No one at the Federal Reserve, Treasury or Council of Economic Advisors foresaw the crisis. When the crisis hit, the predictions were that unless the government dramatically increased its role in the economy, the U.S. would fall off a cliff. In reality, after billions in stimulus spending, unemployment is still unusually high, growth is sluggish, and uncertainty prevails.
There is no monetary rule, no fiscal discipline, no clarity of how to deal with more than $100 trillion of unfunded liabilities in Social Security and Medicare, and no widespread understanding that governments fail when they attempt too much.
The federal government has bailed out financial institutions and taken over Fannie Mae and Freddie Mac, the two large mortgage financers, but no effort has been made to let relative prices adjust, or to make those responsible for bad choices bear the costs.
Stimulus funds have been used to bail out states and public employees who make more than private sector workers, but the multiplier effect of such redistributive acts has been close to zero.
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