Here’s a gem from the always-worth-reading Dr. Thomas Sowell: Prophets and Losses. Excerpt:
Now that the federal government is playing an ever larger role in the economy, a look at Washington’s track record seems to be long overdue.
The recent release of the Federal Reserve Board’s transcripts of its deliberations back in 2007 shows that their economic prophecies were way off. How much faith should we put in their prophecies today — or the policies based on those prophecies?
Even after the housing market began its collapse in 2006, Federal Reserve Chairman Ben Bernanke said in 2007, “The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.”
It turned out that financial disasters in the housing market were not “contained,” but spread out to affect the whole American economy and economies overseas. Then Chairman Bernanke said: “It is an interesting question why what looks like $100 billion or so of credit losses in the subprime market has been reflected in multiple trillions of dollars of losses in paper wealth.”
Dr. Sowell continues in Prophets and Losses: Part II. You should read both articles.
It gives yr. obdt. no small amount of satisfaction to know that Dr. Sowell, one of the most brilliant economic minds of our age, shares my own deep distrust of government interference in the economy. The primary issue is, as Dr. Sowell also notes, is one of accountability; if a businessman makes a mistake, it can cost him his livelihood. If a bureaucrat makes a mistake, his anonymity and the civil service system protects him. If a politician makes a mistake, a little spin and he’s a shoe-in for re-election.
And the fact is, our government (especially elected officials) have an absolutely terrible record when it comes to the nation’s recent economic policy. The dollar is weak, labor force participation is at the lowest point since anyone started keeping track, unemployment is hovering right around eight percent. Pols like to claim we are in a recovery, but one has to look hard to see it; 2012/Q4 GDP has once more dipped into the red, and those of us who remember the roaring economic rush of the early 1980s recovery are baffled indeed at Washington’s choice of words.
Dr. Sowell concludes:
Anyone familiar with the economic history of businesses knows that their mistakes have been common and large. But red ink on the bottom line lets them know that they are going to have to shape up or shut down.
Government agencies face no such constraint. The Federal Reserve can keep making the same mistakes in the next hundred years that it made in its first hundred years. Or it can make new and bigger mistakes.
Elected politicians not only can keep making the same mistakes. They have every incentive to deny that they made a mistake in the first place, since such an admission can end their careers.
That is why these prophets can lead to our losses.
And they aren’t done yet.
Why do we keep sending these people back to Washington, anyway?