America’s present financial crisis is big and scary, but here is something bigger and scarier — the economic hellfire sure to follow from the extraordinary, panicky overreaction by the government.
The thesis has been that anything goes to stave off the high unemployment, crashing businesses and other consequences of a mammoth recession said to be stalking us. And so far, anything and everything has in fact been the strategy employed, starting with a $700 billion bailout package passed by Congress and signed by President Bush.
That’s obviously a lot of money even by federal standards, but it’s pipsqueak stuff next to what’s been done by the Federal Reserve without the drama or democratic niceties of a congressional debate — pledges of trillions for loans and loan guarantees and the purchase of promissory notes. The total of everything put together?
Well, according to a New York Times report that almost casually holds the figure until the third paragraph, it comes to something like $7.8 trillion, which is on the order of a spending A-bomb. True, some of that money will be repaid, and some of it may never have to leave the government’s hands, but there’s more spending to come.
That would be the Barack Obama stimulus plan. No one can say how much it will be, but some guesses are as high as $800 billion. One of the president-elect’s top advisers says the amount should be sufficient to “startle the thing [credit crunch and recession] into submission.”
The more likely consequence will be to startle the free-market system into semisocialism, to startle the economy into runaway, devastating inflation and to startle the government into deficits so monstrous that we will soon enough be right back where we started, with another financial crisis.
Among those predicting such an end is my current favorite politician, Angela Merkel, the German chancellor, who is quoted as saying that “excessively cheap money in the United States was a driver of today’s crisis,” and that “measures being adopted” in America and elsewhere appear to be “reinforcing this trend.”
Of course, there were other drivers besides the Fed’s low interest rates, such as government intervention in mortgage markets that did at least as much to foster disaster as any lack of regulation.
Higher inflation is already a sure thing, my fellow citizens, and when you put that together with the deficits, it’s Katie bar the door. Those deficits will be added to the national debt, and the tax bill to come will be enormous.
Let the debt grow, and you find that it is itself is a kind of tax, of course, because it is mostly financed through borrowing, a way of taking money out of the private economy, which means we also take business growth and job creation out of the private economy.
Maybe the single most distressing issue in all of this is the undermining of one of the most extraordinary achievements in history, a free-market system that has provided more prosperity for a wider swath of people than anything ever known, an enormous reliever of pain and suffering, a triumph of rationality, and a great force for liberty and opportunity.
Free markets entail rise and fall, the rise of new businesses as the inefficient or outmoded ones fall. We are now faced with the rise of suffocating government that then causes the fall of innovation and progress.
None of this is to say that nothing should have been done, only that more prudent and carefully calculated steps should have been taken, and that we should hope the next administration is wiser.
Examiner Columnist Jay Ambrose is a former Washington, D.C., opinion writer and editor of two dailies. He can be reached at [email protected].
