Does McCain Still Agree with Reagan that Government is the Problem?

Ronald Reagan, in his first inaugural address, famously declared that "government is not the solution to our problem; government is the problem."

Twenty-seven years later, in the midst of the worst economic crisis since the Great Depression, and seven-plus years into the reign of Bush and Cheney, Reagan's anti-government battle cry should be on trial. But, stunningly, it is not.

This needs to change. The presidential candidates' view of the role of government should be one of the central questions of the last 36 days of the campaign. And it should definitely be a question they are asked at their next debate:

"Sen. McCain, given the part deregulation played in the current economic crisis and your support of a massive government bailout of the financial industry, are you now ready to break with Ronald Reagan's assessment?"

And, to be even handed: "Sen. Obama, in 1996, Bill Clinton cheerfully announced that 'the era of big government is over.' As the Dow plummets and Wall Street and Main Street turn to Washington for big government bailouts, are you now ready to break with President Clinton's assessment?"

The shift in my own thinking on the role of government was what led to my disillusionment with the Republican Party, and the transformation in my political views. I've always been progressive on social issues: pro-choice, pro-gun control, pro-gay rights -- even when I was a Republican. The big difference is that I once believed the private sector would address America's social problems. But the hope that people would roll up their sleeves and solve this country's social ills without the help of government was never fully realized. There were never enough volunteers or donations -- and the problems were just too massive and intractable to tackle without the raw power of appropriations that only government can provide.

Our economy is not the only thing that is crumbling. So is the philosophical foundation of the modern Republican Party -- also known as the Leave Us Alone Coalition, led by its spiritual guru, Grover Norquist. His dream of making government so small "we can drown it in a bathtub" has been embraced by the GOP mainstream.

Indeed, during his 2003 inauguration, Jeb Bush stood in front of Florida's capitol building and said: "there would be no greater tribute to our maturity as a society than if we can make these buildings around us empty of workers; silent monuments to the time when government played a larger role than it deserved or could adequately fill."

I sadly suspect that Jeb and Grover and their Republican compatriots have not yet updated their views of government -- they have not yet made the connection between demonizing government and looking to it to save the day.

The financial meltdown has put the Grand Old Party's schizophrenia on full display. But why are so many in the media, the Democratic Party, and the Obama campaign averting their eyes from the spectacle of a party that wants to drown government until they need it to bail out Wall Street or AIG -- that wants to vanquish government workers, unless they are listening in on our phone conversations or working hard rolling back government regulations?

It's like the story, probably apocryphal, of the agitated -- and obviously confused -- senior citizen imploring a GOP politician not to "let the government get its hands on Medicare."

With the madness of this contradictory mindset exposed, voters will have a chance to decide if they agree with Norquist and Jeb and W and Cheney and the Republican Messiah himself, Ronald Reagan and, yes, with John McCain. And even Cindy McCain who, in her otherwise bland convention speech, called for "the Federal government" to "get itself under control and out of our way."

A staggering 83 percent of Americans believe that we are heading in the wrong direction. And, I'm sorry, Sen. McCain, I don't think it's because of too many earmarks or because $3 million was spent in 2003 to study bear DNA in Montana.

Size matters in some things, but when it comes to government, it's not the size of the government, it's the way it is utilized.

"Big government" didn't get us into Iraq. It didn't spy on Americans or open black op rendition facilities all over the world. "Big government" didn't create Guantanamo or okay the use of torture. "Big government" didn't leave the residents of New Orleans to suffer in the wake of Katrina. "Big government" didn't cause the financial industry to run off the rails. Indeed, the free market is what created all the new, risky ways for banks to game the system and, eventually, implode -- then come calling on "big government" to ride to the rescue.

So let's hear what McCain and Obama think the fundamental role of government should be. I can think of no better way to underline the massive gulf between the two candidates -- and the two parties they represent -- at the very moment when McCain is so desperately trying to blur the differences (see his recent shopping spree at the second-hand populism store: "Big discounts on 'fat cats' and 'Wall Street greed'!")

