What is Mr. Kudlow smoking?
By Sam Wells
Mr. Kudlow writes as if the United States still has an essentially laissez-faire capitalist system -- something America has not had for almost one hundred years (at least). Since as far back as 1913 the United States has adopted a national central banking agency (the Federal Reserve System) which manipulates money and interest rates rather than relying on free markets. That's not laissez faire. Since then also an income tax has been imposed on Americans, especially since World War II with withholding. That's not laissez faire. The nation already had local public schools, but these have been expanded by increasing federal subsidies and controls since the 1960s. Educational quality has generally declined and teachers unions are now among the most powerful and corrupt special interest groups within the Democrat Party's base constituency.
It seems to me that the Federal Reserve, the income tax, and government schools are probably the three most pernicious political institutions in America. Without them modern socialism would be impossible. With their continued existence, socialism is virtually inevitable. Those three political interventions alone mean that even though we still have the remnants of an essentially capitalist base, we do not have laissez faire or true free-market capitalism, not for a long time. And that doesn't even consider the myriad other federal government intrusions into the marketplace, nor even the government's CRA, Fannie Mae, and Freddie Mac which played such a key role in creating the mortgage crisis which triggered the present wider economic calamity -- an instability made possible and inevitable by many decades of Federal Reserve inflationism and other forms of massive political interventionism. This mountain of politically-induced malinvestments and the huge unsound credit bubble are the consequences of decades of government interventionism -- the opposite of laissez faire. Yet, the Democrat-dominated news media insist on trying to blame a nonexistent "laissez faire" for the current malaise.
I applaud President Bush's lip service in favor of free-market capitalism. I just wish he had thought of that when he was pushing Congress to vote for the Democrats' long-planned trillion-dollar bailout scheme. That is a glaring contradiction to a policy of laissez faire.
Congress was hurriedly pushed to appropriate some $700 billion (and more) of the taxpayers' money for an emergency bailout to save the economy. And now we hear that Treasury Secretary Paulson has played a "bait and switch" trick on Congress by not even using that enormous sum of taxpayer money the way he said he would in order to "stabilize" the markets. Paulson (a Democrat and long-time friend of Wall Street socialist Chuck Schumer) is apparently rewarding his big bank buddies instead. This smells to Jupiter. And now the Democrats want to use more than $25 billion to bail out the UAW, a major Democrat Party special interest group. Some House Republicans are demanding he give the money back, at least what he has not already dished out.
Meanwhile, no reforms in the direction of less government meddling and more freedom in the market are being established. At a minimum, Fannie Mae and Freddie Mac should be immediately abolished or at least phased out as soon as possible with their assets auctioned off to the private sector. The Community Reinvestment Act should be repealed. The Sarbanes-Oxley Act should be repealed and the "mark-to-market" accounting rules suspended.
Also, the politicians who were responsible for oversight of these agencies, especially Barney Frank and Christopher Dodd and Charles Schumer, should be held accountable and fully investigated by an independent prosecutor. Those bureaucrats such as Jamie Gorelick, Rahm Emmanuel, and Harold Raines -- who got very rich while sitting on the boards of Fannie and Freddie and pushing for the most unsound loans to those they knew could not repay -- should face indictment and federal prison for corruption and malfeasance. The American people should turn their righteous wrath at these corrupt Big Government culprits and demand justice.
© Sam Wells 2008