Indisputible Facts and Political Opinion

According to Barack Obama, "[i]t is an indisputable fact that one of the most significant contributors to our economic downturn was an unraveling of major financial institutions and the lack of adequate regulatory structures to prevent abuse and excess." Indisputible. Is there such a thing as an indisputable fact in economic policy? Few would disagree with the first part of his statement, but the second part expresses a political opinion; namely that more or more robust regulatory structures are needed. How can an opinion also be a fact?

This is a cheap rhetorical tactic used by those who want to shut down debate. Declare something controversial to be incontrovertible, and then anyone who opposes you is an unhinged extremist.

The reality is that there are many different views of the economic crisis. Steve Forbes argued that "Mark-to-Market" rules were to blame. Goldbugs like Ron Paul blame the Federal Reserve. Paul Stiglitz argues that too few economic stabilizers allowed this to happen. Fareed Zakaria argues in his excellent "Capitalist Manifesto" that "better international coordination" could avert at least some crashes. (Read the whole thing. Zakaria makes some fantastic points.)

I know that our president likes to be pragmatic and above it all. Oh, does he ever. But there are many different schools of thought on what caused the economic crisis. There's overlap between them, to be sure. For instance, you can dislike Mark-to-Market AND the Federal Reserve. Or maybe you want mark-to-market rescinded (actually, it already was, apparently) in addition to more regulatory reform. But it's far from incontrovertible that our regulatory structures are inadequate and in need of reinvention.

Let's assume that the Federal Reserve had not re-inflated the tech bubble, which then mutated into the housing bubble. Would we have had so many heinous asset-backed securities floating around? Would the banks have been so wildly over-leveraged?

What if mark-to-market had not been put in place? Perhaps banks and other financial could have slowly deleveraged over time, in response to normal market pressures. After all, we had to reach our credit limit sometime. Instead, the introduction of the new rule appeared to have caused a rapid and catastrophic rebalancing of bank balance sheets.

And what if we went Soviet French and just had the government employ everyone? Sure, the banks might go out of business, but we'd all still have jobs and salaries paid in monopoly money. Problem solved. (Perhaps I'm blowing off Nobel Laureate Joseph Stiglitz's argument too flippantly. Bah. Don't care.)

My point is simply this. Our president is a pinhead. Ideology matters. Unbridled pragmatism, the dogma of eternal hope and change, is merely political schizophrenia. I don't dispute that we need to be receptive to the views of others, but we need to be cognizant of the bigger picture that those views entail. That bigger picture is called ideology, and it allows us to put politics into a meaningful framework and perspective. Being detached from that larger perspective allows us to move from bailout to stimulus to regulatory reform with no memory of yesterday's meaning.

There certainly is room to dispute whether or not we have inadequate "regulatory structures." If Barack Obama can't even acknowledge, much less refute, the competing schools of thought on the financial crisis, its unlikely that his solutions will be the right ones.