Now that the swamp has been drained we have figured out that a completely deregulated financial sector was always a bad idea. The economy has crashed and in all likelihood we will see an appropriate collection of new regulatory laws written and enforced in the near future.
Consumers have been jolted into the realization that you can’t build wealth by gambling and borrowing. Their shock will manifest itself in a savings rate somewhere in the 10% area. Plasma TV sales have dropped of off have a cliff. Vegas is in real trouble. Soon 2007 will start to look about as familiar to us as 1927.
But one thing has not changed. During the long extended bubble of leverage and ever increasing government debt, the US government acted like no one cared what they did or how irresponsibly they behaved. We had unlimited ear-marks, unlimited lobbying, unlimited unpaid –for tax cuts, and unlimited defense dept. toys,. The government had an endless supply of cash to sprinkle all over the world (or dump off the back of trucks in Iraq).
As long as the unemployment rate is below 7% the masses pay little or no attention to government budgets.
Then suddenly, just as politicians were arguing about their obligation to be thrifty, they have been given a new pass to spend and spend and spend. In the short run I understand that we need an economic agent who will spend while everyone else is cowering with fear. In the long run however we will need an entirely new mentality out of our public servants. It’s not fun to be a government leader and announce huge cutbacks and huge increases in taxes.
Why is it so hard to cull the fat even while you protect or add to the stimulus programs we all need so desperately. Can we still afford military bases all over the world? Does every earmark improve productivity and reduce unemployment? Can we afford Medicare and Social security without any means tests?
After we produce a new set of laws for financial industry regulation we will need to totally overhaul how our drunken government does business. I believe it will take an entirely new crop of politicians .