Stanford professor Lawrence Lessig says that if Americans recognize that the financial crisis -- and the need for a government bailout -- is due to "policies McCain still promotes... this could well be the event that effected a generational shift in governmental attitudes. Think Hoover vs. (the eventual) FDR."

But if we want to make sure that Americans make that connection, we need to put the question of the role of government front and center in the campaign. Economic policy and foreign policy and domestic policy are all important areas of debate. But before we continue looking at the (falling) trees, let's take a step back and consider the forest.

For those of you in the Pennsylvania area, on Monday I'll be debating Mike Huckabee in Hershey, Pennsylvania. For more information, click here.

Follow Arianna Huffington on Twitter: www.twitter.com/ariannahuff

Comments

[dharma89]

Arianna,
You are "right on" once again. I'm a new subscriber and did not realize you are a reformed Republican! For those of us who are independen­t/unaffili­ated and are looking for a responsible, moderately conservative (which is not tantamount to Republican!) fiscal policy combined with a reasonably progressive domestic social and foreign policy agenda , your article speaks out to the fact that many (educated) people in this country feel polarized supporting R. or D. Though I am unequivocally supporting Obama, I would like to see this and related topics form the basis of a serious discussion of the need for viable, moderate, mainstream third, fourth, and fifth parties in this country, just has occurred in Europe.

[LuckyBlessed]

Despite our dire situation in banking, health, energy, Americans have been brain washed by blood money lobbyists to believe Europe is part of evil socialism. (This as we have to listen the China' Yu Yongding, ``If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately,....`If it is not the end of the world, it is the end of the current international financial system.'' )

[Bladernr1001]

Stanford professor Lawrence Lessig says that if Americans recognize that the financial crisis -- and the need for a government bailout -- is due to "policies McCain still promotes... this could well be the event that effected a generational shift in governmental attitudes. Think Hoover vs. (the eventual) FDR."

***

I think Lessig is wrong. For one thing it now is generaly accepted that FDR's policies (and some of Hoover's too) made the Depression last much longer than it would have if the government did much less meddeling.

I think it is safe to say given recent events that government regulation is no more a panacea for avoiding meltdowns than laissez faire capitalism. Maybe we have to accpect the premise that occasional meltdowns are inevitable and we should simply let them run their course. We should prosecute fraudulent business men (and sue them too). There perhaps needs to be a few well placed regs that promote an orderly marketplace.

[rednecka2z]

Cool it Prof. don't make me give them My Def. Of PHD....

[rnadna]

"For one thing it now is generaly accepted..."

Please elaborate! How can something that didn't take place be proof that it would of been better than something that did! Can the experiment be replayed?

Talk is cheap - and mumbo-jumbo even cheaper! Whole schools of thought can be built around silver lined clouds - and just as effermeral!

Here's reality! For the last 30 years less government and derulguation has led us to the brink of another Depression. Wish that could be replayed!

[Bladernr1001]

One of the biggest errors that FDR made was that he did not really ever stabilize the environment at the time. What do i mean by that? FDR was constantly tinkering with programs, taxes, tariffs, business regs. I you were a buisnessman at that time and you had capital or access to capital to expand your business would you have risked that money not really knowing what the president was going to do next?

Most buisnessmen in this situation were not comfortable investing in business expansion (which would have created the necessary jobs to lift us out of the depression). They figured that any business assuptions they made could be instantly rendered usless by the stroke of FDR's pen. So what did they do?....by and large they did nothing. So no jobs were created. FDR's policies effectively paralized the private sector. This uncertainty did not completely dissappear until we entered the war.

[LuckyBlessed]

Where does Corporate Lobby Blood Money factor into laissez faire?

[berrycooda]

I heard on a Chicago news radio program today that Obama worked with a woman in Chgo. who was
instrumental in securing loans for people who were not qualified to get such loans. This was part of
his community work.
ANYWAY...you can't have freedom without fences.....There will be a percent of the people who when left to do their own thing will take advantage to get what they want. There will always be fraud and greed.
Look when they lifted the rent controls etc.

I think both candidates have their share of making bad calls in the past. I wonder how sincere either
one is now, given the enormous mess this country is in. Once the election is over, and the great big
expensive parties are over, time will tell how they live up to the speech writers agenda.

