There are now three Republican presidents who have presided over economic debacles: Herbert Hoover, Ronald Reagan, and George W. Bush. None of them can be viewed as having a consistent view toward the relationship between government and the economy. All of them at times advocated massive government interventions in the nations economic affairs and at other times all advocated a hands-off approach. The one thing they have in common is that each of them got into serious economic trouble whenever they took their hands off the wheel and selected autopilot mode.
President Hoover had been a strong advocate of government oversight of business and the economy when he began his presidency; nevertheless, it was during the early days of his term, in 1929, that the stock market crashed due to a complete lack of sufficient regulation of investment practices, stock speculation, and lending practices. Millions of people incurred massive amounts of debt that they were unable to pay off and businesses began to fail. (Does this sound familiar?) The economy tanked and Herbert Hoover, long an advocate of hands-on government, inexplicably stood by for years and watched as the country fell into the Great Depression. His principal failure was his hands-off approach, believing that the marketplace would somehow sort out the economic problems of the country. It didn’t.
President Reagan took office as the advocate of “supply-side” economics. His “trickle down” economic beliefs led to significant tax advantages for the wealthy. His across the board tax cuts and massive government spending programs led to temporary prosperity for the U.S., but eventually his monetary policies and lack of appropriate regulations resulted in the Savings and Loan Crisis and the stock market crash of 1987. His out of control economic policies eventually resulted in more than quadrupling the national debt from $700 billion to $3 trillion by the time he left office.
Ronald Reagan’s overall philosophy of government seems to have been that “less is more”. A good example of his less-is-more approach is his deregulation of the airline industry. There is no doubt that airline deregulation has led to many more opportunities for the average American to fly; however, for most people these days flying is simply an exercise in enduring pain and not an experience of a pleasant voyage as in the days before Reagan. This is because of the cutthroat competition that arose among the airlines in the wake of deregulation. Today, all of the airlines struggle to make a profit or even exist, and salaries for new airline pilots are not much more than what people get paid to work as a barista at Starbucks. Think about that the next time you fly. Unregulated competition between airlines is continuing to lead the industry on a dangerous and downward path. Without the reestablishment of government regulation, we are all headed for a hard landing, if not worse.
George W. Bush has consistently pushed for massive tax cuts for the wealthy throughout his administration and has endorsed a government hands-off policy towards business. Under his administration the lack of economic regulations had led to the creation of new, uncontrolled, financial instruments, such as credit default swaps, that have played a key role in the current economic meltdown. He continues to believe in tax cuts for the wealthy and more deregulation of the economy even as he seeks Congressional approval for a bail out for the wealthy by taxing the middle class and the poor. Unfortunately, there is little discernible difference between President Bush’s economic policies and those supported by John McCain.
If there is one lesson to be learned from the experiences of these men it is that Capitalism is not a religion. It’s not something you have to believe in or else you are not an American. It is not the Gospel. Capitalism is simply an economic process that is imperfect, like many processes. It cannot be left to run on automatic mode. It is not self-correcting. It is not an intelligent system capable of employing some sort of feedback to correct itself. Capitalism doesn’t come with an autopilot.
Our current economic crisis, like those major economic crises our country has faced in the past, can be seen to be caused by the failure of the sitting President to put effective economic regulations in place in a timely manner. In each case this failure to act can be traced to an errant belief, a misguided faith in the Capitalist process, that Capitalism is like an airplane on autopilot. It isn’t. You have to watch it all the time and take effective action to avert disaster when it starts to get out of control. These three Presidents all failed to understand this.
Now, as our Congress debates whether to undertake a massive bailout of Wall Street, it is not at all clear that this particular action is the proper action that is needed to correct our economy. It is more likely that it will not correct the underlying problem. Our President needs to understand that simply pumping money into the economy without taking the necessary steps to effectively regulate the sectors of the economy that are completely out of control will only provide us a brief moment of stable flight – before we inevitably crash and burn.
How very well said! I think it proves you are not an American though surely?
I don’t think our political philosophies coincide but we do agree about the Welfare bill for Wall Street. Besides: There is no guarantee or provision in the bailout to force the firms to use the funds they receive to extend credit to the US economy! We have to defeat this disastrous legislation. Check my site SandySays1.wordpress.com
for some tools to fight it.
Your posts are very well written.
I think deregulation in the financial markets, makes about as much sense as deregulating traffic laws. Without some rules the big powerful cars will just end up pushing the little compacts off of the road, and in the end will create a huge crash.