Thursday, October 02, 2008

Crisis Bill & Coverup

A WSJ EDITORIAL this morning has a couple of things that confuse me. First,
"The government needs the power to use public capital to defend and stabilize the financial system. In that sense, we are really bailing out ourselves."
What does "public capital" mean? I suspect this is a phrase that obscures what is real. I don't think government has any savings or investments in real estate or investments in stock ownership that it can reallocate to defending and stabilizing the financial system. I think the government can act in this case based upon taxing the "public" or perhaps by increasing the money supply (and increasing inflation) or perhaps by borrowing against the future productivity of our system of political economy. Maybe if we recognize such actions of government, then we can see "public capital" to mean that the rest of us invest less today in what would otherwise become more capital in the future which would be owned by us privately. Of course, more capital owned by us now and in the future means more growth and prosperity in the future. So, using "public capital" today seems to me less growth and prosperity in the future. But, it seems to me using such a term actually hides this reality from us. Perhaps the present crisis suggests similar tradeoffs, but I don't think we should hide other truths by the use of terms that seem to make little sense.

"Mr. Ryan and some other stalwarts are proof that political leadership does exist in Washington, albeit not always at the highest ranks. In this sense, too, the votes this week in Congress are about bailing out our political class from its own embarrassing performance. Americans are anxious, even frightened, about the financial system. They are looking for leaders who will act to defend it."
Well, yes, I do think the actions of Congress are a major part of the explanation for the present circumstances. I suppose Americans are looking for leaders who will defend our system. Unfortunately, the public debate seems to obscure the Congressional responsibility for the present situation in general, and it also seems to hide the specific blame on certain members of Congress that should be made clear.

The bailout of the political class seems likely to continue the interventionism that explains the present situation. The lesson that I think should be learned in all this is that members of our political class, and our government governors in general, cannot possibly ever have the information necessary to use government's force and coercion in ways that will accomplish their purposes for the public policies they choose. The general lesson to learn is that we should have a government that rests more upon economic liberty and less upon the choices of our governors in Congress and in the government bureaucracy.

But this is not a lesson that is going to be learned by this bailout of our political class. Of course those in Congress now, even if they know this lesson, do not want us to know this lesson because they want to stay members of our political class. Thus, I think this "bailout" of our financial markets is also a "cover-up" for our political class.

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