Suppose you were talking to an architect about a new building. You had an acre of land in an urban area, and you wanted to put up a set of offices.
The architect sketches out a one-floor plan for you, but it doesn’t contain the number of offices you want. So you suggest that he make the building have additional floors.
Then he looks at you as if there’s something wrong with you, and carefully explains that he can’t go any further in any direction because you don’t have enough land. He seems totally oblivous to the idea that there’s another dimension, and it’s possible to go upwards.
You would think he was a brain-damaged architect, and you would be right.
So how about professional media people who do interviews like this CNN one with Bob Bennett?
This woman interviewer seems totally confused about the political spectrum. It’s clear to me that in her mind, it only runs in one dimension, from left/liberal to conservative.
Further, she seems to equate “conservative” with social conservative, bitter clinger types. Bob Bennett has consistently supported the bitter clinger issues, so she’s dumbfounded about why the Tea Party people don’t like him.
However, her mental model of one-dimensional politics and her de-facto conflation of “conservative” with “social conservative” has a big advantage for her. It enables her to completely avoid talking about the real issues.
Her entire piece is slanted to make a member of the Washington political class look good and his opponents look bad. She conveniently never brings up the issues of government size, exploding debt, or high and increasing taxation.
She glosses over the healthcare debate by mentioning that the fair-minded (in her obvious opinion) Bennett introduced a watered down healthcare bill with a Democrat, and the Tea Partiers don’t forgive him for that. She obviously thinks that’s crazy (as does Bennett), but neither of them are going to go anywhere near examining why the Tea Partiers hate the way the healthcare debate turned out so much, or that they are eager to repeal that bill.
These members of the political class (both the reporter and Bennett) are supposed to be professionals, which ought to imply that they understand the additional dimensions of political philosophy, including the difference between social conservatism and libertarian/conservative. They obviously don’t. The prefer to live in a Flatland version of politics, and pretend that the other dimensions don’t exist.
They blather on about how there’s some kind of strange, out-of-nowhere animus to everyone in Washington, as if this irrational urge just suddenly appeared for no logical reason.
They both seem singularly uninterested in getting to the heart of what the Tea Partiers actually believe. Far easier to just shake their heads more-in-sorrow-than-in-anger at such irrational beings, who clearly just don’t understand what paragons such as Bob Bennett have done for us. The idea that such paragons have pushed us, and the rest of the world, to the edge of an economic meltdown that could easily dwarf the Great Depression is apparently not something that impinges on their consciousness.
Well, d@mmit, they’re professionals in the field of politics! Why don’t they understand more about the dimensions of political theory that exist out there? Why do they have to cling to a one-dimensional mental model that has shown itself inadequate to explaining what’s going on?
We all know the reason, don’t we. The media is merely a part of the political class, and is more interested in defending that class than in understanding what’s going on and reporting on it. They prefer to be ignorant of other options. That makes it easy for their internal rationalizations that everyone opposed to the political class is just whacked. They can believe themselves to be fair-minded and objective, by denying the very existence of a logical, consistent philosophy that opposes what they believe.
That’s why I detest them so much. They are worse than the marchers at an ANSWER rally, who at least are honest about what they believe in. The vast majority of journalists are lying to both themselves and us by pretending to be objective reporters and analysts on what’s happening in the world, while they are actually heavily biased, abysmally ignorant about the subjects they cover, and motivated primarily by a desire to legitimize the political class and de-legitimize everyone who seriously opposes it.
*** Update 5:45 PM CST ***
The AP reports that Bob Bennett did not make it through the state GOP convention. He finished a distant third.
The reporting is a somewhat better than the CNN effort I slammed earlier:
Bennett is the first incumbent to lose his seat in Washington this year, the victim of a conservative movement angered by rising taxes and the growth of government.
Bennett was targeted by tea party activists and other groups for supporting a massive bailout of the financial industry, securing earmarks for his state and for co-sponsoring a bipartisan bill to mandate health insurance coverage.
