Panic Has Led To Even More Disaster During the Recession

By Adam Bitely
Since the economy began to tumble in 2008, panic has been the number one driver of quick, knee-jerk legislative “fixes” in Washington, D.C. From multiple iterations of “stimulus”, TARP, auto-bailouts, and a myriad of new regulations that will supposedly prevent future financial downturns, panicked reaction from D.C. politicians has caused politicians to launch harebrained schemes that will solve the nation’s problems.

How did we end up with so many different schemes to fix the economy?
The first reaction from any politician when a crisis emerges is to “fix” the problem. The economic crisis that came to a head in 2008 led politicians to immediately claim that they could set a recovery in motion with a wave of their legislative wands. Bailing out poorly performing banks would stop the problem — or so the politicians told us.

At the height of the panic in the fall of 2008, John McCain even suspended his flailing presidential campaign to fly back to Washington to make sure he had a hand in fixing the economy and to take the credit for doing so.

However, the economy is so complex, composed of so many individuals that make decisions based on the information that they have, that no person, or group of people, can possibly dictate the correct solution to a problem. The panicked reactions from the political class only causes bad problems to become worse, and leads to so many different negative outcomes that the panicked legislative fixes pile up on themselves.
As Politico noted, Obama said this week that it was "important to remember how close we came to disaster" and that "our task is not to panic, not to overreact" in the face of an "uneven" recovery.

Obama should take note of his own advice. After all, ObamaCare was passed out of the panic that he and other politicians shared that Americans don’t receive the adequate amount of health care. Signs of Obama’s panicked overreaction were even more evident when he followed in the footsteps of George Bush by calling for another round of “stimulus” funds. Obama continued his overreaction to the nation’s poorly performing economy even further when he sent even more bailout funds to GM and Chrysler.
Panic is what politicians operate off of — and it’s what causes bad economic policy.
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