Being just weeks away from electing our next President, we're now in that wonderful time of hyper-politicization. Each candidate tells us of the many wonderful things he or she will do ... promising candy and sunshine for all!
The "credit crisis"? No problem ... either heads are gonna roll, or more Rube Goldberg regulatory authorities will be created ... and the mainstream media parrots these promises with their own personal opinions (what they claim to be analysis).
But can they deliver? In my own, special "virtual interview", we'll ask Walter E. Williams, John M. Olin Distinguished Professor of Economics at George Mason University, to help us sort through the maze of political promises. Professor Williams, in his recent column, answers some of the important questions about political promises, and the ability of politicians to deliver.
theCL: Can the President raise or lower taxes?
Williams: Here's what the U.S. Constitution says: "All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills" ... The fact of the matter is that presidents have no power to raise or lower taxes.
theCL: What about budget surpluses or deficits, is the President responsible for that?
Williams: Presidents cannot be held responsible for budget deficits or surpluses. A president cannot spend a dime that Congress does not first appropriate.
theCL: What about jobs, how does a President create jobs?
Williams: In 1996, I landed a job at Grove City College team teaching a course with one of its faculty members, Professor Dirk Mateer. I would like someone to tell me how President Clinton created that job for me. Did he call the college president and say, "Hire Williams"? Did he give Grove City College, a private college, resources to hire me?
theCL: Alright, you've made your point, but this must mean that it's Congress that creates jobs, right?
Williams: That's true in one sense and false in another. You can see this by asking, "Where does Congress get the money to create the jobs?" They won't get it from the Tooth Fairy or Santa Claus; they must get the money from taxpayers.
The bottom line is that Congress can only shift employment or unemployment but cannot create net new jobs.
theCL: That's certainly logical. If the government is to spend a $1 to boost the economy, in a sense, it's an oxymoron, because Congress would first have to take the $1 out of the economy. I'm sure that the $1 loses purchasing power along the way too, but we'll leave that topic for another time.
What about the current "credit crisis", surely the new President or at least Congress can fix that, am I correct?
Williams: Many politicians and pundits claim that the credit crunch and high mortgage foreclosure rate is an example of market failure and want government to step in ... These financial problems are not market failures but government failure ... The Community Reinvestment Act of 1977 is a federal law that intimidated lenders into offering credit ... to low-risk markets ... The Federal Reserve Bank, keeping interest rates artificially low, gave buyers and builders incentive to buy and build, thereby producing the housing bubble.
The credit crunch and foreclosure problems are failures of government policy. In fact, what we see now is a market correction to foolhardy government policy.
theCL: Thank you Professor Williams for clearing things up for us. The Presidential candidates would be wise to hire you as their advisor ... but then again, the TRUTH would then be told, and the masses wouldn't be able to vote for candy anymore.
As always, the politicians muck up the markets with perverse regulations and disincentives and then blame “unregulated free markets” when a crisis hits.
Why do so many people fall for it?
Although healthcare wasn’t mentioned in this virtual interview, the same rule applies.
Health Insurance and Medical services is the second most regulated activity in the nation and yet gasbag politicians manage to sell at least half the voters the lie that “the free market” is to blame for whatever they dislike about health care.