I’d still like to see some mention of the general driving issues of the Tea Party, particularly out-of-control debt and spending, but at least this doesn’t take the CNN reporter’s line, which was basically “Those darn extremist Tea Partiers… there’s just no pleasing them.” I’m betting that some of the the Monday-morning quarterbacks we’ll see later analyzing the convention loss will join her in that assessment.
*** Update 5:55 PM CST ***
Looks like I spoke too soon; the AP article does have something about spending, taxes, and overall government size:
Bennett could become the first sitting U.S. senator to be voted out office this year amid a growing conservative movement that insists on cutting taxes, federal spending and the reach of government.
So kudos to the AP reporter for doing a much better job than the airhead from CNN.
Or perhaps a more precise questions is, “why does it appear the government would prefer we believe the Times Square bomber acted alone?”
Does it somehow make this all much less threatening? Frankly, if true, it makes it even more threatening to me. Or is it because if they deny connections to other terrorists and insist on the “lone wolf” scenario (see Ft. Hood, see Arkansas, etc) they can deny “global terrorism” and not have to face questions about Islmaic jihad?
No credible evidence has been found so far that the Pakistani-American man accused in the Times Square bombing plot received any serious terrorist training from the Pakistani Taliban or another radical Islamic group, six U.S. officials said Thursday.
“There is nothing that confirms that any groups have been found involved in this for certain,” one U.S. official told McClatchy. “It’s a lot of speculation at this point.”
Faisal Shahzad may have, at the most, had “incidental contact” with a terrorist organization, and he may have been encouraged to act, said one of the officials, who declined to elaborate further.
So he went broke here, let his house go into foreclosure, rounded up the family and headed back to Pakistan where he stayed 5 months, came back loaded with money and decided, on a whim to blow up Times Square. But we’re pretty sure that when this guy was hanging out in an area of Pakistan infested with Taliban and other terrorists, he had, at best “incidental contact” with a terrorist organization.
Now to be fair, the bomb he built says if he did indeed get training, whoever trained him wasn’t so great or he was one hell of a bad student – or both. But why did he come back alone and how did he make all that money it is reported he had?
Investigators of the failed car bombing in Times Square are looking for a money courier they say helped funnel cash from overseas to finance a Pakistani-American’s preparations to blow up the crude gasoline-and-propane bomb in the heart of New York, a law-enforcement official told the Associated Press.
Investigators have the name of the courier who they believe helped Faisal Shahzad pay for the used sport utility vehicle and other materials to rig up a car bomb that would have caused a huge fireball in Times Square if it had gone off, the official told the AP. The official didn’t know how much money may have changed hands.
The official spoke on the condition of anonymity because of the sensitivity of the investigation.
So if he acted alone, is a “lone wolf” and only had “incidental contact” with a terrorist organization, whose name to investigators have and why are they trying to find him?
If you’re getting the feeling you’re not getting the whole picture (and there may be security reasons for that – we may be seeing a little disinformation going on here while they pursue other links. Or maybe not and what you’re seeing is how authorities would prefer to have it all spun) you’re probably right.
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Well, well, well – “green energy” costs strike again. You remember the controversial off-shore wind turbine project that was proposed for an area off the coast of Cape Cod in Massachusetts? Well it finally got approved. And surprise – it’s revised costs has the project in “Big Dig” territory:
The controversial Cape Wind project will cost taxpayers and ratepayers more than $2 billion to build – three times its original estimate.
That colossal cost is the driving force behind the sky-high electric rates it plans to charge Massachusetts customers in coming years.
Cape Wind, which wants to build 130 wind turbines off the coast of Cape Cod, and National Grid announced yesterday that they’ve reached an agreement to start charging customers 20.7 cents per kilowatt hour in 2013 – more than double the current rate of electricity from conventional power plants and land-based wind farms.
