Outside Editorial: Leadership deficit in fiscal crisis

Posted: Thursday, September 25, 2008

Know this: Don't believe anybody who says he truly understands the full magnitude of what just happened, and is happening, to the U.S. economy.

Last week saw the best-informed and smartest economic policy elites in this country - Fed chairman Ben Bernanke and Treasury Secretary Henry Paulson - making up strategy by the day. The most tumultuous Wall Street week since the 1930s culminated with their terrifying, come-to-Jesus moment with members of Congress, who were told that America's financial system, without emergency action, was days from collapse.

Result: A proposal allowing the massive taxpayer purchase of bad debt - at least $700 billion worth, probably more - and the granting of extraordinary powers to the treasury secretary to manage this crisis. If this plan goes through, the federal government's power increases to a stunning degree, and the additional debt burden on taxpayers' straining backs will beggar belief.

And if it doesn't go through? The nation, we are told, faces another Great Depression.

The road to America's fiscal slough has been long and winding, with plenty blame for both political parties. Was there reckless Wall Street greed? Absolutely. Was Washington a poor steward of the public's interest in its oversight of the financial markets? Manifestly so. But Michael Bloomberg, the tycoon who is now mayor of New York, surely was correct Sunday when he said the root cause of this mess is Americans' unwillingness to live within their means.

The next president will oversee an era in which the nation learns a punishing lesson about limits. The men who would be president must stop selling the rhetorical equivalent of junk bonds.

Voters would help if they showed that the current crisis has created a new and robust market for something that has been chronically undervalued for some time: the hard truth.

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