Restating the Obvious

One-trick pony

Last Monday, in my "Panic of '08" post, I said I might try to explain why President Bush seems so bewildered by the troubles on Wall Street.

OK, it's simple, really. He has never had but one economic idea -- lower taxes. Hence his puzzlement. You can imagine him getting a report from his Secretary of the Treasury: "Mr. President, unless we accept massive government subsidies -- hundreds of billions of dollars -- the national and international credit system will collapse."

And we can imagine his rejoinder: "I cut taxes, didn't I? What could possibly go wrong?"

Well, now he knows.

Some of us unreconstructed New Dealers saw it coming. We remembered Richard Whitney, and we were warned by George Santayanya that those who did not remember the past would be condemned to repeat it.

Richard Whitney, until he went to prison for theft, was the president of the New York Stock Exchange. The New Deal  took that into account and imposed regulations on capital markets, notably the Glass-Steagall Act.

In the '90s, Glass-Steagall was repealed. Obsolete, said the free-market economists. Too restrictive, said the business school professors. Unleash the mighty prosperity engine of unrestrained capitalism, said the claque of
 pundits.

And you will recall that George Bush wanted you to give these people all your retirement money. I suggested in an Off Deadline column that that sounded like a bad idea. I took a lot of abuse for that from the smart-money boys. Some of them stopped taking my phone calls.

I wonder if they will pick up the receiver now. Probably not.

Now you're going to give them a good chunk of your retirement money anyway. That $600 tax rebate? Right out of your Social Security retirement fund.

It works like this. The government is running a deficit, remember? To give you $600, it has to borrow it from China. To get $600 for you from China, it has to pledge your Social Security fund.

You go out and spend the $600. Probably on shoddy goods from China that you will discard within a year or two. Now you are $600, plus interest, less likely t o collect your Social Security, and you have nothing tangible to show for it.

And it doesn't matter one bit whether you have made all your mortgage  payments on time or not.