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The "Salutary Effects" of Depression

NRO's Jim Geraghty points us to a press release from the liberal Campaign for America's Future that praises the "salutary effects" of a depression:

"[D]epressions have some salutary effects - the scoundrels go belly up, the weakest get purged. And, in the wake of the disaster, people demand strict regulation of the money lenders to keep their greed in check, and government spends money on the real economy to put people back to work.”
(emphasis added).

That's exactly what I've been arguing here, here and even back on Friday here.  What the lefties at Campaign for America's Future understand is that  free markets, capitalism and small government do not thrive in the aftermath of economic catastrophe.  Anyone who doesn't believe me should check out the history of FDR's tenure in The White House, when the Great Depression offered, for better or worse, a rationale for the intrusion of the federal government into areas previously off-limits to it.

It's a judgment call about how far the market can be pushed before that catastrophe happens (it's performing ok today because of the sense on Wall Street that a deal will indeed be forthcoming).  And, of course, the more conservative the legislation is, the better I will like it.  But what can't be minimized or ignored is the enormous downside ramifications of a failure to act.

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