Dan's Papers - September 26, 2008

A Republican is driving down a dark street at night when he sees a woman alongside a car on the side of the road. The car has a flat. He looks at his watch. If he stops, he will be late for his date at the club. He drives on.

A Democrat is driving down a dark street at night when he sees a woman alongside a car on the side of the road. The car has a flat. He pulls over, whips out his cell phone and soon has five other people there fixing the problem. In short order, they break the car's axle.

Thus do Democrats differ from Republicans. And as the years go by, the pendulum swings from unfettered economic promiscuity to bureaucratic hell.

When George Bush came into office in 2000 he spent the beginning of his administration firing Democratic regulators and either not replacing them or replacing them with people from the business being regulated. The result was a whole lot more freedom in the free market system than had been before.

Tightly regulated systems, in the extreme, can lead to stagnation. Unregulated free market systems in the extreme, can lead to catastrophe.

Our current catastrophe happened because of a great Ponzi scheme. If you can't financially qualify to own a house, we'll sell it to you anyway. Just start paying us the serious money in three years. And if you don't have it then, why, just sell the house for a profit. This worked fine as long as prices for homes kept going up and up, which they did for years because 10 million unqualified homeowners came into the market to create a demand that exceeded supply.

It was like that other Ponzi scheme, the chain letter. Send $10 within two days and in two weeks you will receive $100 back. You know it can't go on forever. But you figure maybe you can sneak in and get yours before it comes undone.

There are no laws against chain letters, because in the end, when people get what they deserve, it's small potatoes.

There are reasons for banking laws. One is that, at the end of a chain letter involving housing, what people get is to lose their homes and wind up on the street or in with relatives.

And yet we cannot help ourselves. Which is why we need regulations, SOME regulations. And people to enforce them who don't have their irons in the fire being regulated.

When this country was founded, those who did so realized that people are not all they are cracked up to be. That is why we have the judicial system monitoring Congress, Congress able to impeach the Chief Executive and the Chief Executive able to veto Congress. I can't think of any other system in the world that thinks everybody is no damn good. Sure works.

The last time we had a huge economic catastrophe was during the Reagan Administration, another Republican administration. Reagan created Savings and Loans so that "banks" could lend money without having to worry about banking regulations. People without a dime in their pockets were loaned money to open shopping centers. Lots of construction went on. Lots of new jobs were created. But when the shopping centers failed, the loans went delinquent. And so Wall Street needed a bailout. That bailout, as I recall, cost about a half-trillion dollars.

Before that was another Republican catastrophe that happened during Coolidge and Hoover, when everything came crashing down into the Great Depression.

Democrats who go overboard with regulation don't cause such drama. They cause glut and malaise. People push paper. The economy slows to a crawl. But it doesn't scare the hell out of everybody.

An interesting thing to note is that during all three of the Republican catastrophes, the Republicans in charge, just six or seven years before the catastrophe, allowed the rich to cease having to pay large taxes. Huge amounts of wealth were accumulated among very few people in amounts that one might call "hoarding."

(Reagan said if the rich get very, very rich, it would trickle down, and it did. Then - crash.)

A coincidence? Maybe. But one might say that those wonderful Bush tax cuts, mostly for the rich, will now, to finance the bailout, have to be paid anyway. Hopefully those who hoarded wind up paying the most. There's a certain symmetry about it. Here are a few other interesting things to note.

One is that the decisions being made about how to run the country this month are being made by regulators. They told the president what to do. Now they are telling Congress

Two is that Wall Street cannot be allowed to die. If it does, everybody loses. The rich lose their businesses, the upper-middle class lose their savings and pensions, the lower-middle class lose their jobs and the poor lose their services. In fact, the whole world slows to an economic halt.Which, in an odd way, at least fights global warming.

Three is you can't blame people for behaving the way the founders of our country expected they would. You have to blame the administration. They're the ones that did not rein in the Ponzi scheme.

Four is that, when choosing between the Republicans and the Democrats, there is something to be said for staying somewhat near the middle of the pendulum swing, a little to the left, a little to the right. You don't get either wild or ho hum. But you do chug along.