In a much-anticipated speech yesterday, Treasury Secretary Henry Paulson laid out his “blueprint” to better regulate the financial sector. Unfortunately, Paulson’s plan is nothing groundbreaking; it’s just another example of the Bush Administration’s smoke and mirrors method of reform.

Although some of Paulson’s proposals do demand more regulation of the financial structure, oversight of the most crucial areas is actually looser and more deregulatory than today’s status quo. Stock markets, for example, would be given increased ability to approve new, complicated financial products without first seeking government approval. It is these intricate transactions that are at the heart of today’s mortgage and financial crisis—and are essentially what caused the demise of investment banking giant Bear Stearns.

The Consumer Federation of America hit the nail on the head when it compared Paulson’s “response” to the mortgage and credit crises plaguing Americans to a past Administration disaster — Hurricane Katrina:

“Rolling out this plan in the middle of the current crisis is like telling Hurricane Katrina victims stranded on their rooftops in New Orleans, ‘Don’t worry, if you can hold for a few years, we’ve got a really great plan to restructure the federal emergency response system,’ ” said a statement issued by the CFA.

“This plan,” the group said, “had its genesis in Secretary Paulson’s conviction that overregulation and inefficient regulation were hurting the global competitiveness of U.S. markets. In fact, experience has repeatedly shown that regulatory failure, not overregulation, is the greatest threat to the health of our markets.”

Paul Krugman, in an op-ed, shared a similar sentiment:

And sure enough, according to the executive summary of the new administration plan, regulation will be limited to institutions that receive explicit federal guarantees — that is, institutions that are already regulated, and have not been the source of today’s problems. As for the rest, it blithely declares that “market discipline is the most effective tool to limit systemic risk.” The administration, then, has learned nothing from the current crisis. Yet it needs, as a political matter, to pretend to be doing something.

The Bush Administration has a clear record of reform over the past seven years — reforms that cater to big business, Wall Street, and the rich while masquerading those policies as helping middle class Americans.

Bipartisan worthies from the Brookings Institution, the Heritage Foundation, and elsewhere have identified a great threat to the nation’s future. “Without addressing” this problem, we are told, “our newly elected leaders in 2009 will have little chance to meet the challenges that Americans face in a world of intense global competition and rapidly changing technology.”

The health care crisis? The dropout crisis? Global warming?

Wrong, wrong, wrong.

The problem is “automatic spending growth and the deficits they engender.” More specifically, the problem is “projected increases in spending for Medicare, Medicaid, and Social Security.” To address this crisis, the authors propose an automatic mechanism that forces Congress to cut the benefits in these programs, to raise taxes, or to cut spending within 5 years.

Committed to “hard choices” and “responsibility,” the authors stand ready to slash benefits for the old, the poor, and the infirm. But is this really necessary? Brookings’ own Henry Aaron, a senior fellow in economic studies, disagrees:

A CONSENSUS HAS EMERGED AMONG BUDGET ANALYSTS that potentially ruinous deficits await the nation unless current policy is changed soon and fundamentally: The baby-boom generation is about to start retiring; the nation is committed to paying the elderly and disabled pension and health benefits—Social Security, Medicare, and Medicaid—that are unaffordable; and demography and budgetary overcommitment threaten fiscal meltdown. A political recipe to avoid this specter seems to follow: The nation must cut aid to the aged, disabled, and poor; reduce all other public spending; raise taxes; or do some combination of all three.

This view omits key information. As a result, the political recipe mentioned above is misguided. The United States must reform its health care financing system, public and private. If it does so, there will be no remaining long-term fiscal problem. Reducing current budget deficits is also desirable. But the long-term problem is health care spending, private and public, not a general budget shortfall or entitlements. […]

Thus, a three-premise syllogism emerges: (1) Near-universal coverage is an essential precondition for controlling health care spending. (2) Rising health care spending is the only source of long-term budget shortfalls. (3) Controlling spending under public-sector health care programs cannot proceed independently of control of private-sector health care spending. Therefore, extending health insurance coverage to nearly everyone is a necessary precondition for dealing with long-term budget challenges.

The authors make no proposals to extend health insurance to “nearly everyone” — or anyone. Their motto might be: Pain, no gain.