Promoted by Brendan

Paul Krugman is a gentle man, whose nature is not to be confrontational. So in today's column, rather than accuse the Bush administration of the most outrageous deceit in trying to disguise a continuation of libertarian free market ideology as "reform" he buried this exposure in the text with the title "The Dilbert Strategy "

The article must be read, and absorbed by anyone who cares about the wellbeing of this country. And Bush's reform proposal must be described as the fraud that it is in no uncertain terms.

Here's a sample of the current column:

Thus, in a draft of a speech to be delivered on Monday, Henry Paulson, the Treasury secretary, declares, “I do not believe it is fair or accurate to blame our regulatory structure for the current turmoil.”

And sure enough, according to the executive summary of the new administration plan, regulation will be limited to institutions that receive explicit federal guarantees — that is, institutions that are already regulated, and have not been the source of today’s problems. As for the rest, it blithely declares that “market discipline is the most effective tool to limit systemic risk.”

The administration, then, has learned nothing from the current crisis. Yet it needs, as a political matter, to pretend to be doing something.

Krugman was an early and consistent vocal critic of every aspect of what George W's father so aptly described as voodoo economics. Before 9-11, and with it the "everything has changed" arrogation of authority of a de facto war leader, Krugman was sounding the alarm.

He saw the tax cuts for what they were, and saw through the absurdity of Alan Greenspan's support for them, in order "to save the Government from having to deal with the surplus." Wow, that would have been one hell of a problem!

In years to come it will be hard for students of history to believe that the most powerful economic position of the greatest country in the world was given to a Libertarian Cultist with a Ph.D marked by a missing dissertation. And that he was appointed by Presidents of both parties, and even after his culpability in the worst economic crisis in a half century was known, a major candidate was proposing that he head a committee to save the economy.

Krugman's work from the very beginning has described the petty, partisan, irresponsible elitism of the Bush Administration. And now that the real estate market is collapsing, destroying certain neighborhoods with foreclosures, and risking the economy at large his anger at those who caused it is, in my opinion, clouding his vision.

And who can blame him. How can he support, how can I support anything that emanates from from those who have used the cover of respect for the free market to destroy our economy. The sad thing is that "they", malefactors of great wealth with their governmental enablers, have done too good a job. They have managed to enlist an army of regular people to be co conspirators in their corruption, in the worst way possible.

It is not that they just lured people into bad investments. This happens all the time and the investors simply lose their money. In the sub-prime scam they managed to get the "investors" to move their families into new communities, and their investment, their homes, are merged with those neighbors who would never have gone out on such a limb.

"We must stop the slide in home prices." That's the current meme that is gaining universal credence. Except there is one problem. Unless there is a slide in home prices, unless there is a correction from the doubling of prices in a half decade, housing will not be affordable to those without pre existing wealth.

All our efforts to reverse the divergence between the rich and the poor will be negated, as any mortgage bailout will result in housing prices maintained at a level that is not affordable by those who work for a living. And this support will be paid for, by the very people who are priced out of the market.

I've written diaries saying this before on this site, and I usually get a good reception. I've even had polls that show that the vast majority here do not want bailouts such as Hillary Clinton has proposed. In spite of this general opinion, the mood of the pundit class is changing, and even people such as Krugman are now saying that foreclosures must be prevented.

Here is the moral dilemma in a nutshell:

The market system, individuals making personal decision on investments in their homes, is the best possible housing policy. Government does participate with tax benefits, mortgage guarantees, and numerous other involvements.

Free market principles are not negated by legal constraints, they are only made possible by them. For example, without laws against fraud or patent infringement, there can be no free market. Yet, it is the Bush Administration that willfully, and unconscionably abrogated its responsibility to curtail mortgage fraud.

Now the conundrum, one that is profoundly disturbing to me. The solution to the excesses, the pricing bubble and now it's deflation, can only be found in free market correction. And here's the rub, the only person who is advocating this is from the party that by it's collusion, distorted the free market, encouraged mortgage fraud, to bring the economy to the verge of collapse.

The logic of the Dodd-Frank bill borders on the absurd, "If we can bail out Bear Sterns, then we can bail out the homeowners." No. If it was wrong to bail out Bear Sterns then it is wrong to bail out homeowners. And the two action are separate, each with their own exigencies and consequences.

And of course there is the other unspoken aspect. That bailing out homeowners facing foreclosure is ultimately bailing out the commercial banks that will receive the government guaranteed mortgages. The Homeowners, are the conduits for taxpayers to bail out the financial corporations that engineered this disaster.

Bush's phony financial responsibility proposal is a godsend. It is a reminder that we have been grievously damaged by a movement conservative administration matched with a libertarian federal reserve chairman. It was a perfect storm that has yet to subside.

I actually like Obama's approach described in one of Krugman's earlier diaries :

Finally, Barack Obama’s speech on the economy on Thursday followed the cautious pattern of his earlier statements on economic issues.

I was pleased that Mr. Obama came out strongly for broader financial regulation, which might help avert future crises. But his proposals for aid to the victims of the current crisis, though significant, are less sweeping than Mrs. Clinton’s: he wants to nudge private lenders into restructuring mortgages rather than having the government simply step in and get the job done.

This economic crisis is a perfect opportunity for Senator Obama to be the voice of reason in threading the best way through this disaster. If he deals realistically with this issue, it will make the sideshows of recent weeks fade into the background and demonstrate his political acumen.

There are a vast majority of people of both parties who did not participate in the mortgage debacle of the last five years, who wouldn't think of overextending themselves with the expectation that their houses would always increase in value. When they realize that it is they who are the unwilling underwriters of this excess, they will not be happy.

Let's hope that Obama gets this right. There is a line to walk between Hillary Clinton and John McCain that will lead to the Presidency if done with integrity, skill and leadership. It is a rare election that provides candidates with such an opportunity to define themselves to the public.