We've tasted this recipe before. A crisis is created. Panic is fomented by politicians, pundits, media, business and others. "Something must be done immediately," everyone shouts. That something usually becomes other people suffering while those who caused the crisis or screamed the loudest then benefit from the commotion.
Iraq's "weapons of mass destruction" and "million-man army" were an imminent threat to the region and America. "Something must be done!" the politicians and media shouted. That something involved sending thousands of American troops, the deaths of thousands of Iraqi and Americans and hundreds of billions of American tax payer money being spent. The cost of the war is being born by American taxpayers and our young soldiers while those with connections to the Carlyle Group, Halliburton, DynCorps, Washington Group International and others made fortunes.
"Housing prices are plummeting and mortgages are underwater. This could be the end of the Western economy! Something must be done!" the politicians and media cried. Staunch free marketers decided that the government should intervene to save these poorly managed banks and this hypocrisy led to billions of taxpayer dollars being passed to the Treasury with no restrictions or accountability system put in place. "We can't wait for details, we must act now!" and in the confusion those who caused the crisis divvied up the taxpayers money. Bonuses were paid and billions are still unaccounted for while millions of middle class Americans still have mortgages that underwater and stagnant unemployment.
"Taxes must be cut to stimulate the economy!" was shouted although barely any politician, economist or fellow chugging a beer in a neighborhood bar could keep a straight face while trying to explain that marginal tax rates in the 35% range are significantly discouraging innovation. Someone please find the would-be entrepreneur that says, "I would have built that business and made $5 million last year, but what held me back was that the marginal tax rate was in the mid 30's so I decided to stick with my regular job that pays me $60K a year." While the millionaires shift these tax savings to off shore accounts, the current and future middle class will take on more of the tax burden.
The latest panic that "deficits can only be addressed by cutting spending on social services!" has been fueled by tax cuts, enormous military expenditures, pork-barrel spending and growing social services costs. Now that hysteria has been declared, we can all anticipate the next steps will involve:
•Demands of diminished support for the lower and middle classes
•Politicians (especially those in safe districts) will rail against wasteful pork-barrel spending while doing their best to stow away projects in their district.
•Little serious discussion about cutting the enormous military budget which is more than twice that of 2001 and more than the total spent by the following countries combined: China, United Kingdom, France, Russian Federation, Germany, Japan, Saudi Arabia, Italy, India, South Korea, Brazil, Canada, Australia, Spain, Turkey and Israel.
We have all tasted this recipe before, so let's not get distracted by the hand waving panic. History has taught us that while someone waves one hand wildly, their other hand is often reaching into our wallet.