“Seeing is believing” — right? According to Michael Shermer, author of “The Believing Brain,” that hoary bromide has it exactly wrong. Believing comes first. Then we seek information that confirms our beliefs and reject whatever might contradict them. Our brains are “belief engines,” writes Shermer. They search for patterns and endow them with meanings, simple truths to comfort us in a complex world.
Hard times excite this side of our nature. We look for bogeymen to explain our economic woes — immigrants, Wall Street, the tea party, public service employees. “Greed” is evoked to explain the recent financial collapse. Why the sudden outbreak of one of the Seven Deadly Sins? No one knows. But some people find solace in this medieval hypothesis. We haven’t come that far from the days when natural catastrophes were interpreted as the wrath of the gods.
If the Occupy Wall Street protesters had done their homework, they’d understand that Greed didn’t spring up spontaneously. It was fed by government policies that flooded the market with money at low interest rates, along with the implied promise that if the risky bets failed, government would cover the losses. It was like sending gamblers to Las Vegas with money-back guarantees. Government and Wall Street were bedfellows. If you’re looking for a bogeyman, you can’t give government a pass.
The great debate of the moment is the proper size of government and its role in the economy. One side argues for higher taxes and more government spending, the other for smaller government, lower taxes and deregulation. According to one, government stimulus just saved us from another Great Depression. According to the other, it was misguided, wasteful and ineffective. And so it goes: Redistribution versus growth. Bailouts versus hair cuts. The power of the state versus the freedom of the individual.
How can the assertions of either side be verified? How can we be certain which policies work and which don’t or what might have happened if other policies had been pursued? Not even time will tell for sure. The debate is passionate, facts are routinely manipulated and both sides claim to possess absolute truth. But economics is murky, the global market is infinitely complex and we are confronted with new demographic and technological realities for which the panaceas of the past are of no use.
Our plight ought to present an intriguing challenge for the President. But in spite of his vaunted intellect, he appears to have little interest in economics and is incapable of even considering ideas that haven’t been borrowed from the moth-eaten New Deal playbook.
Instead of looking for ways to encourage the private sector, he projects hostility to business, threatens and demonizes “the rich.” Don’t expect the economy to improve as long as this attitude prevails.
A few simple reforms could avert a repeat crisis and restore prosperity: higher capital requirements for banks, no mortgage loans without good credit and a substantial down payment, no government bailout if your bets turn sour, an end to corporate welfare and loopholes in the tax code. Instead, we get a 2,500-page financial reform bill in which bureaucrats split hairs over the definition of “loan.” In spite of Fannie Mae’s contribution to the financial meltdown, it’s still in business, backing loans on mansions. Cleansing the regulatory stables and reforming the tax code could stimulate economic recovery. But last year, the federal government added more than eighty thousand pages to its trove of regulations.
Still, many people continue to put their faith in government and politicians to save us. Demons and witch doctors still haunt the earth as they did in primeval times.