Humans need someone to blame. Scapegoating, no matter how irrational, focuses anxiety and frustration into something concrete and thereby allows a modicum of healing. To this day, Bostonians blame Bill Buckner for blowing their 1986 World Series, despite the obvious fact that his one mishandled grounder was just one of hundreds of plays throughout their lost series. The irrational piling on shields their psyches from paralyzing self doubt. On the other hand, scapegoating Mr. Buckner may have prevented rational introspection and contributed to Boston’s subsequent 18 year drought.

Scapegoating is by no means solely a sports phenomenon. In 1989, a group of four Democrat Senators, plus one Republican named John McCain, were accused of causing the savings and loan disaster through shady dealings with Charles Keating. The “Keating Five’s” alleged misdeeds might have contributed to a few billion dollars in bank losses, but the S&L crisis totaled $160 billion. Despite the drumbeat of greed and corruption stories, the reality of the S&L crisis was that the industry was structurally flawed by its regulatory mandate. S&L’s took deposits from and made loans exclusively to their respective communities, thereby inappropriately concentrating risk and assuring an eventual collapse. The scapegoat instinct blocked any effort to understand the mess.

More recently, the telecom crash that took down companies such as Qwest and Worldcom was blamed on the dishonesty of a few scapegoats. Joe Naccio, Qwest’s scapegoat, was directly responsible for at most $8bln of the over $80 bln collapse in Qwest’s market value. Likewise Worldcom’s Bernard Ebbers committed a $20 bln accounting scam that contributed to a $167 bln collapse. Both Naccio and Ebbers are crooks, but their crimes did not cause the downfall of Qwest and Worldcom. Both companies were houses of cards, built on unrealistic marketing assumptions; their collapses were inevitable. Blaming their CEO’s eases the psychological wounds of those who lost their investments, but it does not advance understanding of why the losses occurred.

Today, media and politicians are desperate to blame something for the recession. Naturally, the mainstream media and the Democrats are blaming corporate greed and excess. Rep. Barney Frank, one of the chief architects of the collapse of Fanny Mae, has singled out corporate jets and executive bonuses as his scapegoat. He has demanded that the jets be grounded and top executives give up their bonuses. While it is grating to see executives enjoy such perquisites while receiving bailouts, the cost of jets and bonuses amounts to perhaps 1/1000 of the overall problem.

President Elect Obama has taken to blaming the past in order to make his future more palatable. He has talked down the economy for months in a effort to cast blame on the Bush administration. Most recently, he has stated that the recession could last for years, in a preemptive effort to blame Bush in the unlikely event the downturn really does last that long. The worse the economy seems now, the better it will seem in a few months when Obama is in charge. Bill Clinton pulled the same trick in 1992 by declaring that year’s mild recession the worst economy since the great depression. The economy was in a boom cycle before he took office.

Keeping with the spirit, this blog’s scapegoat for the current economic mess is: government meddling in the marketplace. Recessions are an unfortunate, but natural economic event. The traditional Austrian Business Cycle predicts that periodic downturns are inevitable. Far from a catastrophe, recessions are a natural means of redirecting capital to more productive and efficient companies. The harsh justice of allowing inefficient companies to fail during a downturn is also the seed of future growth and prosperity.

Of course the government is against letting its pet companies fail: the Detroit three, Amtrak, big banks, domestic steel, large agriculture corporations, etc. The government has propped up these and countless other companies for decades. The government has spent hundreds of billions of dollars in tax credits to avert recessions over the past few years. The government has made money cheap to borrow for over a decade in an effort to fine tune the economy to its liking.

Usually when an industry enters a downturn, at least one other industry fares well as a balance to the economic drag. This time the government has propped up so many industries for so long, it has nearly run out of levers to pull. Seemingly every sector is in trouble now. By meddling to delay recession, the government has only made the inevitable recession worse.

Contrary to doomsday reports, the US’s best days are not behind it. Times will get better, probably much sooner than Obama’s dour prediction of years into the future. When the smoke clears, smart voters should not indulge in scapegoating the shady characters that inevitably surface during a crisis. Instead, smart voters should consider the wisdom of fine tuning the economy. Smart voters should question delaying a recession at all costs. When Obama’s doomed Keynesian spending orgy eventually dries up, perhaps someone will again take up the mantle of limited government and free markets.