1. Republicans controlled Congress during the so-called “Clinton surplus.”  It was the first Republican majority in more than 40  years and the first budget surplus in more than 25 years.
2. The Democrats had controlled Congress for two years leading up to the 2008 economic crisis.  They helped create the deficit that Pres. Obama “inherited”, and would have made it bigger if they could have.
3. As the Wall Street Journal pointed out in The Obama Economy, Bush essentially governed like a Democrat during the economic crisis of 2008, cooperating with their efforts to throw away billion$ on bailouts and stimulus packages.
4. The current economic policies are merely a continuation of the policies that got us in this mess in the first place.
5. Sowell says that if we are going to talk about “the policies that created this mess in the first place,” let’s at least get the facts straight and the names right.

But I should point out that Sowell missed a few facts that are also important.  First, there was no such thing as a Clinton surplus.  The so-called budget surplus of the mid-1990s was a surplus only if you include as revenue the money that was stolen out of the Social Security fund.  If you count it as borrowed money that has to be returned one day, the government was still running a deficit.

Second, Sowell was entirely correct that the mortgage lending crisis was created by Democrats, although it was implemented in full view of Republicans who did too little to stop them.  The mortgage crisis was like gasoline thrown on the fire of economic crisis of 2008, but there were other factors that must be remembered and corrected:

1. The ultimate cause of the economic conflagration was the widespread belief that this economic gravy train—25+ years of Reagan-Bush recovery—would never end.  This belief caused people throw caution to the wind.  They took on way too much debt to buy bigger and bigger houses and other stuff they didn’t need and couldn’t afford.  Lenders lent money to people who couldn’t afford to pay it back.  Corporations focused on short-term profits at the expense of long-term stability.  It’s very tempting to throw your money around at the casino if you get the stupid idea that the game won’t let you lose.
2. The sudden spike in world oil prices in the summer of 2008 was the match that lit the fire.  Suddenly, industries sensitive to oil prices had to cut back, the effects of which rippled through the economy.  People and corporations were way too extended, so they were vulnerable and fearful.  They panicked.  They cut back.  People’s incomes shrank.  They lost jobs and houses.  You know the rest.
3. In 2008, it became apparent that big-government socialists might occupy all three branches of government.  The leading candidate for the White House was preaching bigger and more expensive government, along with dramatic tax increases.  This caused many job-producers to keep their money on the sidelines.  People just will not risk their money in the face of such uncertainty.
4. Finally, it is going to take time to ease the panic and correct the excesses.  According to the Wall Street Journal, credit excesses built up over many years have to be wound down, and that takes time, while banks have to work down their bad assets.

But hopefully, people are beginning to learn some of the lessons of unchecked government spending.  Check out this column by Hugh Hewitt.  He describes how young teachers in California are being punished by a system that pays extravagant benefits to retired teachers, leaving too little for the teachers still on the job.  Raising taxes is no longer an option.  “The present is very much being sacrificed to the excess of the past.”  It’s another kind of excess that will take years to correct.

But not to worry.  In his piece Obama’s Shrinking Presidency, Columist Richard Cohen tells us exactly what Pres. Obama needs to do that will fix all of this.  He says, “The president needs better speechwriters.”  Well, there you have it!

Tags: economy, politics

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