Wednesday, October 15, 2008

Opportunity Lost

“Government cripples you, then hands you a crutch and says, ‘See, if it wasn’t for us, you couldn’t walk.’ ” — Harry Browne

In the recent vice-presidential debate, the Republican Sarah Palin was asked by moderator Gwen Ifill who she thought was at fault for the sub-prime meltdown;

“Was it the greedy lenders? Was it the risky homebuyers who shouldn’t have been buying a home in the first place? And what should you be doing about it?”

In answer to this loaded question, Palin looked straight into the camera, and said;

“Darn right it was the predatory lenders, who tried to talk Americans into thinking it was smart to buy a $300,000 house if we could only afford a $100,000 house. There was deception there, and there was greed, and there is corruption on Wall Street. And we need to stop that.

Again, John McCain and I, that commitment we have made, and we’re going to follow through on that, getting rid of that corruption.”

The questioner doesn’t even bring up the roll that government policies may have played in this crisis. That is to be expected, given that Ifill is a committed backer of Obama. She does make reference to the irresponsible borrowers, without which there couldn’t have been any “greedy lenders.” But Palin’s answer is outrageous, coming from a Republican. Indeed, Palin was an aggressive “pit bull” in attempting to out-do her rival in smearing private citizens with such un-defined and libelous accusations as “greed” and “corruption”.

The sub-prime lending crisis is a golden opportunity for advocates of free market capitalism to go to the mat with the statists of the left. Biden and the Democrats are openly declaring that freedom has failed, and that government control (i.e., dictatorship) is the only solution. But this is a classic example of a government-created crisis being blamed on the free market, and then declaring that more of the same poison…government power and control…is the solution. The evidence that this crisis was caused and exacerbated by government is overwhelming.

The common denominator to this whole mess is the government and its policies. This is not to excuse the charlatans and their customers operating in the lending industry. But they are a symptom. Consider just a few of the government’s interventions:

Fannie Mae and Freddie Mac; Federal deposit “insurance”; subsidies and tax preferences; the Community Reinvestment Act that imposes “flexible”, i.e., imprudent, even non-existent underwriting standards on mortgage lenders; taxpayer-backed mortgage guarantees through such agencies as FHA and FHLLB; the “too big to fail” policy, which has led to one bailout after another and that, along with FDIC, has resulted in an atmosphere of reward-without-risk; the government-imposed “mark-to-market” accounting rule, which led many solvent financial institutions to “collapse.” Add to this the massive inflationary money creation by the Federal Reserve, coupled with its below-market short-term interest rate policy (as low as 1%) in the years following 9/11, and you have the effect of pouring gasoline on a raging fire.

The list of government interventions in the American financial industry goes on and on. There is so much ammunition upon which to build a case that this is a failure caused by government intervention, rather than capitalism, that one hardly knows where to begin. Yet, with a statist at the head of the GOP ticket, capitalism is being tried and convicted in this election cycle without even the semblance of a hearing. Just as with political prisoners under dictatorships, capitalism’s lead defense attorneys…McCain and Palin…are tripping over themselves to outdo the Obama-led executioners in burying it.

To be sure, there are some Republicans coming down on the right side of the issue. Senator Jim Bunning said that the bailout plan “smacks of socialism.” And SenatorJim DeMint said that “This plan does nothing to address the misguided government policies that created this mess and it could make matters much worse by socializing an entire sector of the U.S. economy.” And Representative Ron Paul addresses the bankrupt monetary policies dating back decades in this recent clip.

But these protests are drowned out by the almost universal call for more government control. We are witnessing a powerful demonstration of why I consider McCain so dangerous. By failing to vigorously defend capitalism, he is doing more damage than outright Marxists could ever do. The same goes for President Bush, who said just prior to one of his recent public announcements urging patience for his massive statist intervention, “As is well known, I’m a free market guy, but…” If the alleged proponents of free markets are advocating socialism, is it any wonder that Obama is gaining in the polls? If socialism is the answer to the “crisis of capitalism,” then why not go with the real deal rather than a phony?

The Republican Party is dead. The failure to rise to the occasion and launch a dramatic call for a rollback of government as the only real solution to the crisis is the GOP’s final epitaph. The disastrous failure since the “Gingrich revolution” of 1994 to build on the “Reagan Revolution” and advance a principled free market agenda…and instead to preside over an explosive growth of government and its consequences, all under the banner of free markets…has cleared the way for the sacking of America by the barbarian hordes of the Left. The last thing we need now is another phony “free market guy” to further discredit capitalism.

The rebirth of the GOP can only happen now at the grass roots. But that rebirth must be built on a proper foundation…a recognition of free market capitalism as the only moral social system. The housing crisis is rooted in the inverted altruist morality that claims that “The right of every family to a decent home” takes precedence over sound banking principles, the legitimate profits of lenders, justice, and individual rights…and that it is the government’s job to enforce that “right” at the point of a legislative gun and at the expense of any prudent bank or homeowner.

The only proper and effective way to fight back against the rising tide of statism is embodied in "ARC’s response to the financial crisis”. Introducing the reader to its web page, ARC states that its “experts clarify the fundamental issues involved in the current crisis—the controls that led to it, the ideas that led to the controls, the destructiveness of the government response so far. And they provide the antidote: an explanation of the true, benevolent nature of the morality of rational self-interest and the political-economic system of laissez-faire capitalism.”

The McCain-led GOP has blown a blockbuster opportunity to give America “a choice, not an echo” against the Democrats’…and President Bush’s…socialist agenda. The perverse effect of this is that Republicans are getting all of the blame for a fiasco that is the direct result of liberal Democrat policies and ideas dating back to FDR. And since Republicans carry the banner of Capitalism, it is Capitalism that gets the blame. America is thus destined to pay a heavy price regardless of who wins in November.

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