A Free-Market Fix
Nobody has ever lost money by betting on the federal government to overreact to a crisis. And as Congress weighs a bailout of the financial markets, it looks as if that’s where the smart money should go yet again.
Any day now, lawmakers are expected to agree to invest some $700 billion — more than the country spent on the first five years of the Iraq war — to restore the financial markets. But lawmakers should also be careful to protect taxpayers.
Let’s begin by noting that there is a legitimate federal role in extraordinary circumstances. There are things Washington needs to do to keep our economy functioning. For example, it was a smart move for the Federal Reserve to pour $150 billion into the system. The Fed exists, after all, to make sure money keeps moving and credit remains available.
But as lawmakers debate buying up hundreds of billions in assets, they should realize that the government’s aggressive meddling in financial decision-making is what got our economy into this mess in the first place. The long-term answer isn’t more federal control, it’s a return to free-market principles….