Outside the Beltway

Robert Higgs On Fannie Mae/Freddie Mac

Steve Verdon · Wednesday, September 17, 2008 · 3 comments

Call it democracy in action or utterly corrupt governance; they are the same thing.

Quite. Read the entire article here.

FILED UNDER: Democracy, Economics and Business, US Politics, Fannie Mae, Freddie Mac

About Steve Verdon

Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

Bithead says:

Thursday, 18 September 2008 at 09:08

I’m not sure democracy had anything to do with it. Was here a vote on Fannie Mae’s creation I missed?
Steve Verdon says:

Thursday, 18 September 2008 at 18:14

Jesus Bithead, are you really this naive? Seriously, read the freaking article itself. Here is a bit more context for you.

In the future, we will see a similar breakdown of the U.S. government’s Social Security system, with its ill-fated pension system and its even more inauspicious Medicare system of financing health care for the elderly. These government schemes are fighting a losing battle against demographic realities, the laws of economics, and the rules of arithmetic. The question is not whether they will fail, but when—and then how the government that can no longer sustain them in their previous Ponzi-scheme form will alter them to salvage what little can be salvaged with minimal damage to the government itself.

Our political economy is rife with such catastrophes in waiting, yet the public always seems startled, and outraged, when the day of reckoning can no longer be deferred, and another apartment collapses in the state’s Hotel of Impossible Promises, loading onto the taxpayers more visibly the burden of sheltering the previous occupants.

Each of these time bombs has at least one element in common: it promises current benefits, often seemingly without cost; but if it must acknowledge a substantial cost, it places that burden somewhere in the distant future, where it will be borne by somebody else. From the standpoint of society in general, every such scheme is a species of eating the seed corn. It satisfies the public’s appetite to consume something for nothing right now, with no thought for the morrow. It represents the height of irresponsibility by permitting people to live higher today than they can truly afford, financing this profligacy by borrowing recklessly and by taxing politically weak and ill-organized people in order to shower benefits on politically strong and well-organized special interests.
Bithead says:

Thursday, 18 September 2008 at 21:08

Jesus Bithead, are you really this naive?

I’m drawing a finer line here, Steve, and I’m not surprised you missed it, no fault to you. But think, now;

Is it naive to note that none of this stuff was ever put to a direct vote? All of it… Every damned penny, Steve, was ‘given’ us without our direct say so. And certainly, Fannie Mae in particular was an imposition from the White House.

What I’m suggesting, here… is that ‘the people’ were never really given the choice in the matter. By definition, that hardly qualifies as democracy, per se’.

Oh, granted that arguably, some candidates over the years have partially campaigned on such governmental largess. But in each case, they present not an individual choice, but a package deal, a take it all or forget it situation.

I look at Obama, as an example, proposing huge tax hikes, and I wonder, if such tax hikes were given a straight up or down vote, minus the personality and all the other issues, would they pass? I doubt it.

And by the way, I think I”ve made perfectly clear that I agree with the ‘utterly corrupt governance’ point, having made that specific argument on the matter of F&F for some days, now.