The Mortgage Crisis™ and the Fannie Mae/Freddie Mac Bailout™ and their confluential conflagration are a great example of policy being set by politics, ideology and the media.
Because not 1% (and I bet less) of the people who are involved have a single clue about the pros and cons of a government bailout. All the congresscritters are voting ideologically and/or to curry favor with the voters. Does anyone know that this will work? No. There have been good examples both for and against government bailouts (socialism!).
A bad example often cited is the airline subsidy after 9-11. “Look what’s happening to the airline industry now!” The detractors have a point: should we have left the airlines to sink under their own weight 7 years ago rather than watching them slowly implode (if that’s not an oxymoron) now? Or was giving them our hard-earned tax money a way to let them try (somtimes fail) to make operational changes over time that lead to a stable industry? There’s no real way to tell. Economists legitamately do not agree and if the experts can’t agree, what should us no-good layabouts think?
Of course, this isn’t about economics, it’s about politics and who is successful at pointing the finger at whom. I look forward to seeing how it all falls out, even though (maybe especially because) it’s my tax money.