[Bladernr1001]

One of the biggest factors in this meltdown was about who we made a lot of loans to. Back in the 80's and 90's government began pushing banks to make loans to folks that they would not otherwisel loan money to because they were poor credit risks. It just so happens that most of these folks were minority (and later on illegals). Crys of "redlining" made headline news. Even though the pols knew these people were bad credit raiks they coerced the banks to loan the money anyway. So the government was just as culpable in this mess as any banker.

And while the actual meltdown happened on Bush's watch democrats as well as republicans had a hand in messing with regulations and taking campaigne money. No one is clean here and if you think dems will make this better I think you are in for some big dissappointment. Hell, dems are just as responsible fro this as anyone.

[Subtle]

Bladernr1001, as someone who worked in the sub-prime mortgage industry in the 90's, I can tell you that you don't know what you're talking about. The problem was greed. End of sentence. People I worked with, sold mortgages to people who were obviously not going to be able to make the payments. One easy way was to qualify them with a 6 month Adjustable Rate Mortgage. When I asked what would happen to their customers when the fed raised the interest rates and the ARM adjusted to an unaffordable level, I got answers ranging from a shrug of the shoulders to "The rapture is coming. Who cares?" Seriously. It was a race to close as many loans and get as much commission as possible. I got out of the game because I refused to qualify people using these tactics. By paying a really high interest rate you could qualify for a home loan without actually proving your income. That is a recipe for disaster.

Reagan and the Republican party said government was the problem and got rid of much of the oversite that had been put in place by previous administrations.

Government is bad, until your house is burning, then you ask were the fire deparment is.

You can blame the people who jumped at the chance to achieve the American dream and own their own home. But the culprit here is lack of oversite and GREED.

[Rocku]

Actually, I think you will find that because SALARIES could not keep up with the cost of housing, financial institutions began to make up ways to put people in houses who could not afford them. Now if you contemplate that there are perhaps as many as 20 million illegal aliens and many more millions of work visa holders in this country, and that job creation does not even come close to providing jobs for the number of new citizen workers in this country, you will begin to get a picture of WHY we are in this mess in the first place! Sadly, neither party seems to want to address THESE issues. The days when we could accept a never ending stream of immigrants from all over the world are long over! The problems we face, not just here but world wide, are all about total population and few are willing to admit it.

[rnadna]

"I heard on a Chicago news radio program today that Obama worked with a woman in Chgo. who was instrumental in securing loans for people who were not qualified to get such loans. This was part of his community work."

I heard this morning on a Mars radio station that McCain is really a Martian!
I also heard on a Anchorage radio station that Palin eats lemmings.

Nonsense is easy to fabricate when you dont have to come up with real facts.

[Choicelady]

Worrying about Big Government made sense when we were a nation of mostly small businesses, owned and operated by creative minds that could innovate and benefit society. But we've not BEEN that type of nation for decades. Starting after the Civil War on through the Gilded Age the threat to this kind of business and society was from giant corporations empowered then, too, by government's lack of control on their excesses. The Great Merger Movement gobbled up or destroyed small and often more innovative business all with government looking the other way. Their control began to end with the Grange Movement, the Populist and Progressive movements, that demanded government work for ALL the people, not just Carnegie, Vanderbilt, and Rockefeller. We had to replay the issue in the last Great Depression.Despite how many of us have been burned badly by corporate greed, we have an endless love affair with wealth and power.What makes people, who have democracy and whose economy was built in no small part through cooperation, still admire robber barons, old and new, the ones who destroy those very virtues? It's a puzzle I've never understood.

[Bladernr1001]

50% of all workers are employed by firms with 500 employees or less. Many of those being 50 or less employees. I think it would behove us to still worry about having smaller government.

[wilnav]

A Solution to the Crisis in Liquidity

The best solution in spending 700 billion dollars is to invest in rebuilding American's infrastructure.

Let the US be its own banker. First awarding bids to rebuild infrastructure and for companies that win the bids and need money to get started, a loan.

Construction companies rebuilding infrastructure will put 100s of thousands of high paid skilled middle class construction workers to work. These men and women bring home the pay check and liquidity problem is sloved. Also tax payer is rewarded as the construction companies pay back the loan with interest.

