We are witnessing a country tear itself apart. The Dow Jones Industrial Average has plummeted 25 percent since inauguration, banks are insolvent, the auto industry is quite literally on life support and mortgages are being defaulted by the millions—all of which have direct impact on us as students. And yet, the only reasons we have as to how we got here can be summed up in tidy sound bites and oversimplified catch phrases like “corporate greed” and “too little regulation.”
Even worse, we bought it. We took our newly appointed savior, President Obama and his army of advisors, at their word. Terrible corporate greed is to blame, regulation will fix it and my stimulus plan will pave the way to road to recovery.
Not so fast.
If you reach back into history to the aftermath of the Great Depression, you’ll find the implementation of some of the most powerful regulating measures in United States history: the rise of the Federal Reserve and the FDIC, the creation of the SEC (Securities and Exchange Commission) and hefty government intervention that began to tax and subsidize various functions of the economy—including real estate—to ensure something as devastating as the Great Depression never occurred again.
While well intentioned, this regulation is directly responsible for the mess we are in. Tax exemptions and deductions for real estate encouraged unnecessary risk taking and loans to low-income buyers that led to rampant real estate speculation. Institutions such as Freddie Mac and Fannie Mae thrived off this artificially created real estate “bubble” of simulated real estate worth— manifested from government regulation.
When land values began to sag, the entire system came down like a house of cards, because a vast majority of real estate (both public and private) is mortgaged in some way. Banks no longer had revenue streams, businesses couldn’t secure capital to operate or expand, Wall Street crumbles and here we are. Right where the government put us.
Naturally, we looked to the government to pull us out of the mess. The “stimulus” plan passed by the Obama administration however, is a sham. It is not a tool of growth or expansion of our economy. It is a package of social programs as opposed to ambitious public works projects and tax cuts attempting to “prop up” the middle class rather than encourage investment. It is income transfer, a holding pattern, rather than a plan for explosive growth and rehabilitation.
It is fundamentally flawed as well. It is spending money in a way private industry could do just as well, or better, if the government made strides to effectively capitalize banks and offer a simple but binding roadmap to recovery. Grover Norquist, the president of Americans for Tax Reform, has a perfect way of describing the Democratic leadership thus far:
“If Barack Obama and Harry Reid and Nancy Pelosi took three buckets of water out of a lake, ran to the other side of the lake, and poured those three buckets into the lake, do you really believe there’s more water in the lake? That’s their spending plan: Take money out of [the] economy, walk around, and hand it to the politically connected—800 billion times.”
President Obama’s budget is even scarier. In his address to congress last month, President Obama identified “$2 trillion in savings over the next decade.” Sadly, half of that $2 trillion is “found” in tax increases—“wasteful and ineffective” spending has been identified as letting investors, entrepreneurs and responsible businesspeople keep their money.
The tax increases he proposes for his new budget are sending shockwaves through the U.S. economy. Capital investors and entrepreneurs now stand idle, awaiting the government swung axe that will end hopes of any kind of expansion or growth starting as soon as 2011. Long-term growth is jeopardized as the president looks for more money in the budget to fulfill unrealistic campaign promises.
We should still be stinging from George Bush’s “passionate” conservative policies sinking us into ever increasing debt. Letting President Barack Obama lead our country down just as damaging “tax and spend” policies while convincing us that the government needs a bigger hand in regulation of the economy would be just as irresponsible. In the words of syndicated columnist Michelle Malkin:
“Enough. In a word, that is the message of disgusted taxpayers fed up with the confiscatory policies of both parties in Washington. George Bush pre-socialized the economy with billion-dollar bailouts of the financial and auto industries. Barack Obama is pouring billions more down those sinkholes. It isn’t just the camel’s back that’s broken. His neck and four legs have all snapped, too.”
