Disingenuous Illusions and Cold Reality
By Karl Reiner
The financial collapse of 2007-08 brought on the deepest recession since the 1930s. As the world of finance unraveled, the banking sector had to be rescued by the government. Had there been no intervention, the slide would have been much worse, perhaps resulting in a depression. Deregulation and the lack of oversight created the environment which allowed the large financial institutions to get out of control. An unfettered market proved it could run itself into the ground.
Although Tea Party adherents were not unduly alarmed when the growing federal deficit was mostly fueled by expenditures for unfunded wars, they became highly incensed by the government’s desperate spending to stave off economic collapse. Some of the resentment is understandable. The government saved big firms while smaller ones went under, homeowners saw their home value shrink and unemployment escalated.
Unfortunately, the magnitude of the economic damage is grossly underestimated. Consumers, banks and governments are struggling to get out from under a massive load of debt. Five years after the housing sector buckled and knocked the economy apart, 21.8 million Americans are unemployed or underemployed. The fact that the U.S. Treasury, Federal Reserve and the central banks of Europe all scrambled to intervene in the crisis doesn’t impress the Tea Party faithful. They believe the problems that came with the breakdown of the housing sector can be solved by cutting spending and curtailing government.