Robert Higgs, he of the famous “ratchet effect” theory of government growth (up but never down in answer to a crisis), has an artcle in the Christian Science Monitor on the merits of doing nothing, and of politicians getting out of the way so that recovery can actually happen.
The real problem with recessions is not that we have them, but that politicians help sow the seeds and deepen them with massive political interventions in vast swaths of the free enterprise economy (money and credit, housing, science, biotechnology, nanotechnology, health care, retirement, automaking and other manufacturing, “infrastructure”–there’s a word that invites endless political manipulation), then prolong them while pretending to be part of an entity (government!) that can help. Government is a force-weilding body that properly adheres to law enforcement and protection of rights. It doesn’t produce wealth or have any relation to that phenomenon except by establishing a limited legal system on which markets can develop–not becoming an economic participant. Government does transfer wealth that others could have used to create additional growth, however.
The actual bold political action, genuine leadership, needed in a crisis today is pretty much the opposite of what’s going on. Indeed, the political price is too high for election-bound lawmakers or career politicians to entertain non-governmental recession recovery.
As Friedrich Hayek pointed out, and as we’ve noted here before, the politicians blamed during a bumpy transition to something closer to laissez-faire will be the ones who stop interest-group benefits, stop labor union benefits, or stop the inflation, stop the mal-investment created by earlier government interventions and favoritism, and so on–not the ones who started those costly processes decades earlier. Instead, your government is going to spend a bunch of money, and leave all these crisis-inducing internventions in place, and add more besides, which cements their “role” in “resolving” future recessions.
Real “stimulus,” that of comprehensive liberization of a fettered economy requires perhaps unpalatable changes in what people expect from government now that they’ve come to depend on what it redistributes. That’s an intractable problem, and I’m not sure the country can recover from it–but leadership would require making the attempt, rather than pandering to that dependency. But more importantly, real economic security requires changes in what representatives in government are constitutionally able to do in the name of “public service.” That would force the attempt rather than the pandering.
So, again, political reality prevents halting the compounded economic damage that artificial stimulation and financial “bailouts to nowhere” promise to deliver. That makes America largely ungovernable now, in the proper sense.