Democrats have had a field day with John McCain's statement earlier this week that the "fundamentals of our economy are sound." They say with all the financial turmoil going on right now that McCain's statements prove that he's out of touch.
But here's the funny thing. McCain's right on the economy.
I know writing about economics is as exciting as watching paint dry with commentary from Al Gore, so I'll try to keep it as lively and as simple as possible.
There are two fundamentals in every economy: supply and demand. Supply is the product or service you bring to the table, and demand is how many people want the product or service. The difference in economic systems comes in how much government gets involved in supply and demand.
When McCain said the fundamentals of our economy were sound, he was talking about how supply and demand are still working here. People haven't stopped spending money, even though many have taken a look at what they're spending their money on. And companies are still selling their products and services. In short, McCain was right.
But what Leftists fail to understand is that the current situation isn't because the economy is bad. What happened was that companies made bad decisions, which happens in every economic system. With the current situation, the fundamentals are sound, but the application of those fundamentals wasn't. And as we've seen with the subprime mortgage situation and the Freddie Mac and Fannie Mae situations, even Democrats can screw up economically.
By the same token, McCain was right about the government not getting involved in bailing out big companies. Whenever a government gets involved in an economy on any level, it impacts supply and demand. One of the ways the market regulates itself is through failure. If a company puts out defective products and people find out about it, the demand will plummet. However, if a government props up that company, it artificially keeps them in business, thus reducing the possibility of failure in the short term while removing a way for the market to regulate itself.
With the government getting involved in high-price tag bailouts, we're making a mistake that will cost us all money and undercut our economy by creating the precedent that companies that are "too big to fail" can fail and get bailed out. And, true to their nature, Democrats have jumped on that bandwagon without really thinking about the implications. Once people really start digging into the root causes, they'll find that Democrats have their fingerprints over the situations we're seeing today.
They won't admit that, just like they won't admit John McCain was right about the fundamentals of our economy being sound.