http://www.washingtonpost.com/…

The biggest political story of 2008 is getting little coverage. It involves the collapse of assumptions that have dominated our economic debate for three decades.

Since the Reagan years, free-market cliches have passed for sophisticated economic analysis. But in the current crisis, these ideas are falling, one by one, as even conservatives recognize that capitalism is ailing.

You know the talking points: Regulation is the problem and deregulation is the solution. The distribution of income and wealth doesn’t matter. Providing incentives for the investors of capital to “grow the pie” is the only policy that counts. Free trade produces well-distributed economic growth, and any dissent from this orthodoxy is “protectionism.”

The old script is in rewrite. “We are in a worldwide crisis now because of excessive deregulation,” Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, said in an interview.

He noted that in 1999 when Congress replaced the New Deal-era Glass-Steagall Act with a set of looser banking rules, “we let investment banks get into a much wider range of activities without regulation.” This helped create the subprime mortgage mess and the cascading calamity in banking.

While Frank is a liberal, the same cannot be said of Ben Bernanke, the chairman of the Federal Reserve. Yet in a speech on Tuesday, Bernanke sounded like a born-again New Dealer in calling for “a more robust framework for the prudential supervision of investment banks and other large securities dealers.”

Bernanke said the Fed needed more authority to get inside “the structure and workings of financial markets” because “recent experience has clearly illustrated the importance, for the purpose of promoting financial stability, of having detailed information about money markets and the activities of borrowers and lenders in those markets.” Sure sounds like Big Government to me.

This is the third time in 100 years that support for taken-for-granted economic ideas has crumbled. The Great Depression discredited the radical laissez-faire doctrines of the Coolidge era. Stagflation in the 1970s and early ’80s undermined New Deal ideas and called forth a rebirth of radical free-market notions. What’s becoming the Panic of 2008 will mean an end to the latest Capital Rules era.

In the campaign so far, John McCain has been clinging to the old economic orthodoxy while Barack Obama has proposed a modestly more active role for government. But the economic assumptions are changing faster than the rhetoric of the campaign. “Reality has broken in,” says Frank. And none too soon.

Is this a joke?

A Massachusetts liberal writing an article about the failures of capitalism using another Harvard grad, NJ born, Massachusetts representing liberal as a source?

Using the fact that the head of the Federal Reserve, which is about as anti-free market as you can get, wants to increase the organization’s power as evidence that free market conservatives are giving up on the free market? Who said Bernanke is conservative? Who said a central bank was free market?

Using the Great Depression as more evidence of free market failures?

Claiming John McCain is a free market conservative?

I’m just astounded by the amount of steaming feces coming off of this article.

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