President Bush gave an urgent and powerful speech last night, demonstrating courage in the face of adversity, right?  Nope.  Courage is not best defined by simple action in this case, as everybody know that some sort of action must be taken.  Rather, it must be the right type of action.

First, President Bush needed to turn the finger of condemnation around on the federal government.  It is largely the government's fault that this whole subprime mess became popular.  In 1977, the Community Reinvestment Act became law, mandating that corporations engage in unsound business practices and offer risky mortgage loans to people from poor communities.  This Act was strengthened during the Savings and Loan fiscal scandals in 1989 and through stricter regulations in the mid-90's.  If companies didn't abide by the unsound practices, they would be penalized under the CRA--including, among other things, the prevention of mergers.

In addition, as businesses were prodded toward ridiculous loans, they were implicitly assured that they would be rescued by the government if the "chickens ever came home to roost" during turbulent economic times.  Fannie Mae and Freddie Mac, both Government-Sponsored Entities (GSE's), could gather profits while the government assumed their risks.  When smaller companies got into financial trouble for the subprime loans, they would sell the loans to Fannie and Freddie.  Thus, businesses were not only encouraged to offer risky loans, but rewarded for them by the implicit promise of a bailout of Fannie and Freddie.

Second, President Bush needed to defend the free-market.  As noted in a previous entry, Barack Obama is traveling the country, spouting the nonsense that "trickle-down economics has failed."  Supply-side economics under Reagan produced the unprecedented wealth of our country extending for the better part of two decades.  The present crisis was created by the adversary of free-markets, the iron fist of government interference.  To impugn supply-side economics is to impugn the free-market, capitalism, and economic freedom.  Obama's rhetoric and many of the current proposals to socialize part of the economy is offering for a solution what made this mess in the first place.  They would replace capitalism's cycle of innovation-->reward; failure-->correction to the socialist scheme that inevitable results in economic stagnancy (see: France).

Third, President Bush needed to be creative in his proactive proposals.  I've heard some wonderful ideas.  As noted in a previous entry, the Republican Study Committee put forward the temporary elimination of the capital-gains tax to allow currency to flow back to the market.  Others have suggested appointing a bi-partisan committee over how any bailout money might be used.  There has also been talk of specifically limiting this bailout to a one-time-event, available only to those entities that are integral to the overall economy.  No bailouts for auto manufacturers or student loans.  Nor should there be bailouts for homeowners facing foreclosure--that harkens back to the policies that created this mess in the first place.  People must get smaller homes and apartments, according to their means.

Personally, I would ask the government to treat their budget as would the average American taxpayer.  In times of economic duress, a person has to make choices regarding his or her finite finances.  It's often not a "both...and," but an "either...or."  Thus, whatever money gets spent on bailouts must be replaced without taxes (which would crush our struggling economy) or the mass-printing of more money (which would cause incredible inflation).  If $65 billion is spent to bail out AIG, then something like the National Endowment of the Arts (NEA) would have to be eliminated.

President Bush, Senator McCain, and Senator Obama have all spoken of strategies that would potentially kill the American economy as we know it.

It's time to tell our government to grow up and not grow out, or else be kicked out!