Note that not only is the president, like the commission chairman, assuming they know the cause that the commission the president signed into law is assigned to find out. But also, this new tax would establish a precedent that any person or business can be taxed or fined for any harm that Congress thinks they did to the economy.
On this theory, everyone who contributed to the real estate and stock market bubble, the breaking of which "caused" the crisis, could be taxed for the "effects" of their economic conduct. Under that theory, everyone who bought real estate or a stock after, say, 2005, should be taxed for their crime against society.
Perhaps the Democrats would apply this theory to education. They could tax the teachers' unions and their members for "causing" generations of ill-educated children.
But beyond such foolishness, the fundamental danger of this mentality is that if they are wrong that, basically, the banks caused the crisis, then their remedies in the form of new regulations and taxes may not make the economy safer. Rather, they may needlessly encumber and tax our financial institutions and drive financial business to unregulated Asia -- and with it, our future prosperity.
Their theory is that greedy, insufficiently regulated bankers went money mad, making bad loans, gambling with their depositors' money and thereby destroyed not only their own banks but the nation's and the world's economy.
It's a simple and time-tested method: Characterize human actions as sins, and respond to sin with punishment. That is how the Spanish Inquisition dealt with heresy, and why primitive societies made human sacrifices to propitiate their gods. Unfortunately, such punishments didn't end free thinking or the droughts that the primitives thought were evidence of their sin against their gods. And punishing the human desire to acquire will not make us healthy, wealthy and wise.
There are other, more plausible theories of what caused the economic crisis. Larry Summers, now the president's top economic adviser, gave a brilliant speech in Mumbai in March 2006 in which he pointed out that the account imbalances in the world -- caused by China's and other's excess savings being loaned to the U.S., and not corrected by letting exchange rates find their natural levels, and the U.S.'s lack of savings and excessive borrowing -- would cause severe recession in the near future.
This trade and capital imbalance problem, many experts believe, was compounded by the Federal Reserve policy of keeping interests rates too low too long after Sept. 11. Between those two phenomena, America was awash in a sea of cheap money that resulted in asset bubbles, excessive debt and the inevitable petty corruptions that attend bubbles. Add to these ill-considered government policies the congressional bipartisan pressure on banks to make bad subprime loans, and you may be approaching a better explanation for what caused the crisis.
Three quarters of a century on, serious economists are still vigorously debating the causes for the Great Depression and its persistence. Wouldn't it be wise to spend at least a few months trying to find out the real causes of our current economic crisis before committing major surgery on a financial system that has over the last century permitted the United States to become the greatest economic engine in human history?
Blankley, who had been suffering from stomach cancer, died Saturday night at Sibley Memorial Hospital in Washington, his wife, Lynda Davis, said Sunday.
In his long career as a political operative and pundit, his most visible role was as a spokesman for and adviser to Gingrich from 1990 to 1997. Gingrich became House Speaker when Republicans took control of the U.S. House of Representatives following the 1994 midterm elections.