Under the 15-year National Grid contract, the price of Cape Wind’s electricity would increase 3.5 percent each year, pushing the kilowatt price to about 34.7 cents by the time the contract ends.
The current price of National Grid’s non-wind electricity is now about 9 cents per kilowatt. That means the cost of fossil-fuel generated electricity would have to increase nearly four-fold just to keep pace with Cape Wind’s prices over the next 15 years.
This little doozy is now on the planning boards – another, in a long line of costly projects backed by government that will cost consumers more than it’s worth and not deliver that much in terms of increased energy – certainly not that much if you look at the price.
“I’m glad it’s your electric bills and not mine,” said Robert McCullough, president of McCullough Research, an Oregon energy consulting firm, referring to Cape Wind’s prices.
He said Massachusetts would have been better off going with less costly land-based wind farms.
“Why are you spending billions (on offshore wind) when you can pay half that with traditional wind?” he asked.
You tell me? And, by the way, how did the costs of building the system suddenly triple? This was only discovered after approval had been granted? Oh – wait a minute:
Three sources familiar with the Cape Wind-National Grid negotiations confirmed yesterday that Cape Wind’s final price tag will be above $2 billion.
Because of available federal tax credits, Cape Wind could reap about $600 million in taxpayer subsidies if the final cost is $2 billion, in addition to its higher power rates.
So the incentives are provided by government? Does this make Cape Wind a “greedy utility?”
Oh, and I love this:
Cape Wind president Jim Gordon yesterday again refused to say how much construction will cost, citing competitive talks he’s now in with construction companies.
Cape Wind and National Grid, which is planning to buy half the energy the wind farm will produce, said their rate deal will add about $1.59 a month, or about 5 cents a day, to the current ratepayer’s bill in 2013.
“The question is whether folks are prepared to pay five cents a day for a better energy future,” said Gordon.
The answer should be “no, they’re not. Either build the project at the original price, bring it on shore if that isn’t possible or forget it.”
The pricing has to be approved by Massachusetts Department of Public Utilities, but I don’t think there’s much of a question as to how that will go:
Ian Bowles, Gov.Deval Patrick’s secretary of energy and environmental affairs, said the National Grid prices are competitive if renewable energy credits are deducted.
Those who aren’t politicians interested in building a green energy legacy this say otherwise:
But energy experts said the proposed National Grid rates, especially with the annual inflation adjustments, add up to a very high price.
“This would seem to me to be a most unwelcome additional energy tax” on customers, said Peter Beutel, an energy analyst at Cameron Hanover in Connecticut.
And that’s precisely what this ends up being – a energy tax to build something that could be build cheaper on shore and which, in reality, won’t add that much energy to the national grid. A rather dubious recommendation for its continuance. I don’t know about you but if I were a citizen of Massachusetts, I’d be raising hell about this and demanding the project be shelved until it can be shown to deliver the promised “clean, green, renewable and cheaper energy” Greenies are always telling everyone these sorts of projects will deliver.
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First from “our friend” Egypt’s Al-Masaa which is the evening edition of the Egyptian government Al-Gumhouriyya. They want to know what all the fuss is about:
“The huge fuss that the U.S. has been making since it announced the exposure of the attempted car bombing in Times Square… is truly outrageous. The U.S. has brought many charges against [the suspected perpetrator], including [involvement in] global terrorism and use of weapons of mass destruction.
“The U.S. seems to have forgotten that it is the world’s number one terrorist. If a couple of propane tanks, some fertilizer, and some fireworks count as WMDs, what do we call the terrible weapons employed by the U.S. in its attacks on the peoples of the world? …Since the Americans occupied the Iraqi city of Falluja in 2004 using phosphorus and depleted uranium bombs, there have been frequent cases of [women who] miscarry [because] their baby is deformed…”
Yeah, so there, we deserve it, by George. And by the way:
“And of course it was some country other [than the U.S.] that used WMDs against the Vietnamese people during the years of [its] occupation [there]. Three million Vietnamese are still suffering from the effects of those weapons, and deformed children are still being born there…”
Of course. As an aside, Arab journalism isn’t noted particularly for having any foundation in truth telling, but it sure can be inflammatory. Suffice it to say, though, this “journalist” is a bit obsessed with deformed babies and children. Unless, of course, they might be walking through Times Square at the wrong time. Then – no biggie.
