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Mark Steyn spots the motto of the nanny state.
I think we ought to be harder when minor functionaries of a failed leviathan reveal themselves to have a defective understanding of the role of government in free societies. Steven Chu, the Energy Secretary who came into office saying “we have to figure out how to boost the price of gasoline to the levels in Europe“, has now offered up another soundbite for our times. On Friday, he defended the ban on Edison’s iconic incandescent in economic terms:
… “We are taking away a choice that continues to let people waste their own money.” …
Krauthammer says the president’s position is farcical.
… All of a sudden he is a man who wants to be the one to cut the deficit and the debt. Its a farce. You can see it in the threat he made where he said I will not sign short-term extension. Let’s say we are in negotiations and we are approaching and we want something real like tax reform which takes a few months. And Republicans pass a tax reform — pass a debt ceiling increase for say three months to allow negotiations. He says he will veto it because he is acting in the national interest; has to be a big deal.
I think the Republicans ought to call the bluff on this. …
Jennifer Rubin noticed Obama agrees with Paul Ryan about Medicare.
At his news conference President Obama explained:
“The vast majority of Democrats on Capitol Hill would prefer not to have to do anything on entitlements. Would prefer, frankly, not to have to do anything on some of these debt and deficit problems. And I’m sympathetic to their concerns, because they are looking after folks that are already hurtin’ and are already vulnerable. And there are a lot of families out there and seniors who are dependent on some of these programs. And what I’ve tried to explain to them is number one, if you look at the numbers, Medicare in particular will run out of money, and we will not be able to sustain that program no matter how much taxes go up. I mean, it’s not an option for us to just sit by and do nothing.”
Gosh that sounds sort of like what Rep. Paul Ryan (R-Wis.) has been saying while the Democrats have been conducting the Mediscare offensive. I asked Ryan’s office for the congressman’s reaction to the president’s admission that Medicare as we know it is going away. A spokesman replied, “As the President made clear — and the Congressional Budget Office has confirmed — Medicare is on an unsustainable path. …
We devote a lot of space today to John Tamny’s review of “Reckless Endangerment.”
… The grotesque rise of Fannie Mae, along with Washington and Wall Street’s bipartisan and politically correct worship of homeownership figure prominently in Gretchen Morgenson and Joshua Rosner’s Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon. The story they tell is surely revolting, but not very well reasoned, however. Worst of all, the authors mostly missed the real story behind the most recent rush to housing.
The book will appeal to extremes. The hard right will love Reckless given their belief – despite basic evidence – that the recessionary rush to housing was caused by Fannie, Freddie, and Democrats in thrall to both. The hard left will be cheered by Reckless owing to their equally dim view that Wall Street and greed drove the housing boom. Both sides will finish the book bursting with facts and quotes that will merely confirm views already held deeply. As for those still searching for answers to explain what just happened, they still won’t know. …
… Indeed, it should be made clear that despite the myriad problems with Reckless, the idea of government subsidizing housing is truly horrifying. From a growth perspective, an investment in housing doesn’t make us more productive, won’t cure cancer or lead to efficiency-enhancing software innovations, nor will it open up foreign markets. Housing on its best day is an item of consumption – albeit a necessary one – that has little to do with real economic growth.
More to the point, housing subsidies, particularly for the poor, are quite simply cruel. In a world where capital moves at the click of a mouse, the last thing governments should be doing is subsidizing a purchase that renders those who take advantage of it less mobile in pursuit of work. …
… it’s probably worth it to lay out a few choice utterances from our politicians. When asked if the Fannie/Freddie subsidies would ultimately trap individuals in properties they couldn’t afford, Rep. Barney Frank responded with “We’ll deal with that problem if it happens.” When presented with the idea that Fannie and Freddie’s business practices might be less than safe, Frank responded with “I think we see entities that are fundamentally sound financially.” During congressional hearings about Fannie and Freddie in 2003, Frank concluded that “there has been more alarm raised about potential unsafety (sic) and unsoundness than, in fact, exists.”
Of course Frank was but one of many Democrats who carried the GSEs’ water in Congress. Rep. Maxine Waters, seeking to avoid “fundamental change” for Fannie and Freddie similarly observed in 2003 that “frankly, we were trying to fix something that wasn’t broke.”
