Part one of a symposium on Obama and the New Progressivism. Read part two on education and part three on culture.

Barack Obama is already making the Clinton and Bush years seem like the good old days.

Close to a trillion dollars are being tossed around in a “stimulus” package that no one in his right mind—and I do not here include the mainstream of the economics profession, which has disgraced itself in this crisis—expects to bring about recovery. Economist Robert Wenzel rightly describes the stimulus as “just the insiders raiding the till while there is still money in it.” Trillions of dollars are likewise being thrown at financial institutions that (if we actually believe in the free market) richly deserve to go bankrupt. Nationalization of the banks is being openly discussed—an outcome our rulers assure us they would undertake only as a last resort, deploring every minute of it, and only for our own good.

We are learning what it is like to live in an Orwell novel. Our television screens are filled with people offering choices between idiotic and suicidal option A and idiotic and suicidal option B. We are being told that we must at least partially nationalize our banks, prop up zombie companies, lower interest rates to zero, and pass stimulus packages in order to escape the fate of Japan—which, um, partially nationalized its banks, propped up zombie companies, lowered interest rates to zero, and passed eight stimulus packages. We have a president who tells us we cannot rely on the free market to get us out of this mess because the free market is what got us here, as if the Federal Reserve and its bubble-inducing monetary policy never existed.

F. A. Hayek won the Nobel Prize in 1974 for showing how central bank manipulation of interest rates gives rise to the kind of boom-bust cycle we are experiencing now, and that such phenomena are not caused by the unhampered market. If by some miracle you manage to hear this point of view on television, it will be sandwiched between hours and hours of Keynesian droning.

Of course, the rationale we’re being given for the insanity is that these are crisis times, and the usual rules go out the window. That’s what Paul Krugman means when he speaks of “depression economics”—a special set of economic principles come into play in times like this that differ radically from those we would abide by under normal conditions. And so we see once again why Keynesian economics swept the board so successfully: it tells the regime just what it wants to hear. It provides intellectual cover for the expansion of government power and the seizure of private property that state officials want to engage in anyway.

“Never allow a crisis to go to waste,” said chief of staff and former Freddie Mac board member Rahm Emmanuel. He needn’t worry. The Keynesian economists who suddenly dominate public life in America, years after everyone else assumed Keynes and his fallacies were long dead and buried, will weave every apologia under the sun for whatever activity Emmanuel and the president he serves choose to undertake. The all-purpose pretext is ready at hand: why, we’ve got to do something about this terrible crisis.

Indeed we should do something—but, as usual, it’s exactly the opposite of what the federal government intends to do. We should cut the government’s budget as drastically as possible, thereby releasing resources for use by the productive sector. (That worked pretty well in stopping the terrible depression of 1920–21.) We should stop the Fed from interfering in the recovery process. We should let the private economy sort out which activities undertaken during the artificial Greenspan boom are genuine wealth-generating activities and which are wealth-destroying bubble activities. The latter should be promptly liquidated so their resources can be better employed by the former.