This editorial will appear in tomorrow’s print edition.

Start with the obvious: Some mysterious gremlin in some murky nook of America’s trading system should not be able to trigger the steepest sell-off in Wall Street history.

For that matter, a small Mediterranean country’s bad debts should not be able to threaten the European economy and spook investors around the world.

And while we’re on the subject, incomprehensible financial products based on fraudulent mortgage schemes should not be able to throw the world into a near-catastrophic credit crisis, as happened in 2008.

Republicans in Congress are attempting a last stand against a Democratic package of sweeping new regulations on financial markets and institutions. The Republicans make the usual points – some of them valid – about the virtues of free markets and the burdens of government restriction. But they’re shouting into a gale.

Americans have seen hundreds of billions of their dollars used to bail out enormous banks, and they aren’t in a mood to let the markets regulate themselves.
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This editorial will appear in tomorrow’s print edition.

Deficits matter.

Just ask the Europeans who’ve been forced to bail out spendthrift Greece to protect their own economies. Just ask Americans who are suddenly seeing the Euro-scare drag down the U.S. stock market.

Wednesday’s 2-plus percent hit on U.S. stocks was largely driven by growing anxiety that Greece’s flirtation with catastrophe could spill over into Portugal, Spain, Ireland and perhaps Italy – all countries threatened by a general erosion of confidence. The ripples could hurt banks and investors around the world who have a financial stake in those countries.

Serious, sustained damage seems less likely now that other European countries – after much grumbling by the fiscally prudent Germans – have agreed to offer Greece $144 billion in undeserved credit. Disaster was staring everyone in the face. Greece’s credit rating had been cut to junk status; its bonds were turning toxic, and it was within three weeks of default.

The lesson for America, whose national debt has now exceeded $11 trillion, is that government cannot run up the VISA bill forever. A binge of deficit spending is sometimes necessary in a dire crisis – World War II and the credit panic of late 2008 come to mind – but the binge can’t become business as usual.

That’s precisely what happened in Greece. Under socialist Prime Minister Andreas Papandreou, its government rapidly expanded public spending in the 1980s. Since then, the country has been as indulgent as the old General Motors. Government workers were promised jobs for life; pensions were passed out to people who’d never contributed to the retirement funds; the public sector ballooned.
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