[T]here is not an economist out there right now who says if we pass this bill without fixing the mortgage problem, without fixing the housing problem--none of them agree that what we are going to do is going to have a significant impact. There is not one.Congress has noted in Asian culture this is the year of the golden ox; the herd is feeding at the trough.
My contention is we are way too early with a stimulus bill. We can spend this... But we run the risk of doing exactly what the Japanese did in the 1990s. They passed eight separate stimulus bills, none of which addressed the real underlying disease of the Japanese economy. That is why it is called the "lost decade" in Japan. They now have a debt to GDP ratio of 150 percent of their GDP. We got here--and it is important to remember how we got here, how we got the "pneumonia"--we got the "pneumonia" because we said we were going to socialize the risk on mortgages so people in this country could buy a home who really could not afford a home, and we were going to put that risk on the rest of the American taxpayers.
What I want the American people to know is we caused that. We did that. We created Fannie Mae and Freddie Mac, and then we did not do the regulatory work we should have done. We encouraged them to be irresponsible. We encouraged them to have bonuses, by making more and more and more of the loans and guaranteeing them and packaging them and selling them throughout the world. We did that. The Congress did that. No President did that--not President Clinton, not President Bush, and not President Obama. We did it. So we ought to be about fixing the real problem.
Until we fix this problem, we are going to stay in a recession. We can pass a bill that spends $1.12 trillion, and we are still going to be in a recession because what the economists tell us this year is that home prices are going to decline another 11 to 12 percent, which is going to put millions more Americans and their mortgages in trouble.
Now, what do we know about stimulus packages in the past? Here is what we know. Only two times in our history--only two times in our history--have we ever had a stimulus package that was effective. Two times. John Fitzgerald Kennedy created a stimulus package that was effective, and Ronald Reagan, in the early 1980s, created a stimulus package that was effective. All of the others have been ineffective to fix what was ailing us.
If we do not fix the mortgage problem in this country, and housing, this money will be to no avail other than to shackle our children and our grandchildren for years to come. What does that mean when I say "shackle"? It means stealing their future. Right now the average American has a 30-percent higher standard of living than the average European and the average Japanese. What we are about to do--and we have been doing--is to guarantee that 30-percent advantage in standard of living is going
to go away.
What got us in this trouble was creating a socialized risk [mortgage loans to high risk segment] that abandoned the market principles and created a system of loans to people who could not afford the loans.
One of the questions I think we ought to ask--at least the American taxpayer ought to be asking every Member of Congress--is what guarantee do you have that passing this $1.12 trillion spending bill is going to solve the problem? You know what. There is not a guarantee out there. No Member of Congress can tell them that. We are going to treat the symptoms with this bill. We are going to solve some of the short-term problems. We are going to create dependency from the States. We are going to outline and do things we have no business doing. We are going to expand Federal bureaucracies. We are going to raise the baseline to $300 billion that will never go away. That is what we are going to do with this bill. We are going to emphasize and fund the most inefficient bureaucracies in the world, not on the basis of what is the best thing to do but because we will look good and we will help out somebody who needs our help right now.
Monday, February 09, 2009
Tom Coburn: Voice of Sanity
Senator Tom Coburn, MD, from Oklahoma has a wonderful summary of the sane position on the recession response. You will not read this in the mass media, because it makes too much sense. It is worth quoting at length, and perhaps although I recommend you share this with your local and national media, as well as your friends and neighbors.
Posted by Bob Cosmos at 2/09/2009 12:02:00 AM