....the mistake in assuming that, even if we had a coherent view of what should be done, coherent polices would therefore be implemented.
This has little relation to how policy is made in a democracy.
Policy is always bad to a degree, but long periods of prosperity tend to be self-reinforcing since powerful interests are born with the means and motive to preserve the status quo. That status quo may really be a contributor to prosperity, such as regulatory restraint and moderate tax rates. That status quo may in some respects be ill-advised, such as excessive subsidy to housing debt.
But once prosperity blows up, the quasi-virtuous policy circle becomes an unvirtuous one as new interest groups come to the fore to exploit an appetite, previously weak, to impose their costly or vindictive wish lists. And even well-meaning policy gets twisted and rendered incoherent.
It's already happening to our banking bailout. If injecting government capital to improve confidence in banks was a good idea, it did nothing to improve the banks' own confidence in their borrowers. Yet now that banks have government capital, they're being pressed to lend to politically favored constituents regardless of their own judgment about whether the borrower is good for the money.
Or take the gathering auto bailout: Taxpayer dollars are being thrown at Detroit auto makers to make them "viable," even as Congress imposes new fuel-mileage mandates requiring them to incur tens of billions in costs unlikely to be recouped from their customers -- the definition of "nonviable."
Question: Will the Republicans gear up NOW, have another "Contract With America" ready for 2010, and tell the American people, "we have REAL change if you vote for us"? I can only hope so....