What you read and what you believe.

WYR&WYB:

Be careful about suspending disbelief

Now that the financial crisis is past and the economy is either in recovery or poised for one, we are seeing the disingenuous opportunists come to the fore. Congress has had some hearings to rake over the coals some who were real heros, like Ben Bernanke whose innovations and timely actions at the Fed were at the forefront of saving the economy and stemming the spillover from the incipient financial disaster.

This was being done, while Henry Paulson had a hot-line installed to Goldman Sachs.

No one in Congress has a finger so supple that when it is pointed out to find the culprits it curls back to point at them.

Without letting the GSEs accept mortgages from houses be bought with no money down and no income tests, bank lending decisions would not have been so bad. Ask your Congressman/woman how that happened... Without that policy shift, the low interest rates allowed by the Fed would not have been able to have done much damage to the housing market. So let's remember that, when we start pointing fingers.

In the private sector there are a lot of reports about how government intervention has stopped the process of healing private sector wounds. The argument is roughly that de-leveraging is needed. The private sector is doing it. But now public credit is growing and the deleveraing is not being achieved economy-wide as federal debt is replacing private debt.

Yes, this incredibly stupid, but perhaps seemingly solid argument to some is making the rounds.

Let's remember that without the government invervention we would not be here in circumstances this, able to be so smug with our smartly pants assessments of the post crisis economy. If private sector de-leveraging (as some want to call it; it is also joblessness, bankruptcy, foreclosure and more) were allowed to go on unabated without an offset from government, there would have been multiplier effects and we could well have wound up in the depression some warned about.

Yes, the upshot of government intervention has been more debt. But having government tax us in real time to spend what it spent would not have made much sense would it? And doing nothing would have been reckless. So be careful what you read and believe.

Paul Krugman wants us to be glad we have a people running the show who do not dislike government. Paul says one million jobs already have been saved by Obamanomics and admits he wanted even more spent (cha-ching!). But let's remember that it was the BUSH Administration that sought and got the big financial aid package. Let's remember Under Bush there had been a very timely stimulus program that had little impact. Let's remember that Obama's package is backloaded and has its much larger impact next year. I don't know how anyone but Obama's best friend could tally one million jobs created to date by this program when more spending in 2008 disappeared into the black hole of nothingness. Clearly based on the resutls of the 2008 stimulus program the economy is recovering (at last) on its own not onthe dribbling early funds spent under Obamanomics. Obamanomics will give a push after recovery has already set it.

So Democrats may not be the only ones who can ride in on a white horse in crisis, despite what Krugman says. And when we see the budget consequences of Obama's (not even Krugman's desired) economic largess we might well wish he had been less generous in spending 'our' money and had put more into stimulus that bit early and less into programs adopted by people who do not hate government, as Krugman says.

Government has a role and that should be to be as effective as possible not as large as possible. The government should try to direct this capitalist economy to focus on fairness, law enforcement and to provide a base of public services to ensure public welfare at some level, while remaining as small as possible to do the job. While there is a role for government (there are several of them in fact). I believe government has social responsibilities as one of those roles; it also has the mandate to be as effective as possibile. Spending a lot of money for the goal of one administration is not a success. That is the wrong standard. We do not yet know anything about the effectiveness of Obamanomics.

Once again be careful what you read and what you believe. And dont' forget to think. You can suspend disbelief in a movie if it suits you but don't do it while reading the financial pages.