Archive for Economy

Tracing the Market Melt Down

Posted in civil rights, Constitution, Economy, Elections, politics with tags , , , , , on October 6, 2008 by heapotrouble

http://online.wsj.com/article/SB122298982558700341.html

 

http://online.wsj.com/article/SB122290574391296381.html?mod=article-outset-box

 

Having read these articles, many others, and relying on memory that becomes less trust worthy with time, I think it is naïve, or politically contrived to pin the blame on any individual, administration, or party. There is plenty of blame and demonstrated incompetence to go around.

 

I read one article that traced the roots of the current crisis to the Johnson administration. The author made the case that in order to get Fannie Mae and Freddie Mac off the federal books to support spending for the war in Vietnam, Johnson privatized both of these organizations. Because it was politically expedient to obfuscate the true relationship between the federal government and these mortgage corporations, the implication was let stand that they operated with the full backing of the Federal Reserve. While this was not true, the stock price of Fannie Mae and Freddie Mac soared on initial public offering because of the implied safety. This swelled the corporate coffers and entrenched a culture of inordinate risk and cavalier risk assessment.

 

Another article I read cited the Community Redevelopment Act of 1977 and the Carter administration as “ground zero” in the current fiasco. By law, these lending institutions were required to meet quotas on minority lending to borrowers that would not normally qualify. Again, it was implied that the Federal Government would cover any losses due to loan default. The program expanded to include not just minorities but all borrowers who would not ordinarily qualify for mortgage loans.  

 

Yet another article blamed the Reagan administration for “deregulating” the mortgage industry. However, it does point out that this deregulation began during the Carter years. It goes on to say that the problem wasn’t that the industry was under-regulated, but that it was poorly regulated. Laws were enacted to meet political needs of elected officials of both parties that did not serve the public in the long run, but did serve the immediate political needs of the representatives.

 

More recently, I think you will remember two incidents that seem to have escaped wide publication. The first was the lost opportunity to mobilize the nation in the wake of 9/11 when President Bush advised the public that the best way to beat Al Quida was to “keep shopping.” That put the consumer credit lenders on notice to open the flood gates. The second was during a State of the Union Address. I can not remember exactly which one, but it was early in the Bush administration. The President voiced his goal that “all Americans should reap the benefits of home ownership.” Once again the signal was received loud and clear, not only by mortgage lenders, but by enabling politicians whose near term political goals coincided with the President’s vision, and once again we were off to the races.

 

I think all these instances can be grouped into two broad categories. The first is where the motivation is noble, but the logic is tragically flawed. The politician truly desires to better the lot of the electorate, but doesn’t understand the root issue. Home ownership is a sign of prosperity. If it becomes easier to obtain credit to buy a home, the owner becomes prosperous with the purchase of a house. Continuing that logic, if the government were to buy everyone a Lexus, Mercedes, or BMW, we’d all be considered “rich” and could afford higher taxes. This group proves once again the old axiom; “The road to hell is paved with good intentions.”

 

The second broad group is as dangerous as the first, but much more pernicious. They are the ones that see the Treasury as an extension of their campaign funds. They use the power of the pen to enact legislation that will direct common resources to benefit their constituency, and support their re-election. In effect, they buy your vote with my money, and visa-versa. This, unfortunately, has become the Washington way of doing business. The McCain-Feingold Act attempts to address this issue, but while trampling the Constitution under heel, misses the point. Because the bill did not address the root cause; there is so much money in politics because there is so much money in government, it serves as the “incumbent protection act” and does more harm than good. Once again, the road to hell…

 

The unfortunate part is that come January, none of this will change. McCain, while he preaches systemic change, is too impulsive to look beyond the surface and address root causes. He is a bull in a china shop, and he doesn’t mind bringing his own china shop. Obama sees change as implementing expanded policy and legislation, delivering more power into the hands of the very people who have brought us to this crisis, either through benign incompetence or malevolent self promotion.

 

In either case, I fear we will get the change promised. But we will find out that disaster is also a form of change.

Gov. Richardson: George W. Bush should have saved the economy from the Democrats — wait, what was the question?

Posted in Economy, Elections, News, Obama, politics, taxes with tags , on September 17, 2008 by Randy Streu

(cross-posted at RedState)

Bill Richardson was on Fox News this morning discussing Obama’s economic plan.  Not much to write home about, but if you had the stomach to sift through (or even *sit* through) the BS, there were a couple of gems worth noting.

 Fox: (after Richardson talks about CEOs and golden parachutes) isn’t it true, though, they were getting the golden parachutes during the Clinton years as well, while you were there?

Richardson:  Well, look, there’s no question about it: what we need is stronger oversight and transparency of these institutions, and my point is, Senator McCain was Chairman of the Commerce Committee that was supposed to regulate these entities.

