Demanding a federal budget that is fair, responsible, and meets our nation's priorities

Thursday, August 09, 2007

Wild Mood Swings

In his post about the president's call for a corporate tax cut, Matt asks:

And what if an unhinged market was the root cause of all this trouble [a potential economic downturn]?

I submit that the market is in fact completely hinged. That is: rapid expansion in financial markets (i.e. bubbles) is always followed by rapid contraction (i.e. bubble bursting). Oscillations between growth and contraction is the nature of the market.

And it is precisely because markets behave this way that some government policies are necessary. They provide a buffer between the humans that depend on constant sources of food, shelter, and security and the rough-and-tumble, unpredictable cruelness of The Market.

I'm going to go out on limb and suggest that of all the programs on which the government could spend money to mitigate the human misery caused by the housing bubble bust, corporate tax breaks would be the least effective.