To be fair, it should be said that the two GSEs had their Republican defenders too, including Newt Gingrich and Robert Zoellick. Zoellick, once general counsel at Fannie, regularly twisted arms in Congress to make sure the company that employed him didn’t face tougher oversight, while Newt Gingrich once stated that “Fannie Mae is an excellent example of a former government institution fulfilling its mandate while functioning in the market economy.” How anyone could claim affiliation with either party after reading this book is a mystery. …
… Throughout the book the authors spoke ill of “predatory” lending (borrowers were apparently always naïve, and never in the wrong), but as evidenced by their description of Countrywide’s actions in poorer communities, Mozilo’s firm knew well that the risks to lending in less prosperous areas were greater, and naturally his firm charged higher rates. The authors paint Mozilo’s actions with the poor as having to do with company systems that “were designed to increase costs precisely for these borrowers”, but then if they’d not done exactly as the authors describe in a negative light, they would have run into trouble much sooner than they did.
And there lies the greatest problem with Reckless. Though it will once again serve well those with political agendas on the left or right, the analysis underlying the reporting was just so weak. This showed up most notably in the authors’ frequent snarky comments about “deregulation” as the driver of so much that went wrong.
There are so many examples in a book full of major contradictions, but the basic narrative from the authors was that a “free market philosophy that had taken hold during the Reagan years and became even greater during the Clinton administration” led to a deregulatory mindset that created the mess they set out to write about. That’s a nice bit of rhetoric, but the problem for the authors was a lack of evidence supporting their claims.
Sure enough, and as the authors reported early in the book, “Because housing finance was heavily regulated, government participation was vital to the homeownership push.” Far from an episode of deregulation, it was precisely because housing finance already had the government’s fingerprints all over it that so many errors were made. Much as many may want to blame the private sector for all that’s occurred, does anyone think all these egregious errors would have been made in an unregulated environment marked by the all-important natural non-regulation that is the freedom to fail? …
… As for the individuals who choose the life of a regulator, it would be fun to hear the authors explain how those with such low ambition might credibly oversee some of the brightest financial minds in the world. After that, their very own book shows time after time (see above) how very unequal and late regulators were to every financial calamity that they describe.
In defense of those same regulators, for them to achieve what the authors’ desire they would have to possess hotlines to the future that, if they utilized them in the private sector, would make them the most brilliant and wealthiest money managers in the world. Those who support the mere notion of regulation as the cure to what ails us ascribe to those charged with implementing them superhuman powers that quite simply don’t exist.
In that case, what we face is something utterly lost on the authors, but that their book made plain if they or their editors had bothered to notice the myriad contradictions within. Simply put, the mortgage debacle they describe was the result of too much regulation, and the only way to fix what they deem problematic is to reduce regulation to one line: if you fail, you die. …
… What’s interesting is that while the authors at the book’s beginning laid out the ”cast of characters” that allegedly brought us to the brink, they oddly left out the man and his Treasury Department that played a bigger role than any of the admittedly worthless people that comprised their cast. Specifically, the authors left out President George W. Bush, and his Treasury Department that reversed the Reagan/Clinton strong-dollar policies in favor of extreme dollar weakness.
As history has regularly shown, from post-WWI Germany, to England and the U.S. in the ‘70s (despite skyrocketing rates of interest), to the decade just completed, when money loses value commodity-like assets including housing tend to rise, particularly in nominal terms. Housing is not gold-like in the sense that gold priced in all currencies tends to rise when currencies decline in value, but the historical correlation between commodity spikes and nominal housing health is very real, and was there during the Bush years for all to see. ..
National Journal says youth unemployment is at historic highs.
Here’s a fact that should give economists—and maybe President Obama’s political team—heartburn: Two years after the Great Recession officially ended, job prospects for young Americans remain historically grim. More than 17 percent of 16-to-24-year-olds who are looking for work can’t find a job, a rate that is close to a 30-year high. The employment-to-population ratio for that demographic—the percentage of young people who are working—has plunged to 45 percent. That’s the lowest level since the Labor Department began tracking the data in 1948. Taken together, the numbers suggest that the U.S. job market is struggling mightily to bring its next generation of workers into the fold.
This is a dangerous proposition, economically (for the United States as a whole) and politically (for the president). …