Let’s get real about the underlying causes of and the way to cure our economic woes.
“It’s the economy stupid.” That is the line that sunk George H. W. Bush’s reelection hopes in 1992 and ushered in eight years of Bill Clinton. In 2008, a similar refrain dashed John McCain’s hope to be the come-back kid once again. Barack Obama won the Oval Office on a campaign of platitudes—hope, change, and a chicken in every pot.
Yes, Obama inherited this economic crisis, but not from George W. Bush. This problem is not the result of greed on Wall Street. Greed on Wall Street is not new; heck, Wall Street is greed incarnate. I am not a big proponent of greed and excess, but if you can’t be greedy on Wall Street, then where can you? Let’s get real about Wall Street. All of us pay those folks on Wall Street to use their greed skills to make us all money. And I mean all of us, not just the so-called rich fat cats. If you have an IRA, an employee stock plan, a 401 K, a public school retirement fund, a firefighter’s retirement fund, or any retirement of any kind, then you are likely invested in mutual funds that are managed or traded on Wall Street. In fact, horror of horrors, your mutual fund is probably invested in oil companies, coal mines, and even banks and brokerage firms! But, I digress.
Back to the origins of this economic crisis, in a rather prophetic article published in the New York Times on September 30, 1999, Steven A. Holmes identifies the cause of the subprime mortgage meltdown of 2008. Here are a few of the telling facts Holmes articulates in that article.
“Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.”
“’Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,’ said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ‘Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.’”
“In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.”
There you have it. The current economic crisis can be directly traced back to the social engineering policies of the Clinton Administration. And now in an attempt to revive the economy, President Obama is proposing even more ill-advised social engineering programs.
Presidents Jefferson and Lincoln admonished America to never forget that you do not benefit the poor by taking from the wealthy (read Obama’s income redistribution plans) and you do not strengthen an economy by punishing those who create jobs (read Obama’s ideas about tax equity).
Whether it is greed or just plain old business sense, Wall Street knows that the most recent bailout legislation won’t begin to address the problem. And the Obama Administration’s propensity for obfuscation and platitudes without details is just like rubbing salt in the economic wound.
President Obama would be wise to understand that “It is the economy stupid.” And if you want to stimulate the economy, reduce tax rates, especially on capital gains, and restore investment tax credits. Do not start a trade war because, as the largest exporting nation in the world, the U.S.A. has the most to lose in that war. And decrease the regulatory burden on domestic businesses if you want to create jobs in America. In pursuing these real economic stimulus policies, the President would be unleashing the awesome and magnificent power of free enterprise, the American economy would once again lead the world in improving the people’s lot in life, and, yes, tax revenues would increase.