Crony capitalism a bum deal
“The pace of economic recovery is likely to be more modest in the near term than had been anticipated.” Those were the carefully chosen words of the Federal Reserve Board after its meeting Tuesday. Translation into English: We wuz wrong.
So were a lot of people, including departing White House economics adviser Christina Romer, who wrote that the Obama Democrats’ February 2009 stimulus package would hold unemployment below 8 percent.
In this summer of unrecovery, it’s still vital to fathom how so many smart people got so much so wrong.
One answer comes from economist Arnold Kling writing for american.com. Kling argues that the collapse of the housing market and the financial crisis disrupted what had been “a sustainable pattern of specialization and trade” and that we need to let the market economy develop a new one.
Instead, the policies of the Obama Democrats have been aimed at propping up the old order – holding up housing prices and the mortgage market, keeping the auto companies in place, maintaining the lush standard of living of public employee union members (the purpose of the $26 billion the House was summoned back to approve Tuesday).
Maintaining unsustainable patterns of production, Kling writes, prevents the trial-and-error process of private investment that creates new jobs and patterns of production that will be sustainable.