About those “policies that got us into this mess”

by Ryan Streeter on October 19, 2012. Follow Ryan on Twitter.

I’ve been away the past two days and so am only getting around to posting my Star column now. I chose to riff on a theme I touched on in this post last week, namely that no one seriously challenges President Obama and his surrogates when they say Romney and Ryan support policies that “got us here in the first place.”

The editors chopped out two other examples I had of how this expression is used. In my original copy, I included a line from Nancy Pelosi and from an AFL-CIO brochure, both of which used the “policies that got us here in the first place” line. I was trying to show that this meme is in the water, so solvent that it hits the bloodstream immediately these days without anyone noticing. Everyone’s using it.

Here’s the column in its entirety (once again, I put the whole thing here because the Star archives its material after a few weeks):

Let’s Be Honest about How We Got into this Financial Mess

October 18, 2012

Indianapolis StarĀ 

The biggest thing you need to fear about Mitt Romney and Paul Ryan is their support for the policies that got our economy into trouble in the first place. Or so you would think if you listen to their opponents.

In a recent television ad, President Obama says: “Gov. Romney believes that with even bigger tax cuts for the wealthy and fewer regulations on Wall Street all of us will prosper. In other words he’d double down on the same trickle-down policies that led to the crisis in the first place.”

On the stump, the president repeatedly riffs on this theme. In Miami last week, he said: “The last thing we can afford, Florida, right now is four years of the very same policies that got us into this mess in the first place.”

Joe Biden, never one to repeat the party line without a little embellishment, claimed in last week’s vice presidential debate, “(The Great Recession) came from (Paul Ryan) voting to put two wars on a credit card, to at the same time put a prescription drug benefit on the credit card, a trillion-dollar tax cut for the very wealthy.”

You’ve got to give Biden credit for venturing into territory that no paid economist has dared to go. No one believes that Medicare Part D caused the recession, or the wars for that matter, regardless of what you think of them as a matter of policy.

The media have basically given the president and his surrogates a pass on this theory. They are happy to leave it in place as accepted Obamanomics doctrine.

Let’s think about this for a minute. Did the Bush tax cuts cause the financial crisis? No one who has seriously studied the key drivers of the downturn has argued that we would have averted it had wealthy Americans been paying the Clinton-era 39.6 percent income tax rate.

Mitt Romney has proposed lowering taxes by 20 percent and offsetting the revenue loss by eliminating exemptions in the tax code (whether Romney can pull that off is a different matter). This may or may not be good tax policy, but how exactly would it inflate the kind of credit bubble that led to our economic downturn?

What about Obama’s claim that Romney would offer “fewer regulations on Wall Street”? Romney has said that he supports some Dodd-Frank provisions, such as increased capital requirements and transparency in interbank relationships. But he thinks the law fails because it creates too much uncertainty by lacking specificity. Now, Romney hasn’t been clear enough about the specifics in his financial regulation plan, which has been a weakness in his campaign. But the point is that he has argued for certainty in regulations, not a return to the previous regulatory scheme — as in the one that “got us here in the first place.”

Let’s look at the other side of the ledger. Obama is running a single-issue campaign: raise taxes on wealthy Americans. He would take the top two income tax rates back to their Clinton-era levels. He has always sold the policy as a way to create more revenue and close the deficit, not as a way to avert another financial crisis — because he and his advisers know that would be voodoo economics.

On financial market regulation, the president signed Dodd-Frank into law, which left Fannie Mae and Freddie Mac untouched while placing more restrictions on their private-sector counterparts. As the New York Times’ Gretchen Morgenson pointed out in her authoritative book, “Reckless Endangerment,” Fannie and Freddie were at the epicenter of the financial crisis. Leaving them unreformed is unabashed support for the “policies that got us here in the first place.”

In a campaign that should without question be about the policies that led to our economic mess, our president has chosen to dissemble rather than to lead.

  • Fergusos

    If fanny and Fred were at the epicenter why were their delinquency rates much lower than private firms? Why did they lose market share from 2002 (50%) to 2005 (30) of total mortgages. 86% of subprime mortgages taken out in 2006 originated from private firms. Epicenter? No. Contributed? Yes.