Government Intervention Atheist

Mark Shields, last week on The NewsHour with Jim Lehrer

And, you know, Jeffrey Frankel of Harvard put it, I thought, perfectly well. He said, "Just as there are no foxholes -- there are no atheists in a foxhole, there are no libertarians in a financial crisis."

I mean, all of the good folks who've told us "hands off, laissez-faire, no government," I don't know where they are. They've suddenly become Marcel Marceau . They've gone mute on us. You know, everybody wants Sam in there, and you can feel the irresistible wave for regulation.

Oh, hi there. I'm a libertarian ... despite this financial crisis.

And I'm a rather concerned libertarian because Shields is right. Most fiscal conservatives have shut up and the climate is ripe for new regulatory legislation. In particular, the so called "fiscal conservatives" - the ones the left paints as being fiscally conservative, like Bush and McCain, when their record proves otherwise - seem to be especially pro-new-government-intervention.

But government intervention is not the cure all for economic woes.

In the early 80s, under the Reagan administration, taxes were lowered and regulation frozen. Although not immediate, the recession that began under Carter came to a close under Reagan.

In the early 20s, another (serious but lesser known because of the 30's depression) recession came and went without Big Government intervention.

And the economic conditions of those two recessions were dramatically worse that today.

At 6.1%, unemployment is lower today than during any year in the entire twelve year range of 1975 to 1987 with the one exception of 1979 where it was only two tenths of a percent lower than today. And 1979, 1980, and 1981 all saw double-digit inflation.

Between 1919 and 1921, unemployment climbed to 11% and the Dow Jones Industrial Average fell losing nearly half it's value.


Now, new regulations would not necessarily be a bad thing. I would welcome laws requiring more transparency assuming that said laws don't add major imediments to business (like say, Sarbanes-Oxley has done). And, if Fannie Mae and Freddie Mac are regrettably here to stay, something needs to be done to change them away from a model of private profits and socialized losses.

But, it's clear that history teaches markets can correct themselves without dramatic government involvement. And it's unlikely that giving in to the temptation to try to have government rescue us from this will be in our interest in the long run.

I join the plea: Kill the Bailout.

Gov't Takeover: Fannie and Freddie

A post of quotes:

From Russel Roberts:

Following its knee-jerk, free-market, Milton Friedman obsessed ideology, the Bush Administration has seized control of Fannie Mae and Freddie Mac.

Joke. A bad one, really. If anything, this is just the latest evidence that it doesn't matter who's President. Is there anything this administration has done lately that reflects a free market philosophy? Yet because the administration sometimes uses the rhetoric of economic freedom, it allows people to paint the administrations policies as market-oriented.

From the Washington Post:

There is no guarantee that the takeover will work, and it comes at a potentially massive cost to taxpayers. The government has pledged to inject money in the companies in any quarter in which they would otherwise be insolvent -- up to $100 billion in total for each company.

"This is a shareholder bailout financed by the U.S. taxpayers," said Armando Falcon Jr., formerly the chief regulator of Fannie Mae and Freddie Mac.

Paulson also announced a separate program in which the government will start buying securities backed by mortgages -- $5 billion worth, initially. That will, in effect, subsidize the purchase of homes by lowering the interest rate that buyers must pay for a mortgage.

From Jon Henke:

This is how government grows...

1. Socialize Risk: Government intervenes in an industry to "solve" some apparent and visible problem.  This is done "for the people."


2. Unintended Consequences: This intervention merely shifts the costs to new areas and sweeps problems under the carpet, where they accumulate.


3. Blame The Market: Government intervention is not blamed, because the people who support it assume their good intentions could not be responsible for bad things.


4. Socialize Profit: The Left demands Something Be Done by people with Good Intentions. Politicians comply.  This is done "for the people."

Unfortunately, our political structure comes at this from four different places.

• Democratic politicians, organizations and activists are happy to go along with Steps 1-4, because, hey, #4 was their goal in the first place.


• Republican politicians and organizations go along with Steps 1-3, only objecting at Step #4.  By which time it is too late.


• Business goes along with Step #1, and attempts to use Step #2 to get more of Step #1.


• Libertarians believe the problem occurs at Step #1.  Once Step #1 is conceded, we've already lost on steps 2-4.  But libertarians and limited government conservatives have relatively little power.