Saudi Arabia may surprise you just a little. This is from an editorial the Saudi daily Al-Riyadh:
“Even if the investigations have not yet uncovered which [group] Shahzad, who tried to explode a car [bomb] in Times Square, belonged to, this New York incident is one instance of insane delirium. Even if the [police] never get a lead on this attack, its ramifications for the entire Muslim world are deadly. This is because we are incapable of restraining the emotion of the [Western] peoples when they see sights that harm them – even if the U.S. administration headed by [U.S. President Barack] Obama is closer and more open to the Muslim world [than the previous U.S. administration]. Moreover, this attack has become a motive for criticizing Obama for his efforts at rapprochement with the Muslims.
“Another problem is that the ramifications of this affair will ignite enmity towards the Muslims and Islam worldwide…
So Obama is our friend, Western people are reactionaries and stuff like this will “ignite enmity towards Muslims and Islam worldwide.” Well duh. How often do you have to be attacked by people of a particular religion who cite their religion as the reason for the attack (among others) before you begin holding a little enmity toward those who are a part of it?
The editorial then offers a little bit of reality for the terrorists:
“Terrorism will exist as long as it has repositories of human and material supplies, and as long as there are forces, and perhaps even countries and organizations, that support [it]. [These elements should know] that even if [their] adversary is harmed [by terrorists,] he is [still] stronger and has greater capabilities to hunt them down and to start a war [against them]. This happens whenever a superpower [targeted by terrorism] needs to defend its national security.”
And, of course, that will happen as long as terrorists continue to attack it and its interests. Human Nature 101. But nice to see the point acknowledged. Then perhaps the best paragraph in the editorial:
“The Muslim world, including all its governments, institutions, and regimes, must condemn this [Times Square] incident – not out of sycophancy towards the U.S., but because our religion vehemently opposes such actions. Furthermore, if we deal with these events wisely and in accordance with our own interests, in order to protect the reputation of our religion and our collective conduct, this will prove to others that we are a society that hunts down terrorism of any kind whatsoever. It is not enough to reject terror on the grounds that the terrorists harm more Muslims than non-Muslims – because the principle [of opposing terror] is the same, whether [the target is] a foreign country, an Islamic country, or members of other religions.
“In order to persuade the other nations [not to equate] Islam with the actions of the terrorists, we must prove that we are share the responsibility [for fighting terrorism], along with all the countries of the world and their peoples.”
Well said – and a welcome change.
Meanwhile, perhaps the most strange of the three comes from an Iraqi columnist living in the US and writing for www.elaph.com. He explains that most Muslims in the US have no feeling of loyalty to it and actually harbor feelings of hostility toward it instead. He makes the argument that the US is too easy on suspected and potential terrorists and that in order to avoid future attack, the US needs to do a little “infringing” on Muslim human rights:
“America is home to about seven million Muslims. Most of them, even if they are not terrorists, do harbor hostility towards the U.S. and feel no loyalty to it. As an Arab and Muslim, [I tell you] that it is difficult to find a Muslim who loves America; those [who do] constitute a tiny minority among all those millions.
“The rationale and need to defend American security and protect [American] lives make it necessary to make sacrifices and infringe on the [existing] laws and charters of human rights. The Muslims must be subjected to the principle of collective suspicion. Individuals whose presence [in the country] causes concern or who have a potential to cause problems must be monitored, pursued and placed in preventive detention, which is not subject to time restrictions or require [the presentation of] evidence. They must [even] be stripped of their citizenship and deported.
