The process by which mankind survives is called trial and error. One can take the measure of an individual's progress not by what they achieve, but how they pick themselves up and adjust after making an error. The same holds true for decisions made by groups of individuals. Very often the errors are not evident soon after an action is taken.
Policies, legislation and regulation are made by groups of individuals who often get it wrong and often get it right. The current rush to judgment in Washington is likely to fall into the former group in several areas. Among them: mortgage bailouts, gas tax relief to consumers, universal health care, and recent trucking regulations.
The past chairman of the Federal Reserve was provided with widespread accolades for the growth that was supported by interest rate adjustments and liquidity availability. I was one of the admiring throng. But hindsight provides some interesting questions.
Was the lowering of interest rates poorly timed in that it occurred when global demand for goods and capital was relatively weak? As demand increased and capital was more than readily available, it seemed like one could do no wrong by expanding and consuming. Not to spoil the party, those in charge of assuring that the rules are followed and that prudent behavior is being exercised also let the beast run freely. It became reasonable to expect that recessions after 1985 would be shorter and also have a less severe downturn. The recession of 1981-'82 was the first of the recessions that lulled the public into thinking that, while uncomfortable, recessions were not catastrophic events. Times have changed for millions of households. I really don't take pleasure in writing this, but the pain we feel now is good for the future of this country.
A capitalist society needs to be awakened every once in a while to understand that there is a need for cautious exuberance. Planning for a rainy day is not common behavior. Living within one's means is also not common behavior. Being truly informed, as required by the basic tenets of a free economy, is often not common behavior. The reliance upon cable gurus has become commonplace. It always startles me when a conversation about the economy revolves around the recent opinions of a media maven.
To be fair, they have 30 seconds to keep us fully informed about what the issue is and any expert brought before the public has the same allocated time. If the statements are not dramatic, ratings suffer and that is unacceptable. To be sure, the printed press lacks either the resources or the interest to provide a balanced view of the consequences of the issues. That is understandable since most of those who are able to read simply don't.
Recent examples include the gas tax holiday — the logistics of executing that at the pumps and keeping required records is not trivial for the independent fuel retailer. The decline in tax receipts depletes the funds needed to help rebuild a declining infrastructure. Taking the funds from the oil companies leads to taking funds from the major food processors and pharmaceutical companies for the same reasons. Unintended consequences.
A truly informed public is the best referee in the battle for scarce resources. At this point in time, there is no way to effectively inform the public as completely as it needs to be. As a result, we are faced with a lingering problem of a housing market that is oversold with overbuilt housing units. The cost of housing has short-circuited the ability to allow for a rainy day. But we can pressure our elected officials to bail us out again — we have precedence.