Financial crisis, recession make for strange bedfellows

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Say one thing about the financial crisis: it's certainly scrambled -- or at least temporarily suspended -- the usual economic coalitions.

Economic liberals, like U.S. Rep. Barney Frank, D-Massachusetts, and Chairman of the pivotal House Financial Services Committee -- a person in Washington you would not normally run to, to ask for assistance for large banks and key corporations -- in general favors the U.S. government's record fiscal and monetary interventions.

Meanwhile, economic conservatives, including U.S. Sen. John Shelby, R-Alabama, in general oppose the intervention and related fiscal policies.

Saving capitalism from the capitalists

The economic conservatives stance looks all the more curious when one considers the fact that if no intervention occurred, the U.S. financial system -- and quite possibly the global financial system -- would have collapsed; at minimum, credit markets would have remained severely constrained, with disastrous implications for commerce in the United States. Hence, by extension, in this financial crisis and recession, economic conservatives, including some of the strongest supporters of capitalism, are opposing policies designed to support and stabilize ... capitalism.

Nevertheless, there remains a segment of lawmakers who still believe that doing nothing and 'letting the market take care of everything' will solve the crisis. But the view from here argues that the economic, social and political unrest that would build from such inaction would have quickly put pressure on public officials to pass even bigger systemic changes, and the result would not be good news for corporate capitalism. Historically, when an economic system faces a crisis, nations have tended to implement reforms that bolster the system's stakeholders -- i.e., those with power and wealth -- and this crisis is no different. In other words, the system being supported by the intervention is not the life of France, with its five-week national vacation policy and free college tuition, but capitalism, American-style.

Who is to blame for the financial crisis, pronounced recession, and the U.S. economy's poor fundamentals? As is so often the case, there's more than enough blame to go around, on both sides of the aisle, inside Washington and outside the beltway. But because they were in charge of the White House from 2001-2008, and because many policies they passed contributed to the crisis, economic conservatives and the Republican Party are most responsible. And they'll pay a political price for these mistakes -- and for other public policy errors and failures -- on election day, for many years.

Of course, at least a portion of economic conservatives will beg to differ, and on Wednesday, opponents of President Obama's policies, along with those opposed to fiscal stimulus, higher taxes on upper income groups, and government spending in general, will hold rallies in U.S. cities to voice their displeasure, and that is their right.

What cannot be condoned, however, is the offensive, extremist rhetoric emanating from these groups. The groups have used lies, scapegoating, insults, misinformation and demagoguery while criticizing the Obama administration and recent congressional actions. The appalling rhetoric and demagoguery represent some of the worst examples of free speech and the actions do nothing to further the nation's discourse.

Mediamatters.org, a media watchdog group that supports liberal policies, has assembled some of the rhetoric used by these individuals and groups. Instead of demagoguery and extremist rhetoric, these protesters should offer a constructive, viable alternative that outlines how they would solve the financial crisis and the U.S. recession.

What led to the activist era?

But don't misunderstand, the financial crisis and the recession did not, in and of themselves, push the American people to consider a more-activist government. Most people think those events did, but they just added more evidence to support their conclusion. Other citizens think it's the Iraq War that did it, but the war and its ultimate impact, whatever the initiative's intentions were, are still undetermined.

No, what really compelled the American people -- particularly the large body of Independent voters -- to try something else was an event in the summer of 2005: Hurricane Katrina and the stunningly inadequate response by the federal government to the plight of the people of New Orleans. The failed response was a national tragedy, and it seared in the minds of Independent voters that maybe the party in power doesn't really care about you if you don't have a lot of money. Not surprisingly, in November 2006, they voted to change the leadership of Congress to the Democratic Party.

Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.

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