The Five Stages of Our Economic Disaster

By Jon Kraushar Communications Consultant

We've suffered through three stages in our economic debacle and number four could break us. Stripped of euphemisms, here is an explanation of how we got into the mess we're in, followed by a recommendation of how to save ourselves.

Stage 1: When rashness breeds stupidity the stupid breed more rashness.

Under Presidents Clinton and Bush, Congress and the Federal Reserve bred stupid policies of loose lending and loose credit, creating easy money and a housing bubble, and breeding rashness in the form of speculation and greed. Congress was a morally hazardous promoter of Fannie Mae and Freddie Mac, in exchange for obscene campaign contributions and other types of bribery. Former "maestro" and Fed Chairman Alan Greenspan sheepishly admitted that it was a "mistake" for him to have sustained interest rates at an abnormally low level for so long.

Stage 2: When irresponsibility spawns a crisis the crisis spawns more irresponsibility.

Wall Street and banks overleveraged. People couldn't afford to pay off the mortgages they shouldn't have gotten. This monstrous irresponsibility spawned a crisis: a toxic debt bomb that exploded, devastating the economy. Deaf, dumb and blind government regulators stood mute and immobile as the crisis spiraled. At least a million homes went into some stage of foreclosure. The stock market and the free market reeled. Panic ensued, followed by stunning acts of more irresponsibility by government officials, masquerading as command and control.

Stage 3: When the going gets confused, the confused get more going.

Henry Paulson, Bush's treasury secretary and his team of acolytes, including then-New York Fed Bank President Timothy Geithner, in cahoots with Fed Chairman Ben Bernanke, first tried to bail out banks. Then they took aim at Wall Street firms and bankrolled collapsing insurance giant AIG. But they kept switching the money spigot on and off and changing the rules of the game on the fly, propping up some firms while letting Lehman Brothers go under as Bear Stearns and Merrill got acquired in fire sales. There has been no real accounting for how all the money is being spent, misspent or hoarded.

A $700 billion bailout is disappearing out the window on "faith." In the meantime, the public has lost all faith in our government's scatterbrained, desperate financial flailing. The watchword of the day is "Don't Trust Anybody," although President Obama, many hope, will be a miracle worker.

Stage 4: Trial, Error and Pain, affecting millions of individuals and businesses, eventually (who knows when?) followed by a crawl out of disaster; then, sadly, the whole process begins again at Stage 1.

In an egregious example of failing upward, Timothy Geithner, despite being a tax cheat as well as one of the above-mentioned financial Keystone Kops, got confirmed this week as our new treasury secretary. President Obama is lobbying Congress to rush through spending another $825-billion (with interest for borrowing, it comes to $1-trillion, according to the Congressional Budget Office). It is an ill-conceived retread of President Franklin Roosevelt's "New Deal" government spending schemes that failed to end the Depression in the 1930's. EvenThe New York Times, the house organ for Obama and liberalism, just gingerly acknowledged that FDR's multi-pronged big government interventions had little effect on employment, new business development and growth until the real "stimulus" came along: World War II.

So we find ourselves at the precipice of a "great experiment" that has proven itself to fail in many similar forms in the past--not only when Roosevelt tried it, but when Marx, Lenin and their heirs tried it in the cratered Soviet Union. This combination of government central planning and spending targets "winner" companies, industries and pet (e.g. "green") projects. This government crapshoot, funded by hundreds of billions of taxpayer dollars, has never worked--anywhere and anyhow. How is it supposed to be different this time?

It won't be, unless we try a rarely used option.

Stage 5: When the brave revolt and offer solutions, the revolt gets braver and offers more solutions.

A few voices of reason are crying in the wilderness. It is regrettable that President Obama is trying to silence them, either by seduction or condemnation. Listen to Rush Limbaugh on the radio and, in the House of Representatives, John Boehner, Paul Ryan, Mike Pence and Eric Cantor. In the Senate, John McCain is resisting Obama's plan, proposing permanent payroll and business tax cuts and no new taxes as an offset to trying to spend our way out of a recession. Tom Coburn and Mitch McConnell are other Senate leaders rounding out the loyal opposition. But these leaders need to be led further--by you.

President Obama has said, "If you can show me that something is going to work, I will welcome it. If it works better than something I have proposed, I will welcome it."

John F. Kennedy's and Ronald Reagan's tax cuts did workto stimulate the economy (and so, for a time, did George W. Bush's). But tax cuts need spending cuts and consistent, accountable government regulation.

Describe how you feel about the four stages and speak up for the fifth stage, by proposing solutions you believe in. Send a copy to your state officials.

Incidentally, you needn't confine your thinking to the economy. You can apply the five stages' principles to, say, the War on Terror or the mess in health care.

Communications consultant Jon Kraushar is at