The End of Republican Economics...

I have found myself more and more curious about the actual components of the financial crisis (crises depending on who you ask). It is complicated and you begin to wonder how much of this money is real and how much if it is well, not. The federal reserve bank has offered almost $200 billion in relief. The federal government now owns 70% of the mortgages in the country and has taken control of the world's largest insurance company A.I.G. I will leave behind the Fannie Mae and Freddie Mac discussion and talk about A.I.G. for a moment. What is A.I.G. you ask? A.I.G. is an insurance company but not just ANY insurance company. They insure all kinds of things but the aspect of their business which makes them so important to the functioning of the world markets (and thus not something we can let go away) is that they insure investments against failure. Many of those sub-prime mortgages that were given to people who could not pay them and then bundled and sold off as tradeable securities which were then bought up by investment firms to trade were investments that AIG had insured against failure. Now as the sub-prime mortgages failed, houses were foreclosed on, and the worth of the securities they represented all failed AIG got into trouble. Now, AIG has also insured good investments so the failing of AIG would have a negative impact on more legitimate, healthy, and necessary aspects of the market. This would only make a terrible situation something similar to the 6th level of hell. The cost of this bail out in the form of a loan which the government gave in exchange for control of the company? $85 billion. And you know what they say: a billion here, a billion there and that starts to add up to real money. The question is, "Why was their no regulation to prevent this kind of bull shit!?" I will tell you why. Republicans. Now, that might seem like the kind of thing that comes off as partisan but it is true. For the most part Republicans are responsible for lessening, blocking, or completely doing away with regulations of industries. (I would like to take this moment to point out that Clinton was a major force of the telecommunications deregulation of the 90's and you can thank him and congressional Republicans for the Clear Channel monopoly of today). So let us talk about the Republican ideas concerning economic theory.
As best I can tell there are three main aspects Republican economic theory: no or little government regulation, no government bailouts, low taxes, and the nefarious "trickle down" theory of wealth distribution. We will take the first two together as they mostly deal with idea of how much business the government has messing around with business. (The second two also seem bound closely together.)
Conservative thinkers (as I see it) seem to think that the political and the economic do and should exist as two seperate spheres (to go back to the Greeks, political is the government of the Polis, or city and economics is derived from the Greek word Oikos for home, governing the home). Or you can look at all of this as a recasting of the public/private debate but I will skip all fo this for the time being. Basically the idea here is that government has no business either regulating or helping the business or the market (as the market is some kind of self-regulating entity). Cleary this has not worked. A lack of regulation has led to this kind of collapse ans thusly forced the hand of some pretty vehement free-market thinkers (remembering that Secretary of the Treasury Henry Paulson came from Goldman-Sachs). So Paulson (because Bush upheld the first sacred law of conservative economics) has had to violate the second sacred law. It is clear that the lack of regulation that was supposed to help business that has led to the collapse of business is not good for business. I am sure there is a syllogism in their somewhere. It will also have an impact on how much tax we will have to pay. Considering that the deficit and debt are really high and that we will have to continue to pay for this bailout and a two fronted war I see little room for other budget cuts now that people will want to do to pay for all of this mess. So go figure that out.
It is dinner time so I will return to this a little later...