D.C. debate is whether to regulate or not

If history is a guide, Congresses and presidents don’t just tackle problems. They turn them into programs, departments and new regulatory regimes. Huge buildings stand around the nation’s capital as monuments to past crisis-management efforts.

• The energy crisis of the 1970s following the Arab oil boycott resulted in the creation of the Department of Energy.
• The Sept. 11, 2001, terror attacks gave birth to the Department of Homeland Security.
• The Great Depression led to a slew of New Deal federal social programs. Many of their successors remain today.
• The Federal Reserve was a response to bank runs in the early 1900s, the Pentagon was a crash construction project to put services fighting World War II under one roof, the Department of Housing and Urban Development owes its 1960s origins to President Johnson’s war on poverty and concern about growing inner-city crime.

President Reagan, championing a smaller and more hands-off government, led an effort in the early 1980s to slash regulations and transfer public functions to the private sector. This slackening of regulation continued under the first Bush presidency and the administrations of Democrat Bill Clinton and the current President Bush as the economy kept expanding — except for recessions in 1990-91 and 2001 — and more and more people obtained homes.

But that has all changed.

Emboldened Democrats who rule Congress and are gunning to reclaim the White House are seeking to put an end to the days of ever-easier standards.

Conservative economists argue that free markets do tend to be self-correcting, and government intervention often makes things worse.

“The best thing for taxpayers and for the budget deficit would be if the economy does start pulling out of this recession and starts doing well. Hopefully, maybe that will be the only thing to stop the stampede to do something in Washington,” said Chris Edwards, director of tax policy for the libertarian Cato Institute.

Such views are clearly in the minority in a presidential election year where polls show the economy is the No. 1 concern of voters.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, is the author of a proposal — headed for a vote before his panel in the coming week — that would create a new insurance fund guaranteeing up to $300 billion in refinanced mortgages. Backers say it could help between one million and two million people.

Could Congress be overreaching? “There’s a theoretical danger,” said Frank. But he added that “I can’t see it happening” given the seriousness of the current situation.

Don't miss this on MSNBC.com Pass it on: Sons of infertile men may be next The eight biggest Olympic marketing debacles Reality show judges range from wise to wacko Cosmic Log: Is this your jetpack? Forget your inhibitions: World's sexiest islands

MORE FROM STOCKS & ECONOMY

Stocks & economy Section Front

Stocks end zigzag day with modest gains   House OKs tax hike for investment managers Watchdog head: TARP not meant for jobs plan Wholesale inventories rise unexpectedly   Cost of oil at lowest point in last two months   Battle lines forming over TARP extension Few CEOs plan to hire in next 6 months Bernanke: Too soon to tell if recovery will last Answer Desk: Adding up bank bailout losses Consumer credit falls for 9th straight month Stocks & economy Section Front   Add Stocks & economy headlines to your news reader: