Originally Posted by Villages Kahuna

You're right. In the last couple of years there ws no one more critical of the profligate spending by Congress, the increasing defits and the ballooning national debt than me. During the campaign, I criticized both candidates for their repeated claims that they would lower taxes. I couldn't see how that could happen while at the same time beginning to balance the budget and begin to whittle away at the national debt. The numbers had reached the point that the tried-and-true tax-cutting approach to stimulating the economy and "growing out of the problem" simply couldn't work any more (in my opinion).

The main difference between your beliefs and mine are of scale. The free-market-limited government approaches that worked in the past are simply not powerful enough to deal with a crisis of this magnitude. The financial crisis that occurred in the few weeks before the election and since, which seems to becoming more critical every day, has "flipped" me into the camp that if we are to avoid permanent damage to our economy and a change in our way of life, we will have to sacrifice whatever desires we might have for fiscal balance. To avoid a complete economic disaster, we'll need to sacrifice the financial future of several future generations of Americans. Our free-market capitalistic system will also likely change. It will almost have to become a "European-type" capitalism, with government heavily involved in the financial system and most of the national social programs. In time that must mean increased taxes and much slower economic growth than we've become accustomed to as Americans.

It's already happened with the government owning most of the large banks and financial companies as well as the three auto companies. The money already injected into those companies already exceeds their market capitalization. The free market has not been able to resolve the healthcare problems of the country, nor has any action been taken to adequately strengthen Social Security or Medicare. Once the government takes those actions, we're there--we will have become Europe. The government will control the banking system, healthcare and will support all those retired people. The rest of the economy can remain capitalistic, but taxes will have to increase to pay for the aforementioned functions that will have fallen under government control.

I really hate to say what I did above, but I believe that to be the facts. Free market capitalism worked extremely well for the U.S. for 50-75 years. But either it's failure or some other perfect storm of conditions has resulted in our economy becoming so weakened and further threatened that there is no alternative except substantial government intervention.

President Bush said it today during his press conference. He said that supporting the $700 billion bailout ran completely contrary to his personal economic beliefs. He said, "...what else could I do when my economic team came to me and told me that unless we injected that huge amount of money into the banks, we'd be facing a depression even worse than in 1929".

I too have finally concluded that substantial government intervention is the only answer. I haven't arrived at any total amount or combination of uses that I feel comfortable with. But huge intervention seems to be the only economic tool left that holds a chance of reversing the economic slide and beginning the re-build of our economy. The scary thing to me is that I'm not even certain of that.

The longer term risk that we face is that Americans forget how well free-market capitalism worked for so long and become accepting of some form of quasi capitalistic-socialistic economic model, similar to what exists in Europe. If they don't forget, we can get back to the system we all know worked in 10-15 years. But if Americans forget and become comfortable and reliant on government's involvement in their lives, we can look at Europe and see what type of economy we will be living with.