"an era of profound irresponsibility"

In his speech today on the economy, President-elect Barak Obama said:

This crisis did not happen solely by some accident of history or normal turn of the business cycle, and we won't get out of it by simply waiting for a better day to come, or relying on the worn-out dogmas of the past. We arrived at this point due to an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington, DC. For years, too many Wall Street executives made imprudent and dangerous decisions, seeking profits with too little regard for risk, too little regulatory scrutiny, and too little accountability. Banks made loans without concern for whether borrowers could repay them, and some borrowers took advantage of cheap credit to take on debt they couldn't afford. Politicians spent taxpayer money without wisdom or discipline, and too often focused on scoring political points instead of the problems they were sent here to solve. The result has been a devastating loss of trust and confidence in our economy, our financial markets, and our government.

Now, the very fact that this crisis is largely of our own making means that it is not beyond our ability to solve. Our problems are rooted in past mistakes, not our capacity for future greatness. It will take time, perhaps many years, but we can rebuild that lost trust and confidence.

Now I am predisposed to thinking Obama is precisely the leader our country needs right now; but I also think, as dispassionately as I can, that this sounds like a man who understands the problem and has a plan to repair and restore, not only our trust in the economy but in our government.

Compare what President Bush said in a farewell interview with Cal Thomas about the same issue and specifically about his conservative critics saying he behaved like a socialist because of the massive bailout spending.

He says he still believes in less government spending, but when Henry Paulson, secretary of the U.S. Treasury, and Ben Bernanke, chairman of the Federal Reserve, tell him that if he doesn't act, the result will be worse than the Great Depression, "you can sit here and say to yourself, 'Well, I'm going to stick to principle and hope for the best, or I'm going to take the actions necessary to prevent the worse."

In other words, Bush does not rethink his principles, based on evidence; he sticks to his principles and simply acts pragmatically to avert a crisis that he's been told will happen if he doesn't. And no thought seems to be given to the possibility that the principle was wrong or to preventing the same from happening again. That kind of thinking got us into this mess -- people acting on their 'principles' without any corrective based on evidence.

In another exit interview, Bush said one of the things he was most proud of was that he didn't betray his principles while in office. "I came into office with one set of principles, and I'm going out with the same principles." Of course, there are some basic principles that should be unchanging (like equality, justice, and liberty); but if one of his principles is "the government is not the solution to the problem, it is the problem," then he did betray that principle out of expediency. And, worse, he did not consider whether the principle is wrong. The fact that he still believes in the principle is just part of that blithe ignoring of cognitive dissonance that characterizes his thinking.

Paul Krugman, Professor of Economics at Princeton, New York Times columnist, and winner of the 2008 Nobel Prize in economics, wrote in an article, "What To Do," in The New York Review of Books (12-15-08):

What we're going to have to do, clearly, is relearn the lessons our grandfathers were taught by the Great Depression. . . . the basic principle should be clear: anything that has to be rescued during a financial crisis, because it plays an essential role in the financial mechanism, should be regulated when there isn't a crisis so that it doesn't take excessive risks.

Applying John Maynard Keynes' statement to our own times, Krugman says our "true scarcity is not in resources but in understanding." And he concludes:

We will not achieve the understanding we need, however, unless we are willing to think clearly about our problems and to follow those thoughts wherever they lead. Some people say that our economic problems are structural, with no quick cure available; but I believe that the only important structural obstacles to world prosperity are the obsolete doctrines that clutter the minds of men.

And that is one more vital reason for hope with an Obama presidency. Unlike his predecessor, he has the capacity to think, the willingness learn from evidence, and the wisdom to change course when necessary.

Ralph