'The Policies That Caused the Mess in the First Place'
For the last four years, Democrats and their amen corner in the old media have been trying to lay all the blame for the financial crisis of 2008 on poor old George W. Bush. They want folks to believe that that since the crisis happened on "his watch," that Bush's policies therefore caused the crisis.
Since we're all about thinking here at American Thinker, that seems to be an example of the error known as post hoc ergo propter hoc -- "after this, therefore because of this." However, in the "thinking" of your garden-variety progressive Democrat, the translation from the Latin is: "after Bush, therefore because of Bush."
Back in the Olden Days, this kind of thinking was considered fallacious -- a failure in logic. Even the old media understood. But here's the deal: the crisis didn't happen only on Bush's watch; it also happened on the Democrats' watch. That's because Democrats controlled both houses of Congress for the final two years of Bush's tenure. Nevertheless, during the 2008 campaign, all Democrats talked about were the "last eight years," as though they hadn't also been in power. Actually, Republicans controlled both houses for only four and a half years of Bush's time in office. If one were to adopt the post hoc thinking of Democrats, one might say that the financial system was doing just fine until Democrats took over Congress in January 2007. Indeed, the Great Recession began about a year after Democrats won the 2006 midterm elections.
Although the financial crisis didn't happen merely because George W. Bush occupied the White House, Democrats would have you believe it. Notice that when Democrats bring up some variation of "going back to the policies that caused the mess in the first place," it stops right there; they don't go on to say what those policies were. The reason why Democrats don't elaborate is because many of the factors that "caused the mess" were created by Democrats -- and some of them had been in effect for decades.
Housing, especially sub-prime mortgages, was at the center of the financial crisis. The Community Reinvestment Act, which coerced commercial banks to make loans to folks who weren't creditworthy, was a big factor. Enacted in 1977, the CRA is a Democrat policy. Fannie Mae was also a prime suspect in the crisis, and Fannie was created by Democrats in 1938, during the New Deal era. The "implicit guarantee" of certain "government-sponsored enterprises" (private companies like Fannie Mae) and the securitization of mortgages are also Democrat policies.
Another factor that may have contributed to the crisis is the repeal of Glass-Steagall (the Banking Act of 1933), which created "firewalls" between commercial and investment banks. That repeal was signed by President Bill Clinton, a Democrat.
Yet another factor implicated in the crisis is the "easy money" policy of the Federal Reserve. That misguided policy is attributable to the Fed's "dual mandate," which Democrats created in 1977.
So some of the causes of the financial crisis are Democrat policies that were already in place when Bush took office in 2001. In his column "Blaming the Bush Tax Cuts" on October 10, Jonah Goldberg sums up the causes for the crisis like this:
The question of what caused the crisis is obviously still controversial (though, Kessler notes, the official inquiry makes no mention of Bush's tax cuts). But a consensus seems to be forming around the following narrative: The federal government, out of an abundance of concern for the plight of the poor and middle class, made it too easy to buy a home. Congress, on a bipartisan basis, set unrealistic affordable-housing goals for Fannie Mae and Freddie Mac. President Clinton used those goals to expand access to mortgages to low-income borrowers. Then President George W. Bush, with the approval of Congress, expanded the practice, until way too many low-income or otherwise underqualified Americans owned mortgages they couldn't afford.
A mixture of greed, idealism, cynicism, and stupidity led to the practice of bundling those iffy mortgages into financial instruments that Wall Street didn't know how to handle and regulators didn't know how to regulate. As Representative Barney Frank (D., Mass.) put it in 2003, he wanted to "to roll the dice a bit" on regulating subprime mortgages.
In another recent column, "The Fed's Mission Creep," concerning the aforementioned "dual mandate" of the Federal Reserve, George Will on October 17 wrote:
Before the Fed was created 99 years ago, the U.S. economy was in recession 48 percent of the time; since 1913, it has been in recession only about 20 percent of the time. The Fed has done much good. It cannot, however, do every good thing, although Congress now seems to think it should.
In July, Fed Chairman Ben Bernanke testified to the Senate, where one of Fisher's Harvard classmates, the ineffable Chuck Schumer (D-N.Y.), clearly hoping the Fed would give the economy a pre-election boost, exhorted Bernanke: "The Fed is the only game in town." Good grief.
Is Congress a spectator at the game of governance? Does it have anything to do with tax rates, spending levels and health care and other policies that have U.S. businesses, in Fisher's words, "inundated with regulatory overload"? Expecting --- no, mandating --- the Fed to perform the irreducibly political task of managing economic policy means off-loading legislative responsibilities.
To repeat: Congress is "off-loading legislative responsibilities" for "economic policy" onto the Federal Reserve. The offloading of its responsibilities onto other bodies, like the Fed, is one of the reasons Congress is the branch of the federal government held in the most contempt. What are we paying these people for? Why not just dissolve Congress and let the Fed do everything?
Democrats, whether it's President Obama or members of Congress, find it difficult to accept responsibility. Maybe that explains why Democrats have a hard time demanding responsibility from the citizenry. Given this unfortunate tendency, conservatives need to erect a "firewall" against the possible re-election of Pres. Obama by returning complete control of Congress back to Republicans. Winning back the majority is paramount.
Democrats fail to mention that during the halcyon days of Bill Clinton, when the budget was balanced and the economy was humming, America had an all-Republican Congress. We need to return to those prosperous days of yesteryear when America had an adult Congress, one that accepted responsibility. The Pelosi-Reid Congress was the worst in generations. America needs to "go back" to a Congress like that of Gingrich-Lott, one that balanced budgets and managed a vibrant economy.
Insofar as "the policies that caused the mess in the first place," Democrats already have a corner on that. As long as they refuse to acknowledge the consequences of their own policies, Democrats cannot be taken seriously.
Jon N. Hall is a programmer/analyst from Kansas City.