Reform

When I was flying small planes in the Congressional Flying Club, taking a break from the tribulations of tax and budget policy, the first thing you did when you encountered heavy weather was to turn off the autopilot.  You didn't want heavy, but dangerous, automatic corrections under those conditions.  No doubt, you would end up off course, but at least the wings were still attached.

The problem with automatic corrections for entitlements is that they would raise taxes and cut benefits at exactly the the wrong time in the business cycle.  In addition, our political leaders just won't accept automatic adjustments because heavy corrections would prove politically dangerous.

This morning, Treasury Secretary Hank Paulson unveiled the long-awaited financial regulatory reform proposal of the President's Working Group on Financial Markets, which he heads. President Bush and Secretary Paulson are to be commended for the breadth of this proposal and for its principled and thoughtful approach. Admittedly, the proposal won't do much for the immediate financial crisis, but it would avert some future crises.

Replacing our hodgepodge of overlapping and ineffective financial regulation with a comprehensive, sensible, and lower cost system makes all the sense in the world. Many in the financial markets support these reforms.