Market Failure: Government is the Problem

The candidates rushed out statements on the Wall Street meltdown yesterday. According to an Obama-friendly piece in the New York Times McCain blamed greed on Wall Street and Obama blamed lax regulation during the Bush years.

It’s a pity that both candidates seem to be clueless.

This meltdown has government failure all over it. Let us count the ways.

1. The first cause is the reckless expansion of credit during the early 2000s as the Federal Reserve worked to head off the threat of deflation. The Fed kept the spigots on too long, as usual, taking two years to raise interest rates from the low of 1 percent up to the middle fives.
   
2. Then there’s the sluicing of money into the housing market with Fannie and Freddie. Sensible people have been warning about Fannie and Freddie for years, but Congress, and mostly Democrats in Congress, have resisted reform.
   
3. There’s the specific distortion that the Clinton administration wrenched into the housing finance market. An Investors Business Daily editorial fingers the guilty parties. The Clintonoids used the Community Reinvestment Act to force banks to lend more money to low-income borrowers. That set up the sub-prime market, and set up the current meltdown.
   
4. Greed on Wall Street. Yes, there’s plenty of that. And unfortunately the easiest way to make money is to game government subsidies and market distortions for a quick buck.
   
5. Lax regulation. Well, the regulators always seem to be a day late and a dollar short. How about we reform the system to force more equity into it. It’s the highly leveraged setups that lead to trouble (think 90 percent mortgages on homes as well) because when you are highly leveraged you can find yourself underwater as soon as the market turns south.
   

The current mess is mostly the creation of government power and the natural instinct of politicians to sluice taxpayers and bondholders money to their favorite special interests.

The beautiful part about this system is that when the whole mess hits the fan, the authors of the mess are usually long gone, and the blame attached to the poor saps who inherited the mess.

The Arc of Celebrity

If you burst onto the scene, they say, your celebrity will last about 15 months unless you amount to more than a flash in the pan.

Let’s see. It’s about 15 months since Sen. Barack Obama (D-IL) burst onto the national scene as a breakout presidential candidate.

The trouble with celebrity, Charles Krauthammer warns, is that its currency is novelty. You can trump yesterday’s celebrity with today’s new phenomenon. It is becominig clear, with the Palin phenomenon, that the Obama phenomenon is becoming old and, well, yesterday.

It is clear, in retrospect, that the natural arc of Obama’s celebrity had started to decline by his Berlin speech earlier this summer. So his handlers decided to make his convention acceptance speech a more sober affair, full of facts and figures. Yet he had already committed to make this sober speech in a football stadium complete with faux-Greek temple.

The incongruity between text and context was apparent. Obama was trying to make himself ordinary — and serious — but could hardly remember how.



One star fades, another is born. The very next morning McCain picks Sarah Palin and a new celebrity is launched. And in the celebrity game, novelty is trump. With her narrative, her persona, her charisma carrying the McCain campaign to places it has never been and by all logic has no right to be, she’s pulling an Obama.

What we conservatives hope is that when Palin’s celebrity novelty cools off her real self will emerge and it will turn out to be the reality a gifted and serious politician.

Earlier this week she gave her first media interview, to Charlie Gibson of ABC News. “Mixed Reviews,” said the London Daily Telegraph. “[U]nfamiliar with the Bush Doctrine,” said the Wall Street Journal. On the other hand, the conservative blogosphere was full of comments about Charlie Gibson’s missteps.

Sooner or later, either before the election or after it, the American people are going to tumble to the fact that the Demcrats are not offering Change this year, but more of the same leavened with a new celebrity. How could they be offering change? Ninety percent of the government programs on the books today are their legacy, the legacy of a century of the welfare state.

Democrats are not yet ready to consider that there might be ways other than the model of the centralized government program to deliver social services. Givern that the government program has served them so well—in political power, in fame, and in comfortable sinecures—why would they offer Change?

Why Palin Really Matters

Never mind the fun-and-games of the Palin candidacy. What started with the pure joy of watching a politician that likes to speak from the podium and who drives our liberal friends nuts has now gone nuclear.

With the pigs-and-lipstick incident we now have young women at rallies with gigantic lipsticked lips, “Read My Lipstick” signs, and Palin Is Great.

But enough of fun and frolic. Let’s get to a serious discussion of the issues from Jay Cost.

Republican Margin of Victory/Defeat: Selected Demographic Groups 1996-2004 1996 2000 2004 White Men +9 +24 +25 White Women -5 +1 +11 African Americans -72 -81 -77 Hispanics -51 -27 -9 Overall -8.5 -0.5 +2.4

You can see what it means. If McCain loses the comfortable majorities in white men and white women, he will lose to the overwhelming pro-Obama vote among African Americans. If won’t be -77% this time. How about -95%?

