The Crisis-Response Cycle

This started out as a short post simply pointing to this AEI this video but it got a little wider in scope once some caffeine got involved.

In this short 4-minute video, the American Enterprise Institute’s Peter Wallison explains the causes of the financial crisis in very plain terms, arguing that this was driven on the front end by government housing policy.  Based upon this, Wallison argues that proposed regulations to prevent this again are unnecessary as long as government does not create the problem again.  A couple of quotes:

If the crisis was caused by the government’s housing policies, it was not caused by any inherent weakness in our financial or in our regulatory system, let alone as the left has been contending: an inherent weakness in capitalism. 

Unless the government embarks on more foolish housing policies in the future, this crisis or crisis like it will not in my judgment occur again.

Watch the video, it’s only 4 minutes long.

This example of government policy resulting in massively unintended consequences, followed by more government, is not unique.  Statists in both parties are simply doing what statists will always do.  H. L. Mencken observed that such people will consistently try “to keep the populace alarmed” in order to grease the skids for their own agenda.

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary. — H. L. Mencken

When one sees a repeated pattern of government interference creating a problem only to be followed by more government meddling to fix the problem originally caused by that same government, one has to assume that 1) they think that we are idiots, 2) we are idiots, or 3) both.  Those of you who picked option #3 go to the head of the class.

The Crisis-Response cycle: the government rides in on a white horse to solve the problems that were caused by that same government, perhaps in some previous crusade.

This same cycle of statist thinking, ignoring the results of previous interference while acting as if history started the day that they took office, is occurring in the health care debate.  The government allowed millions of illegal aliens to flood into the US with access to our health care system.  The government refuses to reign in the slip-and-fall lawyers (thanks, Party of Change), and many government imposed mandates including prohibitions on interstate insurance coverage have resulted in rising costs.  But the results of this are being used as fuel for the push for, you got it, more government control.  At the very least your intelligence should be insulted.

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