The housing bubble began to reverse in the middle of 2006. Strangely, Economists presented with the possibility were almost uniformly confident that it wouldn’t matter. Forgetting the market and liquidity issues, even by the middle of 2007 it was clear the end of the housing bubble had already restrained economic growth. Confidence abounded anyway, largely a result of the mistaken belief that the Federal Reserve could and would cushion any downside.

By early 2008, that confidence started to erode somewhat such that the federal government felt compelled to be involved. Their genius answer was the “helicopter” option. In other words, by the mere fact of being a living, breathing taxpayer you were given cash in the form of a tax credit or rebate ($600 for singles, $1,200 for married couples, with another $300 per qualified dependent).

The idea of “jobs saved” not yet invented, President George W. Bush in the twilight of his second term confidently declared:

In the past seven years, the system has absorbed shocks: recession, corporate scandals, terror attacks, global war; yet the genius of our system is that it can absorb such shocks and emerge even stronger. In a dynamic market economy, our economy will prosper and it will continue to be the marvel of the world.

I bring this up not to single out or embarrass President Bush. This was bipartisan failure, one which the Obama Administration would repeat about a year later. The point is that it doesn’t matter which party is in control of which part of the government. The problem is Economics and the cross-party acceptance of Economists’ advice on the economy.

Economics has devolved instead into an expertise solely of mathematics, correlations and regressions in particular. How and why things work in the actual economy aren’t much studied anymore so much as comparing the significance of potentially parallel data points. And if something happens that hasn’t happened in the past, forget it. The math can’t adjust.