Then, of course, there is the interesting question of the Hispanic vote. We are hearing all the time that Hispanics and blacks don’t like each other. So what does that do to the Hispanic vote this time out? Because the fact is that, even when he won by overwhelming majorities in white men and white women, George W. Bush only just pulled out a win in 2004 by a thin 2.4%.

You can see that the key to a Republican win in 2008 is to keep, and even expand the majority of white women.

Larry Kudlow has an interesting take on the Palin “hockey mom” ad-lib at the convention.

Palin’s really saying: Don’t tread on me. Don’t try to intimidate me. I am a strong, tough mom who is determined to succeed in politics.

And it seems that Sen. Barack Obama, with his clumsy “lipstick on a pig” remark, has played right along with the Palin challenge.

And in the process, he is boosting Palin, getting more and more people to pay attention to her, and motivating more and more white women to come out and vote for her.

Is Abortion the 21st Century Equivalent of Slavery?

In the ancient world, we know, slavery was ubiquitous. In They Year 1000: What Life Was Like at the Turn of the First Millennium Robert Lacey and Danny Danziger write about people in England going to their lord and placing themselves in slavery when starvation threatened. And they write about the Vikings sailing up the rivers in the autumn, plundering the harvest, killing the men, and selling the women and children into slavery at the main slave market in northwest Europe: Dublin. That was in the year 1000 AD, or CE if that’s your preference.

The remarkable thing is not that slavery existed in 1800. The remarkable thing is that it seems to have died out in NW Europe. The remarkable thing is that there were people like William Wilberforce who had organized to stamp it out in the rest of the world.

And stamp it out they did, by ending the trans-Atlantic slave trade and ultimately provoking the great Civil War in the United States that ended slavery on these fruited plains.

The fierce opposition to VP candidate Sarah Palin raises the question as to whether abortion is the new slavery.

Because it is clear that the fact of Sarah Palin’s life, with its unrestained fecundity and its celebration of “special-needs” children, is an offense to our pro-choice liberal friends.

Sarah Palin’s life raises again the issue of abortion. And the fact is that the question of abortion must be decided by the people. It is not the job of the elite Supreme Court to issue a ukase, as it did in 1973. It is up to the people to determine, by political action in its largest sense, when the fetus carried by a woman becomes a life protected by the law.

When women emerged, in the 20th century, from lives completely circumscribed by child-rearing and domestic management, to lives lived more in the public square, a new era began.

This new era opened the question of What Women Want. What does a woman liberated from constant child-bearing want? Feminists like Simone de Beauvoir said that they wanted careers and creative originality and liberation from the domestic sphere. It was natural for upper-class women like her to think that way.

But Beauvoir’s feminism only appealed to an upper-class elite.

Women do want to work, usually with people, outside the home. But few women want male-type careers. And most women want lives fully integrated with children, marriage, family, and the community of women.

Modern western society has just begun to address this question.

If children are important then the issue of abortion is important as well. And it is not exhuasted by the notion that a woman should have absolute control of her body. Nobody in society has absolute control of their body, just as nobody in society has absolute control of their children.

Somehow, some way, in the coming decades, we will come to a resolution of the abortion question. But it won’t be pretty.

A Open Letter to Sen. Obama

Here at Road to the Middle Class we are not exactly fans of Sen. Barack Obama (D-IL). He seems a nice enough chap, son of a liberal anthropologist who turned to raciial identity politics. But we hate to see his campaign imploding. Somebody do something! Best thing to do is to write a letter.

Honorable Barack Obama

United States Senate

Washington DC 20510

Dear Senator:

I’ve never been a supporter of yours, but I just can’t watch and do nothing while your campaign goes down the toilet.

By my reckoning, your campaign has been dead in the water for nearly two weeks. No it wasn’t the introduction of Gov. Palin that killed the motor; it was the speech from the silly sophomoric Greek Temple. Whose brilliant idea was that?

The problem is that the GOP team of McCain and Palin have stolen your issues of Hope and Change, stolen them fair and square.

The further problem is that they make a better argument for representing Hope and Change than you do. After all, what have you ever done to buck the system? What have you ever done?

And for goodness sake, stop with the attacks on Gov. Palin. First of all, she’s not the candidate, John McCain is. And secondly, we are getting to the point where many Americans actively like her and they are not going to put up with anyone criticizing her. And that goes in spades because she is a woman. Women hate it when another woman gets attacked by a man. It activates all their protective instincts and there is nothing you can do about it.

