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The Case Against Intervention

4:01 PM, Sep 10, 2009 • By VICTORINO MATUS
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The government is too involved in the recovery of our economy. It's a bad thing. It sets a bad precedent. Part of the problem stems from the last recession, in which interest rates were held at 1 percent, lower for a longer period of time than was good for the country. Next thing you know, you've got subprime mortgages. The bubble bursts-a bubble that enveloped multiple sectors of the economy. And then we announce the need for drastic measures, lest our nation sink into another Great Depression-such was actually whispered in the halls of Congress. Then comes TARP and the stimulus checks. But have they had any real impact in the long-term? It's doubtful. (Indeed, of the $3.5 billion in stimulus given to California, only $10 million has been used. And over the last 12 months, an additional 5.5 million Americans found themselves out of a job.)

All of this I learned from Professor John B. Taylor, author of Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis. At a lunch yesterday sponsored by the Hoover Institution (where Taylor is a senior fellow), the professor and former Treasury undersecretary made the powerful case for less intervention-including bailouts. In Taylor's words, this has to do with "making failure tolerable." I simply recommend you read his book.