagan’s First Law.
Now, fast-forward to our current economic troubles.
On September 19, when Treasury Secretary Henry Paulson proposed in a three-page document that he be given unprecedented and unreviewable authority, plus $700 billion in tax funds, for bailing out Wall Street, the Dow Jones was at 11,388. Last week when Congress approved Paulson’s plan – after bloating it to more than 440 pages – the market closed at 10,325. When the market closed today, it was down another 679 points to 8,579. It just happened that today was the one-year anniversary of the market’s record highest close of 14,164.
Note that the stock market steadily plunged as the size and complexity of the bailout bill skyrocketed from a few pages to hundreds of pages. The same inverse relationship is seen in the correlation betweeen the stock market losing nearly 40 percent in value while the billions spent by the federal government in the past six months to bailout Fannie Mae, Freddie Mac, AIG and Wall Street generally have gone higher and higher.
See a pattern there? The more government does, the worse the problem becomes.
Events of the past three weeks illustrate what I modestly call Tapscott’s Corollary of Reagan’s First Law: As government regulation and spending on a problem increases, it’s ability to solve that problem decreases, causing officials to seek more power and spend more tax dollars.
It’s pretty simple, really: The bigger government gets, the less able it can shape events, with a result that the bureaucrats and politicians get frustrated, fear voter retaliation or start looking for scapegoats – or all three – and then demand more power and money, as in Paulson’s grab for unlimited authority and funding to do the Wall Street bailout after his earlier billions in bailout spending and expansion of Treasury’s power failed to stem the growing economic crisis occasioned by the explosion of sub-prime mortgage lending mandated by ….the federal government.
The corollary is useful when evaluating claims by politicians, bureaucrats, journalists, “experts” and academics about government programs and proposals. Consider, for example, the mantra among Barack Obama and other Democrats like Nancy Pelosi, Harry Reid and Barney Frank that the Wall Street crisis was “caused by eight years of the Bush administration’s deregulation.”
To listen uncritically to such voices would suggest that Adam Smith was in the Oval Office. In fact, the guy who has been in the White House since January 2001 has been the biggest spender ever and has piled up new regulations on the U.S. economy at an incredible rate.
As The Heritage Foundation’s Morning Bell recently noted:
“First of all, by every quantifiable measure, regulation has increased under President Bush:
* Money spent by federal regulatory agencies is up to $44.9 billion in 2007 from $27 billion in 2001, a 44% increase.
* Total people employed by federal regulatory agencies is up to 244,000 in 2007 from 172,000 in 2001, a 41% increase.
* Total number of pages in the Code of Federal Regulations is up more than 4,500 pages since Bush took office.
* Cost imposed on Americans is more than $28 billion in new regulations since Bush took office.”
And we are only beginning to see the full implications of what is contained in the bailout. To get an idea, check out tomorrow’s Examiner editorial, entitled “What, me worry?”
And while there, check out Examiner columnist and Evans-Novak Political Report editor Timothy P. Carney’s look at how Barack Obama is hanging out the fly-paper for K Street lobbyists, especially those from Wall Street and the rest of the financial community.
