Sunday, Nov. 08, 2009

Sanford's stubborn recklessness

We were staring into an economic abyss.

Wall Street was teetering; trillions of dollars of 401(k) value vanished.

Millions lost jobs, topping out at about 700,000 in a single month.

Even financially secure and savvy Americans considered removing their money from banks.

The price of gas was heading to $5 per gallon.

Using a variety of tools, including the $700 billion TARP implemented under the Bush administration and the $787 billion stimulus plan under the Obama administration, the government stopped the bleeding. Economic indicators, including a 3.5 percent jump in the GDP, prove the efforts have dragged us into a recovery faster than anyone predicted.

That's why I was fascinated by a book review Gov. Mark Sanford recently wrote for Newsweek in which he discussed the economy.

"Those in power in Washington - or indeed in Columbia, S.C. - often lead themselves to believe that our prosperity depends on their wisdom. It doesn't," he wrote. "The prosperity and opportunity we enjoy comes ultimately from the creative energies of the country's businessmen, entrepreneurs, investors, marketers, and inventors. The longer it takes this country to reawaken to this reality, the worse we - and in turn, our children's standard of living - will be."

Sanford doesn't seem to realize that private companies don't want free enterprise; they want less competition. Car manufacturers in the early 20th century secretly purchased railroads and pulled up countless miles of rail lines, which is part of the reason China is light years ahead of us in high-speed rail infrastructure.

He also seems to not know how the primary tool - the Internet - used by entrepreneurs to level the playing field came into existence. The government created the Advanced Research Projects Agency after being spooked by Russia's Sputnik. It's a long story about how the Internet as we know it came to life - and yes, Al Gore did play a significant role. The Internet's creators sat down with Vanity Fair last year. They said private corporations didn't touch it because they didn't think it profitable.

"AT&T ... They fought it tooth and nail at the beginning," Paul Baran, an electrical engineer who conceived one of the Internet's building blocks, said. "They tried all sorts of things to stop it."

How less robust would our private economy be without the government-inspired Internet?

Sanford blamed the recession on government-backed mortgage giants Fannie Mae and Freddie Mac. He ignored the actions of highly paid MBAs, who took reckless risks with other people's money. He forgot about Enron - which caused rolling blackouts in California - and the Worldcoms and the Bernie Madoffs and East Coast Repos, a small outfit that once sold used mobile homes along the Grand Strand to people desperate to own a home but who knew little about the mortgage process.

East Coast Repos and brokers made money upfront, sold off the bogus loans and disappeared when the mobile home owners went into foreclosure. That happened throughout the country and foreshadowed the current real estate crisis. They weren't trying to increase homeownership rates. East Coast Repos wanted to make a fast dollar no matter who got hurt.

Sanford must not have been paying attention at the recent Boeing announcement. The manufacturer is going to build a major plant in the state, which could produce thousands of jobs. Boeing would not be here without the government. The interstate system, international airport, technical colleges and other planned government infrastructure improvements in Charleston and promised incentives convinced Boeing to come.

Sanford should read the testimony of Mark Zandi, one of the nation's most widely-quoted economists, sent to the U.S. Congress. Zandi estimates the stimulus plan saved about 1 million jobs.

"The Great Recession has finally come to an end, in large part because of unprecedented policy efforts by the Federal Reserve and fiscal policymakers," he wrote. "The cost to taxpayers has been substantial but would have been even greater if aggressive action was not taken and the financial crisis and recession had been allowed to continue unchecked. ... The stimulus is working."

I asked if Sanford had reconsidered anything or knew that the S.C. Board of Economic Advisors said ill-advised tax cuts thrust the state into recession earlier than necessary.

"The Administration still supports the idea of decreasing the tax burden on the state's businesses and individuals - and I'd say it would not be correct to say that we are taking a different, fresh look at our philosophy on this issue," Sanford spokesman Ben Fox said.

We need to accurately assess what happened, figure out how best to strengthen the recovery and lessen further job losses and implement policies to prevent a reoccurrence.

Sanford's insolence proves that Wall Street execs aren't the only ones recklessly holding onto failed philosophies.