The Bush administration’s approach to today’s meltdown is to direct all its energies and largess to mortgage lending institutions. There is, as yet, no program to help distressed homeowners renegotiate the terms of their home mortgages with loan modifications or loan work-out plans. The president is opposed to further stimulus programs, even though private-sector investment in the United States has all but ceased.
It’s becoming increasingly clear, however, that while saving the banks may limit further calamities, it doesn’t really save anybody else. Even with government-guaranteed lines of credit, financial institutions are refusing to lend money. Credit card debt continues to mount for Americans nationwide and affordability for housing has become a growing fear for many families in all types of neighborhoods. With the banks effectively on strike, an economic recovery, if there is to be one, must begin with the government injecting funds to those parts of the economy that need it most: infrastructure development, state and local governments, an alternative-energy sector. These are all programs to which Bush is firmly opposed.
In a sense, Bush’s inactivity is even less excusable than Hoover’s. Unlike Hoover, Bush could learn from the successes of New Deal and World War II-era programs to revive the economy. Keynes’s general theory of how to defeat depressions wasn’t around when Hoover was president, but it’s been with us now for seventy two years. What’s more, virtually every reputable conservative economist, from Martin Feldstein on down, now supports a government stimulus program. But Bush, drawing on no known body of economic thought, remains opposed. And with each passing day, the economic hole out of which we will have to climb grows deeper. Read the complete article at Real Clear Politics.
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