So to the banking problem, morgage problem you goes away.

A simple working solution that helps everyone.

[Choicelady]

The investment would be great, the method is a good idea, but none of that can help this crisis which involves the credit markets. Unless and until we get control over that, homeowners, kids needing college loans, and small businesses are facing real problems that long-term investments in infrastructure cannot turn around. Better we lend the money, demand that not one dime in dividends or corporate pay be shelled out until we, the nation's people, are repaid. The buy-in is close to that - it dmeands that we have ownership in those financial institutions and that WE get paid. The next version, though, should NOT have bankruptcy reform but an insistence that ALL homeowners with subprimen mortgages be given an immediate shot at refinancing. We must also insist that corporate compensation to the execs by limited not to $500K but to, as one person here noted, the top govermental salary. It's OUR money. Let's make it work, not throw it away. Paulson must be fired right along with Bush.

[rednecka2z]

too late to fire anyone but reguardless of the party comming to power it will happen. Even McCain won't allow this to progress. I would bet the power of the FED (monitary banking) will be curtailed.

[doneright]

Those who want to play the game without rules ought to know better. The things that we value as a society are the domain of government. Government is where we come together to inforce our Idealism and without idealism we are animals. Civilization itself is the result of common laws and belief that maintain piece and preserve the common good.

It is not about big government versus little government. It is about government doing the job of government. The size of government and the taxes we pay are practical matters. Government does what private industry cannot and will not do. Those who always want their taxes lower and are never satisfied with what is low enough are not being practical. Society will not work without government. That which is not working today - the financial markets - is the responsibility of government. Government is the only institution that can foot the bill and restore integrity to the market place. Without integrity the market place collapses and the ability for anyone to make a living is put into jeopardy.

[rednecka2z]

In case you haven't noticed "Mainstreet" is currently controlled by Animals, and Government over the last 20 + years has done nothing about it. Too Much Money (unaccounted for) is going into slush funds of POLITICANS at every Level.

[Rocku]

Factually.... Civilization IS government! Neither can exist without the other. The trick is to determine just how much civilization you can tolerate and still be an individual. Thus Democracy! But majority rule being somewhat overbearing, a Democratic Republic seems to be in order, where the rights of minorities are still recognized and protected. Therefore a Bill of Rights must be instituted and respected. Does any of this ring a bell? When you start throwing away pieces of tried and true principles because you think they are outdated you no longer have government nor civilization!

[doneright]

I don't believe I have thrown away anything tried and true. All I said was that free interprise without government oversight and regulation does not make for a stable economic system. The rules are needed for the game to have meaning and without the rules you will experience wild happenings. That is my idea of a tried and true principle.

On the matter of being willing to change I believe the founding fathers would be surprised by the way people today tend to deify their work. I believe they expected changes in what they started. The world is not static. Changes in the environment and the acquisition of knowledge force change upon on us. We either see the change comming and become a part of the program or we get swept away by change.

[RussAbbott]

Absolutely. We have to get past the simplistic thinking that suggests there are only two options: government-is-bad vs. government­-is-the-an­swer-to-ev­erything.

As David Sloan Wilson says, every entity is both an individual and a group. Government is how the country works as a group. That doesn't deprecate the role of individuals -- or even of markets, which are very important. It simply says that we need a governing structure to succeed as an organization.

We have to get past the sloganeering and think more clearly and honestly about what that really means.

[rednecka2z]

We have to get past more than the "sloganeering". We have to get pastn the Greed and corruption in bothe Government and Business.

[44pol]

Sen. McCain first has to decide whether he is a Teddy Roosevelt disciple a or a "foot soldier" in the Reagan revolution. Since he seems to be a male version of the The Three Faces of Eve, maybe he is uniquely qualified to be both at the same time.

[Danny]

Even the likable Ron Paul's thesis is falling apart. Bring back government by the people for the people. Repair what's broken here before breaking stuff abroad.

[castlerider]

Thanks Arianna, Great post.

