The Curious Economics of our Times

We’ve all been focused recently on the tactical actions of our government in the current financial crisis.  Recapitalizations.  Bail-outs.  Bridge loans to nowhere.  Stimulus packages.  Anything but actually helping us to solve the fundamental issue of concern – debt.

A major component of the current economic crisis is an overabundance of debt.  Financial companies borrowed in excess to feed leveraged investments to boost returns, encouraged by low lending rates and a long bull market.  Industry overextended itself, expecting that there would always be enough free capital to be found.  And individual citizens took on excessive debt not only in their houses and cars, but on credit cards and other less attractive terms.

So in comes the Fed to recapitalize banks and slash interest rates in the expectation of jump-starting lending.  I can understand this as a short-term measure to unfreeze the credit markets, but in the longer term I cannot understand how one solves a problem of excessive debt load by encouraging people to borrow even more.

Perhaps it’s just my conservative nature, but it seems to this non-politician that the only way for us to deal with excessive debt is to pay it back, and that the best way the government can help with this is to leave us more of our own money to do so.  That rather than tax the productive to send checks to support the unproductive, we should encourage the productive to invest and create jobs to make more of the population productive.  That rather than grow government and cheering the “jobs created” we should be paring government to the bone to reduce the load on society at a difficult time.

Instead we’re getting an ever-expanding “stimulus package” and support programs for all paid for by the middle class (once the rich pay their tax accountants a little more to avoid them).  We’ll make it harder to get a job through minimum wage increases and more expensive to keep employees due to mandated benefits and increased costs.  To help us get out of the recession we’re going to make it harder to get a job, harder to keep a job, and ensure that we get less money if we manage to hold on to a job.

I really fail to understand why this is so attractive to liberals.  Why do we prefer dependency over employment?  Why do we cheer when government takes choices away from us? Why is it that the call to “pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of liberty” does not apply to our own freedom of contract?

I fear we are heading for a fall, and that far too many of us wish to close our eyes, cartoon style, and hope that if we don’t know we’ve gone over the cliff that we’ll remain aloft.  Because that always worked so well for the coyote.