Listening to the radio on the way home from work today, I heard about a new congressional plan to help stem the tide of foreclosures (a “hemorrhaging,” as I believe Senator Christopher Dodd said). The plan was roughly to transfer some variable-rate mortgages to fixed-rate, government-backed mortgages. I am no expert on the particulars of the bill, obviously, and so I will leave that to others.
However, I will address the underlying philosophy behind the bill. Some critics of the bill admitted the reach and effect of this bill will be limited. Senator Dodd countered with the now widely accepted adage that “It’s better to do something than nothing” when it comes to government economic intervention. This is terribly flawed logic. Unfortunately, it is largely swallowed by most establishment political pundits on the left and the right.
Suppose the problem is as grave as most say it is (the number of foreclosures certainly appears quite serious). Consider the huge (and growing) federal budget, not to mention the federal deficit. Consider the huge number of government economic interventions, regulations, etc., and the frank admission that the numerous regulations are not fixing our economic maladies (hence the call for more). Moreover, consider the huge ignorance of the presence of these multitudinous interventions, not to mention the absolute lack of knowledge as to their overall, long-term effects, both economically and with respect to individual freedom.
With all of that in mind, it does not therefore follow that it is appropriate and good to take more taxpayer money and infringe more on individual economic liberty in a somewhat arbitrary attempt to remedy a fraction of an economic problem.
Before any effort is made to expand the reach of government, effort should be made to first understand the effects, long-term and short-term, to all affected groups, of government economic interventions. Once that comprehensive understanding is gained, then, and only then, can any argument be made in favor of expanding government reach and power.
Of course, I am of the strong opinion that once a comprehensive investigation is concluded, it will be obvious that the costs to individual liberty and economic progress far outweigh any actual benefits, thus exposing the futility and destructive nature of government interventions.
We will understand that serious recessions like that in 1921 were short-lived precisely because of a lack of government economic intervention. We will come to understand that one of the primary reasons for the prolonged economic effects of the Great Depression was intense, unprecedented federal economic government intervention. We will come to understand that taxation and regulation are inherently destructive to economic growth and progress. We will come to understand that such interventions most hurt the destitute and impoverished among us, and most benefit the wealthy and connected. We will come to understand the unending nature of government growth and its infringement on liberty. We will come to understand the arbitrary nature of vast amounts of legislation and regulation. We will come to understand that the business cycle of boom and bust is directly linked to government-sanctioned central banking policies.
At the very least, before we exercise any knee-jerk reaction that “The government has to do something” just because there is some economic malady, we must understand both what the government has done and the effect of those actions. If we intentionally ignore this path, then we are doomed to repeat the very mistakes that plague us as a nation.