He obviously supports profiling and Joe Lieberman’s “strip them of their citizenship” approach. I know a lot of folks that share his vision of how to treat those like himself.
So there it is – a look at how some Arabs in the press view the Times Square bombing – the good, the bad and the ugly.
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We added jobs last month. In fact, according to Reuters we added more to US nonfarm payrolls than we have in 4 years.
290,000 jobs were added in April (66,000 government and the rest private sector). What this points to is a number that is higher than that which is necessary to keep the unemployment percentage stable (around 140,000 a month) because of the natural turbulence within the jobs market.
On the other hand, with some adjustments, the unemployment rate itself went up .02 percentage points to 9.9% (Reuters mistakenly claims it stayed at 9.7%).
Now this is unquestionably good news. However, given that 8.2 million jobs have been lost in the recession, a few thousand a month increase isn’t going to change the unemployment rate drastically any time soon. Most see that rate coming down very slowly over years. And, as the bad news in Europe continues to grow and markets for American goods there decline, it is entirely possible that it will flatten out again or even spike a bit before it heads back down.
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Greece is a financial basket case. And Greeks are mad as hell about it. I can understand both their anger and their concern. But despite the pundits on the left who say otherwise, their condition can be explained fairly easily:
But the beauty of Greece’s looming default is that it is a totally straightforward story of uncontrolled public spending and the determination of governments to run up impossible debts.
That’s it. That’s all. What has made Greeks so mad is government has lied about it all along.
No really. And not just one, but many of all stripes and persuaions. Cheap accounting tricks, double books, whatever you want to call it, Greek governments have been playing fast and loose with the truth:
Since getting on the euro in 2001, the Greek government has apparently been fudging its budget statistics, a practice countenanced by both conservative and socialist governments. To its credit, the current government kicked the current crisis into high gear when it released a deficit-to-GDP number of 12.7 percent — double the previously announced figure, and by far the highest in Europe.
And the truth will make you go bust – which is precisely where the country is headed without a bailout. Upon learning that their government has been running two sets of books as well as running up exorbitant debt – debt it can’t afford or pay back – and that big changes and cuts were coming under an austerity program, millions of Greeks took to the street:
“All of us are angry, very, very angry,” bellowed Stella Stamou, a civil servant standing on a street corner, screaming herself hoarse, a block away from where the bank had been set alight.
“You write that – angry, angry, angry, angry,” she said, after participating in one of the biggest ever rallies to rock the capital since the return of democracy in 1974. “Angry with our own politicians, angry with the IMF, angry with the EU, angry that we have lost income, angry that we have never been told the truth.”
Well I can understand the anger, but unfortunately Ms. Stamou is part of the problem. Fully one-third of all Greeks work for government. And I’ve never seen government produce anything except more government – which is precisely what has happened. The government sector has grown while the productive sector has been taxed. The problem is there wasn’t enough money – ever – to pay for the lifestyle to which Greek workers had grown accustomed.
“For 30 years the Greek people have been held hostage,” said Periandros Athanassakis, 48, a garbage collector in Piraeus, the port near Athens. “Those who stole the money should pay.”
It’s not clear who the protesters think “should pay” but they know someone should and it isn’t them.
Unfortunately even if they protest from now until doomsday, it is them – those protesting their innocence – who will pay because they are the ones stuck with the bill. All the screaming, shouting, rock-trowing and fire-bombing in the world won’t change that.
What’s to come? Well, reality. And with reality, some pretty tough conditions with which Greece gets a loan:
The new measures include an increase of two percentage points in the value-added sales tax, which is now 19 percent; a further increase in the fuel tax; increases of 20 percent for alcohol taxes and 6 percent for cigarette taxes; a new tax on luxury goods; and a 12 percent cut in supplements to wages for civil servants, Mr. Petalotis said.
They also include a 30 percent reduction in the bonuses given to civil servants as holiday pay, which amount to two additional monthly wages, he said.