Translation:  Um… er… ah… yeah, anyway, back to what I was saying before I was so rudely interrupted with fact…

Richardson: Look, I — I want to let businesses deal with their own market.  I think the AIG bailout, in my personal opinion, was the right thing to do, because you’ve got a hundred and 16 thousand employees… but we have an inconsistent policy…

I’m going to pause for a moment to just let that sink in… … …

And, we’re moving forward:

Fox: I know the — there’s the housing enterprise regulatory reform act of 2005, which he (McCain) sponsored, which Democrats killed… and in that reform act, Governor Richardson, he talked about his worry about the way real estate was going, the lack of — McCain — Senator John McCain, that is — and Fannie Mae and Freddy Mac, specifically.
Richardson: Well, but, look: who was in the white house?  President Bush. Where was President Bush?  Look, you know, it doesn’t make sense just to assign blame.  I think what’s important is, where do we go from here.  At least Senator Obama has said, “these are the steps that I would take as President.”

Translation: You’re right, and President Bush should have saved the American economy from the disastrous fiscal policy of the Democrats — um, I mean, hey, you know, let’s not get into the finger-pointing.  You say it was the Democrats, I say the Democrats should have been stopped — but anyway, VOTE DEMOCRAT.

I think, to paraphrase Ronaldus Maximus, that it’s not that Governor Richardson is ignorant… he’s just not very bright.

Edwards Says “Jump” …

Posted in Economy, Elections, Hillary, John Edwards, News, politics, taxes with tags , , , on December 21, 2007 by Randy Streu

As I mentioned here a day or so ago, John Edwards challenged other Democratic nominees to, among other things, adopt a $9.50/hour minumum wage.  Which, as I also mentioned, is a horrendously bad idea.  Among the reasons I listed previously, there’s also the fact that a minimum wage increase like this would create inflation, while giving no relief to those workers who originally made the same or more than the new minimum wage (employers, for reasons of basic economy, rarely raise larger incomes in a direct ratio to the minimum wage increase).

However, Hillary Clinton took the bait.  And, as I might have guessed, she’s making it look like she’s leading the charge, while her campaign credits her with more strong, bold leadership.  Hillary simply and neatly neglects to mention that it wasn’t even her idea.  Seriously.  I could write this woman’s script.

I don’t mind when Dem candidates play “mine’s bigger than yours” — I do mind when they play it with our money, our economy and our future.

Job Creation: How Hillary Clinton Will Use a Worthless Metric to Take Over America

Posted in Constitution, Elections, Hillary, politics with tags , , , , on November 21, 2007 by Randy Streu

Hillary Clinton has begun to outline her new economic plan.  Though she’s being praised by her corner for specifics, I haven’t found any, unfortunately, so I’ll have to work with what she’s got. 

Before I get into that, though, I’d better start by explaining what I mean in my title, when I say “worthless metric.”  During elections, Democrats especially love to throw out numbers like “jobs created” during certain terms.  They see this as an extremely important metric in determining how to rate a President’s success.  However, not only is “job creation” not in the President’s job description, it isn’t even in the federal government’s!  “Job creation” is a false metric created by people who either haven’t read the Constitution or have chosen because of political convenience to ignore it. 

Hillary Clinton is one such person.  In her new economic plan, Clinton promises to create “good jobs essential to broad-based prosperity.”  The released information doesn’t really go into her strategy for doing so, but one would assume this strategy would tie in with the rest of her “comprehensive” plan.  So, then, looking deeper into the plan, we see a bunch of stuff about HUD, and about home energy.  Not so much about how she’s going to create those jobs.

So, it appears we’re going to have to look at the policies and issues she has been a bit more vocal about.  This whole thing centers, as does most Leftist policy, on class warfare.  (Class warfare is good for liberals, because “Us vs. Them” makes much better propaganda than “You have what it takes to succeed.”)  So, knowing that, we drop over to Hill’s Issues page on “Strengthening the Middle Class.”  I’m not really sure how creating more government dependence is considered “strength” — but then, I’m not a liberal. 

So here, alongside Clinton’s promise to create “good jobs with good wages,” we see also references to her healthcare plan, ideas to protect people from having to read fine print on housing loans, throw more money at public universities, and — ah, here we are — increase the minimum wage.   

Okay, now let’s take a look at the first and last things I mentioned on this list: healthcare and wages.  Now, I’ve mentioned healthcare before here, but to quickly lay out what this means in the context of job creation:  Under Hillarycare 2.0, employers will be required to either (A) put money into healthcare for their own employees or (B) pay an extra tax that would be earmarked for Clinton’s public health insurance.  Add this cost to the increased minimum wage under another Clinton administration, and you see a net loss for American businesses. 

Now, when you look at the pattern of business, what generally happens when cost of labor goes up is that either (A) businesses outsource to a contractor or, (B) they outsource to another country.  Though the first option may create a couple jobs, neither is particularly good for American workers as a whole. 

So, the conclusion I have to come to is that either Hillary is ignorant of basic economics (which I doubt… she’s a lot of things; dumb ain’t one of them.), or she expects you are.