Here’s what happens when kids who grow up getting overdoses of revisionist depression-era history written by liberal non-economists in the public schools. They write this when they grow up and become journalists (read: not economists):
It’s safe to assume President Bush and his advisers wince at that description, since it calls to mind another Republican president, Herbert Hoover, whose free-market, time-will-tell, all-things-run-in-cycles attitude helped plunge the United States into financial catastrophe.
First of all, the republican/democrat distinction was totally different in those days. So trying to paint republicans as any kind of caricature of today is totally off the mark. Also, Herbert Hoover was not a free-marketeer at all. While you may have heard this in junior high because FDR did so many zany things in the name of regulation, this characterization of Hoover is completely false. In fact, they called him the "engineer" and he certainly thought he could engineer the economy. He simply got out engineered by FDR who ended up making things much worse, not improving anything as your progressive textbook would have you believe. Business cycles are largely the result of fed policy and regulation (read: intervention), not the other way around. Read this for a good history of the Depression. And read this to see why "engineering" the economy a la Hoover or FDR or the Fed causes crests and troughs, booms and busts.
But the N&O gets worse in its editorializing on economic matters:
For while it’s true that individuals must use good judgment in their financial affairs, and surely some didn’t when taking out their troubled mortgages, for one example, the free-and-easy regulatory system contributed to making it easier for them to get themselves in trouble. And to obtain their mortgages, after all, they didn’t rob banks. They applied for loans that somebody approved.
The free-and-easy regulatory system? Try the free and easy pressure by "progressives" HUD and other agencies for mortgage lenders and other institutions to push loans onto high risk populations. Let’s also remember that government interventions and bailouts yield more profligacy and risky behavior, not less, because the market is stern with punishment and people learn from their failures. Government is simply trying to legislate away risk. I’m weary of the media fifth column calling for the government to be our mommies and daddies when it comes to economic matters–particularly that of people AND lenders who were irresponsible. Success and failure are two sides of the same coin when it comes to creating wealth. N&O’s economically ill-informed editorializing contributes to terrible myths about the supposed social benefits of government paternalism — ideas that have thoroughly been discredited.
This media narrative of markets as enemy is getting old and tired. It’s spun by people who have absolutely no authority to speak on such matters. Their proposals are completely counterproductive.