Now that the public at large has been getting educated on what has happened with our economy over the last several years, largely thanks to your blog, I've been wondering why no journalist has even thought to ask Clinton point blank why he even decided to sign into law the Commodities Modernization Act, along with the repeal of the Glass-Seagal Act.

It's obvious he did not expect it to be such a disaster, but he deserves to be heard on what in the world it was that prompted him to do it.

[20thcenturykid]

One way to trim the power of the government is by giving power to the people instead to the bankers. If money is power then why not give every man, woman and child in the US an even million dollars as a "stimulus package"... instead of giving $700 billion to the bankers! One million from the hands of the populace would end up in the banks eventually anyway, mortgages would be paid, the economy would be boosted, savings accounts and small businesses would benefit first and it would trickle UP rather than (as is the case now, never) DOWN! We have a total population of roughly 310 million people: that's only $310 million dollars, compared to $700 billion going wasted to the bankers! Think of the savings for the treasury and the benefits this money would create to the consumer economy! There's nothing wrong with this! Obama, call me if you need the details on this great idea!

[20thcenturykid]

Sorry, my calculation was faulty: 310 million times 1 million is 3,100,000,000. But the savings for the US are still great and the money would not have to go through the grubby hands of Wall Street bankers initially...

[torrrep]

You need to put new batteries in your calculator. That's still not right. You must be a product of the public schools.

[proudliberal4truth]

Better brush up on your math kid. 310 milliion people/$310 miillion dollars is ONE dollar per person, not one million

[proudliberal4truth]

I'm figuring at a cost of $310 TRILLION dollars, maybe you should send this idea to Sara P to use in the debate :)

[rednecka2z]

When I first heard the theory trickle down
I thought it must be the work of a clown.
Now that trickle down is dead,
I really wish their trickle hadn't been on my head.

[judithod]

I agree with Reagan that government is the problem, particularly when you consider who is responsible for laying the foundation of this financial crisis--the Carter and Clinton administrations. Carter signed into law the Community Reinvestment Act (CRA), which required banks to provide credit to "under-served populations" by granting them "affordable mortgages." In 1995, Clinton's administration made changes to the CRA, increasing access to mortgages for those "under-served." This retooling of the CRA included a federal requirement that if banks didn't make these loans, they would face penalties. As a result, banks were forced to issue $1 trillion in subprime mortgages, with Fannie and Freddie leading the way. Legislation to rein in Fannie and Freddie was proposed in 2003, 2005, and 2007, but the Democrats blocked all bill proposals. We've witnessed a giant giveaway precipitated by the federal government, and we, the citizens, are left holding the bag.

[slaxx]

if the mortgages had been "affordable" as the act stipulates, we wouldn't have this problem.

don't blame the CRA - it's obviously not the sole problem. banks were NOT forced to give mortgages to unworthy people! these loans were made due to greedy originators who wanted their commissions and committed fraud by lying to the buyers and making them believe that they could afford these mortgages and that it was a good investment and by falsifying documents to get the buyer approved for the loan. i have persoanlly seen mortgage companies trying to give people loans who in no way could afford them because they knew that they would simply sell off the loan and leave someone else holding the bag.

if there had been greater regulation and if banks were more responsible in overseeing who they gave loans to and had a more ethical corporate culture, this wouldn't have happened. did you forget about the credit union crisis and bailout that occured during the 80's due to reagan's deregulatuon of that industry?

[cheforacle]

The CRA did not require lenders to ignore reasonable, well-established guidelines for approving loans. That is poppycock being conveyed by Faux News and a lot of other desperate Republicans. If the law was so bad why did we not have a subpar loan crisis until the 2000's. The penalties added to the 1995 did not require these or other banks to change their guidelines for loans only to give minorities the same consideration everyone else did. It was an anti-discrimination measure not a dictate that you abort all normal judgments about an applicant's creditworthiness. The canard you peddle is similar to other periods of disaster where some like to blame minorities. The glut of home loans in the late 90's and 00's also was caused by the huge increase in small lending institutions and mortgage brokers eager to take advantage of the then-vibrant real estate market.

