The danger of ignorance, or why you want smart people in government

I just finished watching this mediocre Frontline documentary on our current crisis.  Too much of it consisted of close-ups stills of Bernanke and Paulson, and the narrative progressed too slowly, but it was useful as a high-level refresher of the events through the end of 2008.  What strikes me most, however, is how completely many of our elected officials do not understand this crisis and the ramifications of their stubborness. 

We have been so infected with this Darwinian notion of survival of the fittest that we cannot abandon it in the face of changing circumstances.  This rigidity is the definition of dogma.  Because Reagan was such a hero, we get an ideology that says all government sucks, firms must be allowed to fail regardless of the consequences, and that the market is always right.  (Of course the market has been wrong on the upside, but who’s to say that means it’s wrong on the downside?)  So a significant minority of our leaders say, “Damn the consequences, I will not bail out the financial system because that is intrinsically wrong.  I do not care that this will halt the economy and bring us into a depression, that’s just talk that liberals make to expand government power.  People must learn their lesson.”  Because, you know, having your equity wiped out, losing your job, and earning the scorn of your society really induces moral hazard.

When you have the former head of the titan of Wall Street (Paulson, Goldman Sachs) telling the government that the whole system needs a bailout, you know you’re in a crisis.  One of the smartest Republican men with an intimate knowledge of our country’s finances does not ask for a bailout so he can buy his friends a Gulfstream V.  He does it because he understands how the system work and the danger of a credit freeze.  But to men and women on the Hill with little to no understanding of Economics 101, all those zeroes must mean that the government is trying to grab power just because it’s greedy. 

Of course, the most disgusting hypocriticism is when it’s okay to spend money with abandon and go into debt when the president is Republican, you’re the party in power, and you’re buying guns, but when the country actually needs the money for productive ends, all of a sudden the government is dangerous and must try to balance its revenues and expenses.  The history of 2001-2009 will be the history of dogma trumping pragmatism.