Questions and Observations

I was reading something by Matt Welch at Reason and he inspired some thought about OWS and the left.

Welch takes a bit of nonsense in Salon.com called “The New Declaration of Independence” on and he cites a rather long passage from the article.   In it are these few paragraphs:

For the young, higher education was said to be a ticket to class mobility, or at least a secure career. Instead, middle-class students have taken on billions of dollars of inescapable debt during a prolonged jobs crisis. Lower-income students are blatantly ripped off by usurious scam artists working for educationally dubious for-profit schools. Even those seeking to join the professional class, through medical school or law school, find themselves with mountains of debt and dwindling job prospects. The rapidly rising cost of higher education pushes bright students into lucrative but socially destructive fields, like finance. [...]

For millions of middle-class and striving blue-collar American families, the promise of homeownership as the world’s safest investment became another money-making bubble for Wall Street that remains Main Street’s intractable mess. Those members of the middle class unfortunate enough to do as an industry of wise men counseled them and invest in the stock market and real estate have seen the fruits of a lifetime’s worth of labor evaporate in multiple busts and crashes that the wise men always escape from economically intact. [...]

It is not in the national interest to force the impoverished to become wage slaves to pay off insurmountable debts owned to payday lenders and hugely profitable bankers. [...]

Every other rich nation on earth heavily subsidizes higher education. We force mere kids to mortgage their futures, then ensure that the debt follows them the rest of their lives, regardless of their living circumstances. [...]

Even millions of homeowners who "did everything right" find themselves underwater, or illegally foreclosed upon by banks running roughshod over the rights of homeowners by robo-signing fraudulent foreclosure documents by the thousands.

Welch does a very good job of firing with all guns on this nonsense.

Which is why phrases like "wage slaves," "inescapable debt," and "force" "force" "force" leave me feeling like a brother from another planet. Adult human beings have agency, the ability (even responsibility!) to run their own cost/benefit analyses and choose accordingly. You could go to a state school (or community college) instead of an over-inflated prestige mill. You could pay for a 10-year-old car in cash, instead of a new one on installments. You could try to make it in Minneapolis before living the dream in Williamsburg. You could stare into the face of a no-money-down, adjustable rate 30-year mortgage at the tail end of a housing-price run-up and conclude "Maybe that one’s not for me." You could even choose to turn down a bad if high-paying job when you’re living below the poverty line. If we indeed live in a "candid world," let us state bluntly that offloading 100% of the blame for your own mountain of debt on a group of Greedy McBanksters who "forced" you to "play by the rules" is more than a little pathetic.

Of course, he’s entirely correct as far as he goes.  And, to his credit, he touches on the real problem. The “mountain of debt” chosen by those who have taken on such enormous debt in exchange for what many times turns out to be a useless degree costs so much because government subsidizes it through its loans.

While the choices Welch points to are an entirely reasonable response to the “woe is me, I made bad choices and want you to bail me out” crowd, that crowd still doesn’t understand that without the government, not the “greedy bankers”, higher education would be much more reasonable than it is.  Right now, colleges and universities don’t have to compete for a student’s dollars.   They simply state the price and you either pay or you don’t go.    Imagine having to compete to get those hard earned or even borrowed dollars.

So the emphasis on banks and the greedy is misplaced in the case of college loans.   If anyone is the greedy one’s it is schools.  And they’re just naturally taking advantage of the results of the government distorting the market.

And that’s not the only protest that’s misplaced.  Michael Bloomberg got in hot water yesterday for saying that the housing crisis was the fault of government.  In fact it was.

Did bankers have something to do with it?  Well yes, but it wasn’t their program and its enforcement that inspired the problem.  Bloomberg points to the real problem:

"I hear your complaints," Bloomberg said. "Some of them are totally unfounded. It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I’m not saying I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that.

"But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it’s one target, it’s easy to blame them and congress certainly isn’t going to blame themselves. At the same time, Congress is trying to pressure banks to loosen their lending standards to make more loans. This is exactly the same speech they criticized them for."

Investors Business Daily goes into some detail about all of that, pointing out that it was indeed government enforcing government policy that led to the housing bubble.  But understanding that requires a little research:

Rewind to 1994. That year, the federal government declared war on an enemy — the racist lender — who officials claimed was to blame for differences in homeownership rate, and launched what would prove the costliest social crusade in U.S. history.

At President Clinton’s direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.

The threat was codified in a 20-page "Policy Statement on Discrimination in Lending" and entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending. Clinton set up the little-known body to coordinate an unprecedented crackdown on alleged bank redlining.

The edict — completely overlooked by the Financial Crisis Inquiry Commission and the mainstream media — was signed by then-HUD Secretary Henry Cisneros, Attorney General Janet Reno, Comptroller of the Currency Eugene Ludwig and Federal Reserve Chairman Alan Greenspan, along with the heads of six other financial regulatory agencies.

"The agencies will not tolerate lending discrimination in any form," the document warned financial institutions.

Ludwig at the time stated the ruling would be used by the agencies as a fair-lending enforcement "tool," and would apply to "all lenders" — including banks and thrifts, credit unions, mortgage brokers and finance companies.

Again you have the government intruding in the market in the name of social justice and being threatened by that government to modify their practices and make bad loans.  And that’s just what they did.  The IBD chart in the article cited tells the story.  Government policy required bad loan practices be used to comply with the law.

The point, of course, is that government has most of the blame for creating the two problems that Salon.com is going on about.   And, one can only assume, it is ignorance of market dynamics or more broad ignorance of economics in general that has them using this nonsensical argument that ignores the real core of the problem.  You have to do that if your intent is to use government as the instrument of “social justice”, even when it is government coming to the “rescue” of a problem government created.

But then, that shouldn’t really come as a surprise.  What has become evident to me, in general as I watch most of the left, is that Econ 101 was never a subject that was required for a journalism degree or most other liberal arts degrees that are so favored on that side of the spectrum.  And it is ignorance (or blatant disingenuousness, take your pick) that drives such clueless arguments as that which Salon (and OWS) is pushing.  However, you have to do that if your intent is to use government as the instrument of “social justice”, even when it is government coming to the “rescue” of a problem government created.

~McQ

Twitter: @McQandO