Furthermore, the notion that this crisis is caused strictly by offering bad loans to people who cannot afford them is misleading. The problem is more complex. It derives not only from the tendering of loans to those who are not creditworthy but from the practice, commenced in the late 80's and accelerated in this decade, in which the mortgage on one house was used as collateral to back other security instruments meaning that, if the underlying loan or loans went bad, there would be a deleterious ripple effect greater than the mere foreclosure of the home.

[Janelynne]

From what I understand, much of this was a snakeoil sheme, where "insurance" was sold and reshuffled. Money was produced in bucketfuls. Everything was fine until the "nothing" they were selling suddenly became "something" they had to deliver.

If you look at this country, all we have been selling for the last 10 years is nothing, and it's been sold to to the most irrational and exhuberent idiot that could get found. Actually we have been lining up.

[cheforacle]

Have you read this article in Business Week: http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html

It completely rebuts your position.

have you read the CRA Read it and you'll see there is no such mandate:
http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html

I understand that knowing the truth about that law might undermine your position as a supporter of Republicans but better to be enlightened than peddling false propaganda that relies on the scapegoating of minorities.

[Choicelady]

The CRA did not mandate that 65% of those with subprime loans actually were denied those rates for conventional mortgages and driven into highly questionable deals. That is outright falsehood on the part of the lenders. The loans were NOT done to meet CRA criteria but to feed the derivities markets that make money purely on gambling. The CRA is NOT responsible but apparently has become the convenient scapegoat for those who absolutely will not see that unfettered capitalism is evil. This is not the Baily Savings & Loan that can make reasonable decisions about reasonable investment - this is rapacious greed that has ALWAYS been a huge detriment to society. This nation has been brought to the brink time and again, not by government, but by outrageous corporate capital speculation and unrestricted exploitation. Live with it.

[chaz]

See I told you Hillary wasn't the problem.

[slaxx]

"Size matters in some things, but when it comes to government, it's not the size of the government, it's the way it is utilized."

exactly. this whole mess could have been avoided. i'd like to mention one thing, though...while i've never been one to care or pick on mccain's age, i think he has some serious cognitive and emotional problems, whether due to his age or not. he almost reminds me of the turn bill clinton has taken in his later years.

throughout this crisis, obama has remained rational, cool, calm, and realistic, and he has urged us to do the same. mccain's grandstanding makes him look like a neanderthal stomping his feet and beating his chest and his running around like a hysterical lunatic over this "crisis" flat out scares me and shows how irrational he is. this isn't what we need at a time when the finanical system is undergoing, and will continue to undergo, a self-fulling panic, which worsens the the problem.

mccain's behavior during this time exemplifies how this is a man that shouldn't be in charge of our country, especially during crisis. the man simply does not have the temperment, and his VP is total loser. both scare me.

[intellectualindependent]

The problem here is not the issue of big government vs. small gov't at all. The problem that has arisen is due to the fact that most members of Congress likely have no idea truly what this financial crisis means or what caused it. For some reason Congress is doing to things very irresponsibly. First they are attempting to get a crash course on economics to try and get a grasp on what caused this meltdown and second feel the need to pass some sort of relief bill immediately. Most of the details regarding the loans and morgages this crisis centers around involve such complex wording that the average American let alone Congressmen have no idea what they mean. It is irresponsible for Congress to try and take immediate action to this problem when most of them do not understand what this problem means. Failure of this bill in the House of Representatives was a blessing in disguise. A majority of Repunlicans and a large number of democrats recognized that this bill was not the right bill and must not be passed despite calls from Democrat leaders and Presdent Bush that action needed to be taken. Those who know the economy best aka economists and those in the financial market should be the key players in any "bailout" not Congress who by passing this bill would be doing more harm than good.

[AWCG]

Inadequate leadership
Inadequate courage
Inadequate honesty
Inadequate education of the public
Inadequate ability to share responsibility and accept blame
Inadequate respect for political and legislative processes
Inadequate balance between regulation and free markets
Inadequate regulation for 21st C global economy
Inadequate attention paid to reform Fannie Mae and Freddie Mac
Inadequate rules regarding mortgage eligibility
Inadequate rules regarding lender and broker behavior
Inadequate commitment to plan and manage personal finances

Where are the grown-ups and where are the statesmen? This is a greater good moment for everyone.