I Thought We Solved This Problem

The graphic above, though not as far reaching into history as I would have liked, indicates a strong and long track record of effective management of the economy since WWII. A greater role for the Fed in managing the money supply and an adequate job in fiscal management has developed long periods of relatively uninterrupted growth in the latter half of the twentieth century. Undeniably there were bumps; the 9% inflation in the seventies made it nearly impossible to guage risk and resolving the stagflation at the beginning of the eighties was a daunting and painful task. The budget deficits of the early nineties created the first cracks in America's edifice of solvency. With proper oversight and timely action, these obstacles became surmountable. It was foolish to ever believe that we had solved the business cycle, but it sure seemed like we had tamed it. Over the last eight years, the nation's good work and relationship with our uniquely American economic model has unraveled. The leadership failed us at every level. I often joked of George Bush's ambidexterity when he was Governor as the number of convicts executed under his watch made it seem as if the switches were pulled two at a time. Now I find he can sign a spending bill and a new tax cut into law simultaneously. Where was the foresight when it was suggested by him that it was in our national interest for everyone to own a house? Where were the intellectuals in his government to oversee the wild west mortgage machines of Fannie and Freddie? Who sat by and allowed mortgages virtually unsecured and fantasized to be bundled into prime rated securities and sold around the world? Who decided that it was ok for our rating agencies to "A" rate a security they didn't understand? Whose idea was it to burden an already unmanageable set of entitlements with an extra $400 billion of obligations through prescription drug care? And where was Alan the Maestro? Caught up in his own press I'm afraid or drunk on the power of the fiefdom he presided over. The autonomy of the Central Bank was washed away in wave of rabid deregulation by Phil Gramm and his cronies. The SEC was apparently run by the fourth Stooge Shep with the deft management of a FEMA director in a Louisiana storm. Gosh, could I go on. The point is that the impossible has been made possible and we let loose the volatility and improbability we thought we had boxed and put on display in the Smithsonian.