Now you read through that description of the measures that have to be taken and tell me who has benefited from government’s shady accounting and profligate spending. No wonder Ms. Stamu and Mr. Athanassakis are in the streets and angry. They should only be paid for 12 months work instead of 14? Their supplements to wages are going to go down 12%? Whose idea is that?
Those that are going to bail them out, of course – and they don’t like it one bit.
Additionally it appears their jobs are on the line as well as government considers divesting itself of some properties:
The government will accelerate privatizations (€ 2.5 bill. budgeted for 2010) and may change its mind regarding majority ownership by strategic (foreign/EU) investors of types of assets / industries that have been protected under the existing social /political model, including utility/infrastructure, transport or special state (monopoly) assets. Examples might include the railway company, water distribution companies, the electricity grid or the power company (PPC), as well as the soccer betting company (OPAP), gambling Casinos and the remaining stake in Hellenic Telecom (OTE), which will probably be sold to Deutsche Telekom. Other interesting candidates for privatization might include airports and seaports and enhanced PPP/PFI models will be considered for infrastructure investments.
In other words, state run industries will be privatized and my guess is this means competitive wages – matched to private industry. Not government wages pegged to, well, nothing.
All of this is just too much for Jeff Kaye at FireDogLake who cries:
So goodbye living wages, goodbye state-run utilities, transport, and telecom.
Yeah, “goodbye”. They’ve worked out real well in government hands so far haven’t they?
Oh, and when is a “living wage” not a “living wage”?
When you can’t freakin’ afford it!
Next? A rousing rendition of “California, here I come”.
UPDATE: It should be kept in mind that Greece is simply the tip of the European insolvency iceberg:
Virtually every country in the EU spends more than it takes in and has made long-term fiscal promises to an aging work force that it can’t keep. A little over a year ago, economist Jagadeesh Gokhale, writing for the National Center for Policy Analysis, produced a pithy – and scary – summation of the fiscal challenges faced by Europe. Don’t read it if you have trouble sleeping.
“The average EU country,” he concluded, “would need to have more than four times (434%) its current annual gross domestic product in the bank today, earning interest at the government’s borrowing rate, in order to fund current policies indefinitely.”
In other words, Europe would have to have the equivalent of roughly $60 trillion in the bank today to fund its very general welfare benefits in the future. Of course, it doesn’t.
Things haven’t changed much since that study was done. So suppose they don’t put aside all that money. What then? By 2035, Gokhale reckons, the EU will need an average tax rate of 57% to pay for its lavish welfare state.
Today, Greece is only the tip of a very large iceberg. Portugal, Spain, Italy and Ireland together owe $3.9 trillion in short- and medium-term debts, an amount larger than their combined GDP, estimated last year at $3.3 trillion.
California would need half a trillion in the bank to cover it’s state pension promises right now and of course we know about the trillions upon trillions necessary to fund the future promises of Social Security and Medicare which aren’t even close to being available. Europe will most likely get to its end much more quickly than we will, but not by much, unless drastic changes in entitlements are made and made soon.
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I sometimes wonder what the thought process some people use, if any, when they make decisions like this:
On any other day at Live Oak High School in Morgan Hill, Daniel Galli and his four friends would not even be noticed for wearing T-shirts with the American flag. But Cinco de Mayo is not any typical day especially on a campus with a large Mexican American student population.
Galli says he and his friends were sitting at a table during brunch break when the vice principal asked two of the boys to remove American flag bandannas that they wearing on their heads and for the others to turn their American flag T-shirts inside out. When they refused, the boys were ordered to go to the principal’s office.
“They said we could wear it on any other day,” Daniel Galli said, “but today is sensitive to Mexican-Americans because it’s supposed to be their holiday so we were not allowed to wear it today.”
The boys said the administrators called their T-shirts “incendiary” that would lead to fights on campus.
I wonder – would Mexican-Americans wearing a Mexican flag to school on the 4th of July be considered “incendiary?” Oh, wait, we’ll never know. The 4th of July is a national holiday and school is out in the United States.
