Many people argue that the Troubled Asset Relief Program (known as TARP) is an example of government intervention in the economy being necessary. If government hadn’t intervened, the argument goes, the economy wouldn’t have stabilized and our severe recession would now be a severe depression, or worse.
I have two replies to this argument. One, it’s too early to judge what’s coming. Social Security and Medicare were judged as brilliant and effective programs when they were passed; in reality, they turned out to be fiscal and moral disasters more costly and disruptive to freedom than their harshest opponents ever predicted upon passage.
Two, the argument in favor of TARP evades why TARP was allegedly needed in the first place. According to serious economists (such as Thomas Sowell), the primary cause of the bank meltdown was the fact that mortgages were handed out to people who could not afford houses. As people who never should have been granted loans in the first place piled up debt, the entire mortgage industry imploded. This is because the federally managed mortgage industry mandated that more people get mortgages. Politicians in both parties, including George W. Bush, liked to see those home ownership numbers increase because it made them feel like they were creating a vibrant economy. In reality, the collapse of the financial industry which “required” TARP was due to government intervention in the economy.
It’s true that businesses make honest mistakes, and sometimes even evade the truth when they make financial decisions, despite what they have to lose. But ever since the 1930s especially, the government has agreed to back up the private sector for any errors it makes, especially big ones. The great injustice surrounding the view over the 2007-08 financial meltdown is that the private sector gets the blame. Socialists and liberals attribute it to “greed and selfishness” on Wall Street. What’s greedy about driving your mortgage or financial business into the ground? No answer is given. It’s just greed, that’s all.
But Republicans and conservatives are no better. They claim, “Without TARP, the free market system as we know it would have collapsed.” In arguing this, they’re evading the fact that we haven’t had a free market system — not a consistent one — in any of our lifetimes. The financial collapse makes the case for a free market economy of unhampered capitalism, not a case for government intervention. Opponents of government intervention such as economist Ludwig von Mises and others argued, for decades, that government intervention in the economy leads to a need for more intervention — which may stabilize things at first, but then creates a new unintended consequence (or disaster) and leads to further interventions until, eventually, the economy collapses into all out socialism. We’re nearly there in the United States.
The same thing happened in medicine. Politicians worried that old people would not be able to afford health care. They didn’t trust the private market to deliver. They didn’t trust elderly people to sensibly purchase, in what would have been an expanding market (if Medicare had never passed), the health care coverage that best suited their needs. If Medicare had never passed, the market for medical care insurance (for both the elderly and the younger) would look like the medical equivalent of the grocery or computer industries today. There would be choice and innovation based on the economic calculation of countless innovators, business people and consumers. Instead, we got socialized medicine for the elderly and, predictably, it went bankrupt and got dysfunctional. More than that, it caused hospitals and doctors to pass the excessive costs on to the patient by raising rates for non-Medicare patients. This gave truth to the lie that “everyone, not the elderly” needs socialized medicine. That’s why Obama’s reckless bill passed, and that’s why nationalization of medicine is now under way. The prior intervention in the medical marketplace made it inevitable, not the nature of a private marketplace itself.
Capitalism keeps getting the blame for the errors of government intervention. Government starts out by hampering the private economy in some sphere, and while at first it feels good to some, eventually it creates problems. When these problems occur, the socialists and liberals scream, “See? We need more intervention!” Of course, that’s what socialists and liberals do: Scream for government intervention. They’re not the problem. The problem, I have finally come to understand, are the “conservatives.” It’s the conservatives who are killing us. They are the ones to argue for government intervention when push comes to shove, giving the liberal socialists what they want without the liberal socialists ever taking the blame.
Case in point: Herbert Hoover, who increased taxes and expanded the role of government before Franklin Delano Roosevelt, the grand socialist, ever took office. Hoover extended the pain of the initial recession, helped turn it into a depression, and then FDR made the depression last more than a decade.
Case in point from our own time: George W. Bush. In a recent interview I saw him say that if there was to be an economic depression, he wanted to be Roosevelt and not Hoover. First of all, Bush didn’t read his history. Bush worsened the government-induced crisis in the mortgage industry and turned it into a painful recession. Obama came into office, massively expanded Bush’s policies and used the recession as an excuse to massively expand the role of government in every aspect of human life. Bush was Hoover, and Obama is FDR (in that respect). More than that, Bush’s comments reveal the true nature of the platform of “compassionate conservatism” he originally ran on. It meant that when push comes to shove … he’s a socialist. When it’s crisis time, he’s not some Republican — he’s the biggest socialist President in American history!
That’s the case with all the conservatives and Republicans we have known to date. They only vary in degree. Conservatives are killing capitalism, and therefore are killing us — even those of us who oppose capitalism, because we all need capitalism to thrive and survive. The Tea Party claims to be different. They’ll have to be, because up to now conservatives have been the best friends a socialist and a liberal could ever dream of having.