Tucson CitizenTucson Citizen

Obama’s recovery ‘fix’ won’t fly

Paul Schwennesen and his family

Paul Schwennesen and his family

President Obama recently described our economic woes as a “death spiral.

As a former Air Force officer and private pilot, I couldn’t help but heed his recommendation for “decisive action” to get ourselves out of it.

As any aviator will tell you, however, the decisive action needed to recover from a so-called “death spiral” is counterintuitive, in that it requires little action.

Just reduce power and apply opposite rudder. The reason “death spirals” (or spins) killed so many early fliers was that pilots invariably tried flying their way out, unintentionally aggravating the condition.

Accuse me of carrying a simile too far, but I’m afraid our government is trying to fly its way out of this mess, and it can’t be done.

Economies, one could say, function in much the same way as airplanes. Lift is provided by a profit-seeking investing population that seeks alternative uses for scarce resources, which reduces prices and improves quality in the process.

This economic “lift” helps everyone, which is why capitalist nations have the highest standards of living on Earth (and why so much of the rest of the world tries to migrate there).

Government, not surprisingly, creates drag. Not that drag is always bad, for some of it is necessary to create the dynamic equilibrium of a stable nation.

Government “drag” is supposed to exist to ensure that men do not, as Jefferson put it, “injure one another” in a completely unfettered economic free-for-all.

Things get hairy, however, when drag begins to outstrip lift. And this is where we find ourselves today.

Government dangerously increases drag when it stifles the investing behavior of citizens, frightens capital markets and increases transaction costs through over-regulation.

But aren’t our problems a result of under-regulation? I would argue the contrary. A steady accumulation of greater regulation has added layer after layer of drag-inducing red tape to our financial system.

Seemingly “good” regulations like Sarbanes-Oxley smother our markets, while the likes of Bernard Madoff injure their victims unmolested.

Government regulations, helpfully geared to provide “affordable” housing to those who could ill afford it, required the nation’s largest mortgage lenders, Fannie Mae and Freddie Mac, to lend far beyond rationality. These toxic assets have disrupted our credit markets and the economic buffeting we see today.

The administration goes sorely astray in scapegoating the lift-producing sectors of our society while trying to convince us that more drag is the answer.

The “decisive action” Obama suggested after his “death spiral” remark was to pledge $275 billion toward reducing the debt burden on underwater homeowners. This money is to be allocated through Fannie Mae and Freddie Mac, allowing indiscreet buyers to retire a portion of their bad debt at taxpayer expense.

So the very institutions most responsible for inflating the housing bubble and generating our credit instability will now exacerbate the problem with our money.

Am I suggesting the government sit back and do nothing? Practically, yes. When did the term “too big to fail” enter the vernacular? We are an educated, creative, industrious society, and I would suggest we spend less time waiting for government solutions and more time searching within ourselves, our neighborhoods, our businessmen and our capitalists for the solutions. Let us advocate for a government that will get out of the way, roll back needless regulation and throttle back its power in our lives.

Let us advocate for a government that, to finish Jefferson’s passage, “shall leave men free to regulate their own pursuits of industry and improvement,” and “shall not take from the mouth of labor the bread it has earned.”

In an age of aviation metaphors like “bailout” and “death spiral,” I hope our administration heeds some of aviation’s hard-earned wisdom as well. Mr. President, reduce power and apply opposite rudder. You can’t fly your way out of this one.

Paul Schwennesen is a rancher north of Tucson. He was educated in political philosophy at the U.S. Air Force Academy and Harvard University.

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