Forget the Swift Boat narrative. A lot of Democrats are running around saying that we must never let the Republicans Swiftboat us again like they did in 2004. They are missing the point. The point was that John Kerry decided to run as a war hero. But John Kerry didn’t really have a very good story on his war service, at least, not in the sense of “I’m John Kerry, and I’m reporting for duty.” John Kerry made his bones as an anti-war political activist. That’s who he was in the 1970s. By 2004 he was just another undistinguished liberal Democratic senator with many years of service in the Senate.

You must learn from Kerry’s mistake. Your narrative has to tell the voters who you are, not who you are pretending to be.

Focus on the issues. The three big issues right now are: energy, the economy, and the mortgage meltdown. The American people want to know what you are going to do about these issues. You do have a plan, don’t you? Of course it’s true that we have an energy crisis because Democrats have spent the last generation standing in front of the oil derrick plafform, standing at the nuclear plant gate, stopping all energy development, but the American people don’t mind that. They just want someone to get gas prices down.

On the economy, you ought to be sweeping the floor with the Republicans. What’s with you guys? Here you are proposing gigantic spending programs and tax increases when you should be proposing to cut wasteful special-interest spending and cut taxes to get the economy moving.

And the mortgage mess. Today it is reported that you don’t like it that the CEOs of Fannie and Freddie are walking away with big severance packages. Very deep that. How about a real plan to solve the problem of unaccountable government sponsored enterprises going belly up?

Frankly, Senator, I don’t know if there is time to turn your campaign around. I don’t think you have the experience of dealing with a crisis like this. But if you can pull it out and turn your campaign around you will deserve to be president.

sincerely,

Christopher Chantrill

Fannie and Freddie Hit the Buffers

It was Weekend at Henry’s again last weekend as Treasury Secretary Henry Paulson executed another credit system surgery operation. This time, as we all know, the surgery was on the failed Depression era program that began as the Federal National Mortgage Assocation back in 1938. Today it is two government-sponsored enterprises, Fannie Mae and Freddie Mac.

Fannie and Freddie operate a secondary market in home mortgages, buying up mortgages and securitizing them into mortgage-backed bonds for sale to the public.

But like all government programs, what began as a good idea to mitigate the mess of the Great Depression turned into a political slush fund, and a firehose that sluiced mortgage money at the housing market.

Now it’s all ended in tears, because losses due to the housing collapse have used up all Fannie and Freddies reserves. It’s all Bush’s fault, my Democratic friends will say, because it happened on his watch.

Well maybe that’s a small price to pay, if we can put a stop to this silly program which has jacked house prices into the stratosphere, and is now insolvent as prices fall back to earth.

The Federal Reserve Board has been warning for years about the risks inherent in the operations of Fannie and Freddie. Back in the early 2000s President Bush and some Republican senators tried to get Congress’s attention to reform them. But Congress wouldn’t listen.

Everyone is talking about how the taxpayers are now going to have to bail Fannie and Freddie out. Actually, more likely it is not the taxpayers but the bondholders of Treasury securities and the average American who will pay. The bailout will result down the road in higher prices and a lower value of the dollar when the government papers over its mistakes with higher inflation.

Making It In Politics the Hard Way

Politics ain’t beanbag, right? But most prominent women get ahead the old-fashioned way, writes Victor David Hanson.

[Think of] successful contemporary female role-model politicians, such as a Diane Feinstein, Nancy Pelosi, Mary Landrieu, or Hillary Clinton — or pundits like Sally Quinn, Eleanor Clift, Andrea Mitchell, Campbell Brown, Gail Collins[.]

How did these women get started? They married well, or they were the children of established politicians.

Nothing wrong with that. Hey, you gotta play the hand you are dealt.

But it makes you realize that you wouldn’t want to start with these cards, not unless you are playing low-ball.

1. Grow up in small-town America.
   
2. Make it Alaska.
   
3. No Ivy League law school.
   
4. Marry a guy without money or influence.
   
5. No money, connections, or “name” in her family either.
   
6. Have lots of children.
   
7. Conservative: pro-life, pro-gun, pro-religion, pro-drilling. Republican.
   
8. Start career in all-male corrupt machine.
   
9. Get national attention in bad year for your party.
   
10. Corny photos with moose or party-hardy Alaskans, and more to come.
    

You gotta hand it to Gov. Palin; she did it her way.

Of course, you say, talent will out. No doubt. But it sure makes things easier when hubby or daddy can get you into the game.