Market Madness?

Megan McArdle’s new blog at the Atlantic starts with a post urging market calm:

Now is not a fun time to be either a homeowner, or a hedge-fund manager, and from what I can tell I am the only person left in the United States who isn’t at least one of those things…. [But] having a nasty market contraction does not mean that your economy automatically goes down the tubes. It particularly does not mean this in a large, diversified, fully developed economy such as ours.

And in the Washington Post, Amity Shlaes says that comparisons to the crash of 1929 aren’t warranted, and, in fact, the only way they could be is if elected leaders decided to enact the same sort of faulty, restrictive economic policy that caused a decline to turn into a multi-year financial catastrophe:

Is a serious downturn possible? Yes, especially if Washington makes bigger mistakes. If Democrats win the White House by turning against free trade and then pass protectionist laws, they will be pulling a Hoover. China will trade elsewhere. Taxation is another concern. Many lawmakers want to increase taxes to cover Social Security and Medicare shortfalls. Lifting the Social Security cap, so that every dollar of income for higher earners is subject to the payroll tax, seems an easy remedy. Democrats want the Bush income tax cuts to expire. When John Edwards advocated this last month, his words could have been taken out of a Hoover or Roosevelt speech: “it’s time for us to put our economy back in line with our values.” In reality, a combined change in these two levies would be a terrible blow to U.S. competitiveness, a sort of Sarbanes-Oxley of taxation.

And we all know how Sarb-Ox turned out.