On Thursday Mitt Romney made another speech denouncing all forms of regulation, from clean air regulation, to bank regulations that are in place to prevent a situation like the last housing bubble from happening again.
The problem, according to Romney, is too much government involvement.
Or is it?
During the Bush era, government restrictions were at a low, and yet they are what spurred on the overinflated prices both on the stock market and in the housing market.
I know, Friedmanites will explain this away as the fault of still more regulations in place. But what about looking back to the past? Back before the Great Depression, there were significantly fewer restrictions in place. Business was a free for all and the U.S. prospered, until it didn’t. And the market crashed and burned, badly.
Instead, all around us, we see the positive effects of the stimulus. The auto industry has recovered. Banks have gained stable footing again. Many of the loans the government made to rescue the industries have been paid back with interest, leaving taxpayers with more money than they started with.
Had there been no government interventions, we probably would have seen the collapse of the U.S. auto industry and many major banks. While we might have been able to crawl out from under the rubble, I find it hard to believe that we would be standing where we are today.
There is a lot of talk about the European crisis as being evidence for a failed so-called “socialist” system, and great proof that the U.S. must stop regulating. But the most successful European countries, Sweden, Denmark and Norway, are amongst those that have the most heavy regulations, taxes and welfare systems.
The spending and cash flow problems have occurred in European countries where there has been a move to deregulate housing markets and lending.
Time and time again it has been shown that government spending is in the best interest of the middle class. Spending supports their job security, health insurance accessibility, and market stability.
The only real way out of the hole we have dug is to raise taxes on the wealthy back to their pre-Bush levels. The increase will not, even according to Warren Buffet, affect spending or investments significantly over the long-term.
Trickle down economics does not work. A return to these policies will not lead to long-term growth and prosperity for the middle and lower classes. It will allow the wealth gap to continue to grow.