What Are the "Failed Theories That Helped Lead Us Into This Crisis"?


In today's Washington Post, Barack Obama pummels a strawman:

In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis—the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.

Raise your hand if you have criticisms of the stimulus. OK, I see a lot of hands. Since there are a lot of libertarians in the room (fatcats!), how many of you think that "tax cuts alone will solve all our problems"?


Well, you people hate socialized health care, right? (More than I do, btw, having enjoyed much of the delicious stuff in France.) So how many think we can "ignore" the "high cost of health care and still expect our economy our country to thrive"?

Weird. It's almost as if we agree that there are some problems in this country, but have different ideas about how to solve them!

There is one charge here that I for one am happy to embrace: We can indeed "ignore…energy independence"…because there's no such as thing as energy independence. Really. It's bullshit.

Why do people oppose the stimulus? Here are a few actual reasons: There is no strong evidence that stimuli work, and plenty of evidence that they don't (a relevant consideration, no?). Like the deeply flawed PATRIOT Act, the deeply flawed Iraq War resolution, and the deeply flawed bank bailout, it is being rushed through the legislature in an atmosphere of pants-wetting crisis and presidential warnings of impending doom. It is filled with special interest giveaways, big-government featherbedding, and "Buy American" considerations that have about as much to do with stimulating an economy as playing violin has with putting out fires. By taking from fiscally responsible states (like South Carolina) and giving to fiscally irresponsible states (like California), it violates basic notions of fairness and creates still more moral hazard in an already hazardtastic universe. These will do for starters; there will be more and better reasons in the comments.

And remember–aside from misportraying his opponents' concerns, Obama is also blaming their "theories" for the whole crisis in the first place. Neat! But who had the theory that the federal government should be the elephant in the room of the mortgage business, pressure commercial banks to write mortgages for risky borrowers, even while applying less oversight to Fannie Mae and Freddie Mac than on actors in private sector? It certainly wasn't the free marketeers. Who thought credit default swaps and mortgage-backed securities should be left to expand like crazy without providing for a clearinghouse to at least measure their number and worth? It wasn't the house libertarian on the SEC. Who thought elevating Alan Greenspan to deity status while he maestroed the long era of loose credit was the capital thing to do? I know this will come as a surprise for those who think an Ayn Rand habit gets people a lifetime get-out-of-jail-free card on Planet Libertarian, but Greenspan's bubble-blowing policies were plenty controversial in these quarters before the dukey hit the fan.

The burden of proof, as always, should be on those who want to spend our money. Obama's a smart guy; surely he can bring a better closing argument.