Time for Emergency Freedom

A crisis is a terrible thing to waste: so say politicians who over the past decade have used every actual or imagined one to justify more government control over the economy.

First they created Sarbanes-Oxley. Passed under the Republicans, and justified by a few high profile frauds [1], this law presumes all publicly traded businesses as guilty until proven innocent. Public companies are now forced to divert untold billions from productive efforts to plead their own innocence to various political appointees.

Then it was Bush's bailouts. Using the Lehman bankruptcy as cover, Republicans and Democrats alike advocated a carte blanche rescue of other financial institutions -- but were initially stymied by massive public outcry. Unfortunately, when the stock market dropped almost 9% after the bill initially failed, people accepted it as "proof" that the law was necessary, because -- though we might not like bailouts in theory -- the government had to respond to the emergency. (Curiously, when the market fell another 38% after the bill passed, nobody saw fit to repeal the bailouts or the mentality behind them.)

Obama carried the logic further during his automaker bailouts, when he used the impending bankruptcies to unlawfully give unionized workers millions of dollars rightfully owed to investors.

Next came Obama' $787 billion stimulus package. Under guise of a vague economic crisis, the nation indentured its children to fund all sorts of government boondoggles, from Cash for Clunkers to green subsidies for soon-to-be bankrupt firms to spending $7 million per home to provide broadband internet access.

Having had no (positive) effects, the stimulus was then repeated in kind by Bernanke's trillion-dollar QE1 and QE2.

In every case, when advocates were asked to justify these programs, the response was: "Given the crisis, it's incumbent that the government do something."

The actual result of these and countless other government interventions in the economy has been to weaken the real driver of economic growth: creative individuals left free to operate in the private sector.

Consider just some of the impacts: Sarbanes-Oxley treated executives of public companies as latent criminals. Not only did this destroy the morale of the business community, it also steered firms away from America's public markets. When companies can't readily access the capital required to grow, investors, consumers, and job-seekers all suffer.

Bailouts embedded a “too big to fail” mentality which increased systemic risk. They also unjustly punished the foresightful individuals and institutions that would have profited absent government intervention. (Those who refrained from entering an over-heated housing market still haven't been rewarded for their acumen, while deadbeat lenders and homebuyers are being subsidized to keep home prices from falling.) The lesson? Prudence and forecasting don't pay; it's much better to plunge in recklessly and then have the government redistribute other people's wealth to save you.

Similarly, Obama's disregard for the law taught everyone to be wary of investing unless they happened to have the president or his cronies in their pocket. (A lesson emphasized by Obamacare and its notorious waivers.)