We're beginning to get a sense of what the next four years will look like. It won't be a conservative era, that's for sure. Nor will it, despite appearances to the contrary, be a reprise of the Clinton era. Bill Clinton's version of economic liberalism meant slightly higher tax rates on income and capital, a slightly more burdensome regulatory apparatus, lower deficits, and a commitment to free trade. The public sector didn't meddle too much in the private sector. It was content, for the most part, to sit back and enjoy the tax revenue that the tech boom poured in.

Obama's liberalism will be different. The center of political gravity has moved to the left since the 1990s. The president-elect does not share his recent predecessors' enthusiasm for free trade. He also won't face a Republican Congress. Instead he'll be dealing with, and from time to time confronting, a Democratic Congress eager to enact a kilometers-long liberal wish list.

What's more, the global economy is entering a severe downturn. Tax receipts are going to plummet, which means the deficit will skyrocket. And the cash-strapped government isn't about to sit still. Earlier this year Washington spent $150 billion in economic stimulus. That seems to have had little effect, so there is considerable political pressure for--what else?--more stimulus. We will foot the bill.

There is no guarantee that this crisis will remain only economic. At home, an ineffective or incompetent government risks populist backlash. Abroad, prolonged recessions have a way of spilling over into the national

Meanwhile, President-elect Obama will run a government that is heavily entangled in the formerly private sector. President Bush has already overseen the federal takeover of Fannie Mae and Freddie Mac as well as the American International Group. The Federal Reserve has poured billions into the commercial paper and other debt markets. The federal government now owns shares of the nation's largest financial institutions. And with hundreds of billions yet to be spent, industry after industry is lining up at the trough.

Bush authorized these interventions in order to prevent a systemic collapse of global finance. Banks are the economy's circulatory system. They allow the marketplace to function. This is why Bush is reluctant to bail out the Detroit auto companies. In his view, such a bailout would interfere with the creative destruction natural to the marketplace.

But the Democrats see things differently. For them, TARP is a backdoor through which they can manage the economy in accordance with liberal nostrums. Senate Democrats like Christopher Dodd and Charles Schumer want to set compensation rates and loan criteria for the banks that have accepted federal money. They want to overrule the boards and shareholders who normally determine CEO salary and bonuses. They want to force financial institutions to lend to consumers who may not be able to repay the debt. This, even though loan defaults are what got us into trouble in the first place.