The crash was preordained

Beginning about 30 years ago, with the election of Ronald Reagan, there began a fundamental shift in the philosophy of how the government should control the economy, a series of moves, endorsed by virtually every administration since then, that I believe helped contribute to the current economic meltdown we're facing.

Several factors led to this crisis.

First was the belief that large corporations and industries would be better controlling themselves through the marketplace, a philosophy that lead to massive de-regulation and oversight of those major industries. The theory was it would improve competition and open the door for the "small dogs" to get in the game.

It didn't quite turn out that way.

The airline industry, for example, began such cutthroat competition that not only were the small dogs quickly swallowed up, but the big dogs overexpanded and cut their profit margins so thin that the slightest blip on the radar drove almost all of them into bankruptcy.

Those that failed merged with or were bought out by larger competitors, creating supercorporations that, when they got into trouble, required the government (read taxpayers) to bail them out. We have fewer major airlines today than we had 30 years ago, the costs are much higher for travelers and the services provided are considerably reduced (remember when they used to serve you a real meal -- for free -- on long-distance flights?).

The secondary impacts slaughtered the airline construction industry, and combined, tens of thousands of jobs were lost.

Today, for example, the U.S. essentially has only two manufacturers building our military fighter aircraft, and one of them (Boeing) is going to functionally get out of the military fighter aircraft business soon, leaving only Lockheed. Increasingly, foreign firms will be bidding to provide our military might (and taking our technology with them).

Deregulation and lax oversight of the banking and financial businesses of this country (particularly during the laissez faire days of the current administration who dealt with big business on a wink-wink basis) led to similar failures and mergers. There are fewer major institutions competing with each other today than there were 30 years ago, and they are so huge that if they develop problems, the government is left with almost no choice but to use taxpayer dollars to bail them out.

Second, was the belief, advocated by government policy makers for 20 of the last 28 years, in the theory of "trickle down" economics. The theory is, if you give tax breaks to the wealthiest individuals and corporations, they will use the money to reinvest in their own companies, adding jobs to the economy.

But, by and large, they didn't.

Instead, they used the windfalls to pour money into other investments, largely purely financial speculations. They used the money to invest in money to make money, rather than investing in goods and services to make money.

They put money into dot-com stock, which had exploding stock prices, but no significant assets to back up the value of the stock. A couple dozen programmers and their computers could handle the business (no real boost in job growth there), but when the dot-coms began to fail in droves, there were no significant assets to help repay investors.

And in the last decade, they poured their money into land speculation, buying up, for example, subprime mortgages.

Subprimes were an ideal investment (notice this use of their tax cut money created almost no new jobs, either, merely greater wealth for those who already had money to burn).

"Regular" home loans might make only a 2 or 3 percent profit. But subprimes could bring in a 6-10 percent profit, even if they were riskier.

In fact, some financial institutions actually tightened up their criteria for regular home loans in order to steer buyers into the more lucrative subprime market, which made mortgage payments for those buyers much higher -- forcing the average Joe who had a subprime to operate on a tighter budget, which left him little pad for unexpected expenses.

But it was a great way for lenders to make money, and they expanded that to include easy-to-get credit cards at anywhere from 10 to 24 percent interest (where they could make massive profits but which were misused by consumers who built up huge credit debts).

Between deregulation and tax breaks that weren't being used the way they were intended, the rich were getting a lot richer.

Meanwhile, since the government had robbed the social security accounts for so long that future benefit payments were at risk, individuals were encouraged to invest in 401K plans, to create their own retirement accounts that would be managed by these same financial institutions. It was an idea that looked good when things were going well, and the value of stocks was climbing (well, well past the actual assets of the companies that issued those stocks). But apparently no one in the government pushing that idea thought to consider what would happen if things went bad.

Then oil prices began to go through the ceiling, pushing costs for just about everything up dramatically (a product of a total lack of a coherent, long-term energy policy by every administration since the Arab oil embargo of 1973). American consumers, the "little guys" who had been living on the edge because of the high-priced credit they'd freely accepted and used, went under, triggering a domino effect that finally caught up with the big lenders, including Fannie Mae and Freddie Mac.

Once again, the government had to step in to save companies from bad corporate decisions (by officers who make a quarter of a billion dollars a year to make those decisions). And once again, the small taxpayer has been asked to pony up to save the rich, because if they don't the economic dislocation is so huge they get hurt even worse.

But there is a limit to how much the government (taxpayers) can bail out big business and the wealthiest 1 percent of this country. And it may have hit that point. We're just a few more big bankruptcy's away from tipping over from recession to depression.

Meanwhile, the regular Joes who took the government's advice and put large amounts of money into 401Ks, have seen that hedge for retirement reduced to a small, scraggly bush. The rich got hurt too, but have so much wealth most can absorb the losses and still live high on the hog (OK, maybe they'll have to sell one of their seven homes). But the little guy has been slaughtered (and may have to sell his only home).

There's a couple lessons here: 1) trickle-down economics doesn't work. The little guy merely gets trickled on and pays for it when the big guys make horrible decisions; and, 2) overregulation of industries can be a bad thing, but massive deregulation has turned out to be worse.

For once, we need government policy makers to reinvent themselves and focus on strengthening and protecting the little guy, rather than being in bed with the big corporations.

But until that happens, we'll keep seeing the same disasters happening over and over again, and you and I will keep paying for it.