Depression fears

Lee Ohanian gets it, but has not yet quited figured out the importance of what it means:

Will we duck a depression? We will if the principles of economic growth -- increasing the incentives to work and save, promoting competition, and fostering economic openness -- are maintained. This is the most important lesson we learned, the hard way, from the 1930s.

I agree with that, but the problem is he said this earlier in his article:

...there is a real danger that even a moderate recession, along with the current perception of an economic crisis, would lead to calls from various quarters for bad economic policies -- policies that tend to either pander to special-interest groups, benefiting relatively few at the expense of many, or raising taxes, particularly on the nation's most productive citizens, many of whom create jobs through their own enterprises.

Well, the Democratic Party is on the verge of a possible electoral landslide, and they are the party that is more likely to "pander to special-interest groups, benefiting relatively few at the expense of many, or raising taxes, particularly on the nation's most productive citizens, many of whom create jobs through their own enterprises". Lee Ohanian has yet to put these facts together to see how perilously close we are to the next depression.

The Death of Capitalism

Daniel Gross writes:

Just as happened in 1932, it's possible that the Republicans' incompetence and bullheadedness in managing a financial crisis could lead to Democrats controlling both the White House and Congress.

This sentiment should strike fear in the heart of every free market advocate who reads it. Before the Great Depression, America had a classical free market economy. America was almost a libertarian utopia. After the Great Depression, America slowly became a socialized paternalistic big government nanny state.

If the financial crisis gets worse, and the Democratic party increases its political control, capitalism as we know it may not be able to survive. Saving capitalism should be the goal of all those who ideologically believe in free markets. If that means a bailout needs to be passed, then so be it.

Update: Megan McArdle says it better than I do:

It is worth noting, in answer to the libertarians who are wary of government intervention in the economy, that if there is a serious crash, we will get even more government intervention in the economy--and intervention that is much less to our liking. That cost has to be weighed in your assessment.

Financial crisis resolved?

Hugh Hewitt writes:

If, as appears likely, the two parties which are on opposite sides of a deep ideological divide can work together to resolve a crisis and then immediately return to throwing hammers at each other for five weeks, this will be as great an example of the wonders of our system that can be imagined.

Now that the crisis has been resolved (hopefully), libertarians, conservatives and all those who embrace free markets need to work to save and restore capitalism in America. The stakes are now to high to allow the paternalistic socialist state to continue acquiring more control over the economy and the lives of American people.

Those who embrace free markets need to sell the concept to the American people that the cost of this bailout need not be equally borne by all members of society. Instead, it could more productively be borne by the least productive members of society (i.e., the do nothing civil servant bureaucrats, parasitic accountants and lawyers, upper middle class welfare king and queen college professors, wealthy foreign allies who do not adequately pay for their own defense, dead beat home owners that caused this crisis, monopolistic corporations who gain government induced economy of scale advantages through laws and regulations, etc).

These are tough arguments to make, and undoubtedly, free market advocates will be accused of having no compassion. However, free market advocates need to frame the debate around the concept of having compassion for the hard working Americans who are being asked to borne the cost of solving a problem that they did not create. Free market advocates can win these arguments and save and restore capitalism in America, but they need to get to work ASAP.