Nobel-prize winning economist Gary S. Becker had a piece in the Wall Street Journal on Friday which is perhaps the best short comprehensive piece on the ongoing economic malaise, from the causes of the financial crisis of 2008 to the failure of the immediate past Congress and current administration to remedy the situation.
The University of Chicago economics professor reminds his readers that “government behavior also contributed to and prolonged” the financial crisis: “Regulators who could have reined in banks instead became cheerleaders for the banks.”
Given that markets melted down in a Republican administration, Democrats cleaned up at all levels in the 2008 elections. Once in power, they turned to their party’s tried and true response to economic crises: more government spending. Congressional Democrats put together a near-trillion dollar “stimulus plan”, and “Leading government economists, backed up by essentially no evidence, argued that this spending would stimulate the economy by enough to reduce unemployment rates to under 8%.”
Although a lot of economic theory supports the notion that higher spending stimulates the economy, the historical record tells a different story.
Instead of economic expansion on par with previous economic recoveries with accelerating job creation and declining unemployment, the Democratic stimulus instead produced . . .
. . . a sizable expansion of the federal deficit and debt.
The misdiagnosis of widespread market failure led congressional leaders, after the 2008 election, to propose radical changes in financial institutions and, more generally, much wider regulation and government control of companies and consumer behavior. . . .
Although regulatory discretion failed leading up to the crisis, Congress nevertheless added to the number and diversity of federal regulations as well as to the discretion of regulators. These laws and the continuing calls for additional regulations and taxes have broadened the uncertainty about the economic environment facing businesses and consumers.
Read the whole thing. These regulations put more power in the hands of federal bureaucrats who are incapable of creating new jobs and take it away from entrepreneurs who are the leading generators of new jobs in our economy.
FROM THE COMMENTS: Blair Ivey writes:
Once in power, they turned to their party’s tried and true response to economic crises: more government spending.”
It’s been tried, but it ain’t true.
Good catch, Blair.