Cinco de Mayo – a “holiday” developed by bar owners as an excuse to sell more Mexican beer. It’s historic significance? It is the date the Mexican army beat the French army at the battle of Puebla in 1862. In Mexico it’s pretty much only celebrated in Puebla. It’s kind of like us celebrating the battle of New Orleans when we thumped the Brits. The only thing that might conceivably be considered “bad taste” would be wearing a French flag – and they lost.
I have no idea if this Vice Principal knows this, but he completely blew this out of proportion regardless. Had he simply ignored it, the day probably would have passed without incident. More infuriating, at least to me, is he (or she) decided the celebration of a bogus foreign “holiday” in the United States took precedence over displaying or showing the flag of the United States – which he considered “incendiary”. I wonder if the school had decided not to fly it on the school’s US flag that day for the same reason?
The good news? The district left the Vice Principle out on that limb all by himself, exactly where he belongs. In their press release they said:
The district does not concur with the Live Oak High School administration’s interpretation of either board or district policy related to these actions.
Good on ya, “district”.
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Longtime QandO readers know how cynical I have become about national media. They’re mostly biased, incompetent hacks and far more interested in pushing an agenda and a narrative than researching stories and actually telling us anything of importance.
Too often, that shows up in what they don’t cover just as much as what they do. I’m told their coverage of the Nashville floods was perfunctory. Even the Brits did a better job than some of the mainstream press in the US. This was a situation, perhaps the first one that affected me, where YouTube was the best bet for coverage.
Really, though, I’m glad we didn’t get much attention from those hacks during the last week. I’m sure a few are disappointed that we didn’t hand them any ready-made stories reinforcing their opinions that we’re just a bunch of rubes who need their enlightened guidance to take care of ourselves. But, hey, you guys have the oil slick to get hysterical over.
So, please, you mainstream hacks should just stay away from us. We’ve got work to do. We certainly don’t need your usual, lazy, formulaic, agenda-driven reporting on our work. It’s pointless – it all comes out looking like this:
**** Update 1:45 PM CST ****
I should also mention that I’m happy that Nashville isn’t so brain-damaged that bottled water is illegal here as it is in one of those Yankee cities. With one of our two water treatment plants out and water supplies disrupted in various places, a lot of of us lived on bottled water the last week. I’m still drinking it because I don’t completely trust the water supply yet.
Does Wall Street have come culpability in the financial meltdown we suffered? Of course they do. But so far, Democrats have chosen to focus only on that and ignore the culpability shared to an even larger degree by government.
Slipping through the news cycle yesterday at about 5pm eastern was this little jewel:
Freddie Mac is asking for $10.6 billion in additional federal aid after posting a big loss in the first three months of the year. It’s another sign that the taxpayer bill for stabilizing the housing market will keep mounting.
The McLean, Va.-based mortgage finance company has been effectively owned by the government after nearly collapsing in September 2008. The new request will bring the total tab for rescuing Freddie Mac to $61.3 billion.
The fact that Freddie Mac and his ailing sister Fanny Mae have been hemorrhaging money since September 2008 with no end it sight didn’t stop them from paying retention bonuses to their officers even while private payments such as that were vilified and demonized.
Another bit of fiction that Democrats in Congress like to use is that both are “quasi-governmental” entities, or, in fact, really private institutions. In fact they’re not at all:
As the CBO notes in a recent background paper, the standards for when to include government-sponsored entities in the budget go back to the 1960s, when a Presidential commission laid out a set of questions.
To wit: “Who owns the agency?” (In the case of Fan and Fred, taxpayers.) “Who supplies its capital?” (Taxpayers.) “Who selects its managers?” (The federal government.) And finally, “Do the Congress and the President have control over the agency’s program and budget, or are the agency’s policies the responsibility of the Congress or the President only in some broad ultimate sense?” (The feds have control in every sense.)
