The lessons should be clear. As they say, those who can’t remember the past are condemned to repeat it.
But with the nation barely out from under the shadow of the Great Recession, the Trump administration and a complicit Congress continue to ignore the lessons of the past decade. Safeguards put in place to protect against another economic meltdown are being rolled back, while protections for consumers are being ignored.
The dangers are clear. Fueled by a burst housing bubble and lax oversight for the financial industry, the United States’ Gross Domestic Product dropped 2.8 percent in 2009 and unemployment reached 10 percent. Those numbers represent the biggest economic catastrophe since The Great Depression.
Since then, the nation has enjoyed a steady but slow recovery. Unemployment now is near historic lows, although the growth of wages has been inadequate. President Trump’s policies deserve some credit for continuing the recovery that began under President Obama, but the goal must be to extend and improve upon that recovery. That is where the lessons of the past must be heeded.
Instead, on May 24, Trump signed into law a bill rolling back provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which in 2010 added sensible oversight of the U.S. banking industry. The changes did not cut as deeply into the law as President Trump had hoped, but they are disconcerting.
Meanwhile, Acting Director Mark Mulvaney continues to undermine the Consumer Financial Protection Bureau. Last week, he fired the agency’s 25-member advisory board, leading Sen. Sherrod Brown, D-Ohio, to say: “Mulvaney has proven once again he would rather cozy up with payday lenders and industry insiders than listen to consumer advocates who want to make sure hard-working Americans are not cheated by financial scams.” The Consumer Financial Protection Bureau was authorized as part of Dodd-Frank reforms, and Mulvaney repeatedly has acted to deconstruct the bureau from within.
Critics claim the bureau amounts to government overreach; we would argue that the Great Recession demonstrated the need for that reach. It is difficult to maintain faith in the banking and financial industries that triggered the recession, but the federal government keeps providing banks with more leeway.
Regulators now are working to repeal the so-called Volcker Rule, which restricts federally insured lenders from engaging in speculative trading that can trigger huge losses. Such speculation played a large role in the Great Recession and led Congress to spend $700 billion of taxpayer money on the bank bailout known as the Troubled Asset Relief Program.
Add all of this to sharp tax cuts and spending increases that have pushed the national debt over $21 trillion, plus President Trump’s ill-conceived tariffs upon imports, and conditions are ripe for another financial crisis.
Unlike some critics, we would never wish for a recession; that is akin to hoping that the pilot of our plane flies into a mountain just to prove our suggestion that they are unqualified. But the administration and Republicans in Congress are engaging in irresponsible economic policy that endangers the nation’s financial health.
Instead, they should be paying attention to the lessons of the past decade.