All that happened in September of 2008 is Hank Paulson put them in conservatorship. In fact, Freddie and Fannie alone will account for up to $391 billion in bailouts over 10 years according to the CBO. So why are the Democrats pointedly ignoring these two institutions? Reread the CBO background paper, especially the part about who selects the managers and who has control over the agency’s program and budget, not to mention control over it’s policies.
Ezra Klein tries to wave it all away as he delicately attempts to explain how Freddie and Fanny are really beneficial to society as a whole and not financial black holes. But now matter who hard he tries, he can’t quite avoid the truth:
The mortgage giants, slightly confusingly, do not sell mortgages. They buy them from the banks that sell them. About 90 percent of them, to be precise. They do that to make mortgages — and thus home ownership — cheaper. That’s fine. If the country wants to encourage home ownership as a policy, subsidizing banks so they can offer better mortgage terms is a sensible way to do it.
I assume he typed that with a straight face. Uh, no Ezra, that’s not the way to do it. That “policy” (Community Reinvestment Act) which was hardly endorsed by the “country” is precisely what incentivized sub-prime mortgages (you sell ‘em, we’ll buy ‘em no matter how bad they are) and the eventual collapse. So that makes it anything but “sensible”.
Klein then attempts to further the myth of “quasi-governmental” status for the two institutions and, in a rather amusing and round about way, admits they were the cause of the whole thing:
Rather than using taxpayer dollars to subsidize mortgages, they were borrowing money very cheaply because their quasi-governmental status assured the market that there’d be a taxpayer bailout in the case of any sort of collapse. That is to say, their business model relied on markets ignoring the risk of their activities. And then, because they were private companies with shareholders to please, they also got into slicing and dicing mortgage packages to make money like an investment bank rather than a housing policy. In theory this should’ve worried the markets where they borrowed their money, but again, the government backstop saved them. Forget too-big-to-fail. This was not-allowed-to-fail.
Their “business model” relied on markets ignoring the risk of their activities? No. Instead their policy (CRA) directed that Fannie and Freddie ignore the risk an buy these mortgages that were a bad deal. In effect, by direction of a policy that encouraged and incentivized it, mortgage companies complied with the CRA and Freddie and Fannie bought the bad paper.
Klein denies this had anything much at all to do with the collapse of the mortgage market – even with $391 billion in bailouts staring him in the face. The most he’ll admit too is they were “part of the problem.” And that is at least better than the Democrats will do.
But he ends up doubling back on himself without seemingly knowing it:
Of course, you don’t necessarily need to eliminate Fannie and Freddie. You could solve the problem by fully incorporating them into the government and making them a straightforward housing subsidy rather than a stealth housing subsidy hidden within a profit-maximizing company. But it’s not clear that bringing more major institutions under the control of the government is going to be popular, either. So what do you do?
Well, it’s hard to say. Procedurally, Democrats think that the Fannie and Freddie question is a housing market question and should be dealt with in the context of a major housing-policy bill. What that bill will do, however, is anyone’s guess. And that’s pretty much where we are on Fannie and Freddie.
As pointed out, they both are “fully incorporated” into government whether that’s technically true or not. They’re certainly not private, and they’ve never really been “quasi-governmental”. They’ve been organs that execute government policy, no matter how absurd or costly. And recommending the two institutions be handled in the context of a “major housing-policy bill”, further cements the point that they’re part of the government that executes policy as it pertains to the housing industry.
And by the way – the payments to these two institutions are being kept “off the books” – meaning they don’t have to be accounted for in budgeting.
Until and unless these two institutions are addressed within any “comprehensive” financial reform bill, the bill isn’t worth the powder to blow it to hell. And when Sen. Chris Dodd (D-CT) announces, “we’ve ended the ‘too big to fail’ debate. So no longer do I expect any argument to be made that this bill exposes the American taxpayer” feel fully entitled to shout that which fans normally shout at officials at sporting events who get the call wrong.
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