What Really Caused Our Current Economic Problems
For quite some time a major argument of the Democrats has been to blame Bush for our current situation. Now this is being expanded to claim that to elect Romney and Ryan would be a return to same policies that got us into this problem in the first place. While a common line from the left, as I detailed in my book Preserving Democracy, this ignores what actually happened.
In short (and see my book for the details) the financial crisis in 2008 was brought about by 4 factors. 1) The housing bubble which was caused by government housing policy going back to the late 70s and that punished banks that did not loosen their lending practices to make the riskier loans demanded by the government. 2) New financial instruments developed to satisfy the government’s push for looser home loan practices. Leading the way in this area were Fannie Mae and Freddy Mac. These instruments were then put into the market with the vague backing of the federal government, and once accepted became the norm and were soon used by others. 3) These first two caused the housing bubble and as the bubble grew it produced the typical loose standards and excesses common to all finical bubbles. All three things came to a head in 2007 as the bubble began to burst.
While you would never know it from the media, it is just a fact that Bush and the Republicans repeatedly tried to fix these growing problems, but they were blocked by Democrats, who instead attacked the the regulators trying to point out the problems and accused Republicans of trying to deny housing to the poor. The last major effort to avoid this crisis was in 2005.
Once the Democrats won control of the Congress in 2006, any hope of averting growing problem was gone. So while the claims that this was all Bush’s fault may play well with President Obama’s supporters, they don’t quite line up with the facts of what actually happened. Still with all that, as the bubble burst the indications were that the recession that followed would be a mild one, and it very well may have been, except for the last item.
4) Late in 2007 the government accounting board mandated a change in the accounting rules imposing mark to market accounting. It was this change in the rules that took what looked to be a mild recession and turned it into a major fiscal crisis. Again for the details see my book, but this is why TARP and the various stimulus bills did not work, for they did not address the actual problem. By the time the problem was realized and the rule repealed in April 2009, the damage had been done.
Thus it is simply false to claim that Romney and Ryan would be a return to the policies that caused our current problems. While Bush is by no means completely blameless, after all his administration came up with the initial response of bailouts and TARP, he at least tried to address the root causes of the housing bubble, which was behind the recession. Still, I do not believe either party was really behind the Mark to Market rule which caused the worse problems. Frankly this may be one of the reasons its role is frequently overlooked, as there is no political advantage in pointing to Mark to Market, since neither side can really blame the other side for this.
Responding to Cornwall: Ryan
In his evaluation of the Romney-Ryan team Bob Cornwall, made a number of points, but I believe that many of them will be better addressed later on, as I am sure the issues will come up again and probably in a more direct fashion. So here let me address a couple of his underlying assumptions. If I believed what he said was true, in particular that Romney and Ryan would “balance the budget on the backs of the poorest Americans” then I would probably agree with him, but I don’t.
Perhaps the biggest disagreement would be the seeming automatic equating of a government program for the poor with helping the poor. Again we agree on the goals, i.e., reaching out to, and helping those in need. Where we disagree is over whether or not existing government programs actually do that, and probably more importantly, whether or not government programs, particularly the type favored by Obama and the Democrats, are even capable of doing that.
To be clear, this is not the same thing as claiming that Government programs never do any good, or that government has no role at all. The real answer is far more complex, with a myriad of qualifiers. But we cannot just look at the promises made by those in government about what a program is intended to do; we must also look at how effective it is, and compare this to the costs, both direct, and indirect. We must look at both the good a program does and the harm that a program does, and whether or not there is a better way. It must also look and both the short and long term effects in a way that considers the entire individual.
We will be getting into a lot of the details in the coming weeks. But the bottom line for me is that a lot of what government does results in far more harm than good.
I believe this comes to the emphasis on both truth and love. Our compassion must be based in what actually works, and not just in our desire to love.
Responding to Cornwall on Faith and Politics
Concerning Bob Cornwall’s reply to the first question I must say that I find a lot of common ground, particularly when it comes to the problem of balancing involvement in politics and avoiding the dangers inherent in “the lure of power politics.” But, not surprisingly, there was some disagreement. One of the most problematic statements was his claim that “I recognize that I cannot coercively impose my beliefs on others. We live in a pluralistic country, not a Christian one.”
What makes this statement so troubling for me is that virtually every act of government is an act of coercion, the imposition of one person’s, or group’s beliefs and values on others who disagree. After all if there was 100% agreement, there would be no need for government. Government passes laws, which if transgressed, can result in the loss of property (fines), freedom (prison) or even death. To pay for this government likewise coerces money in the form of taxes. This makes government, at its core, an enemy to freedom and liberty.
I believe that some of the problems caused by this coercion can be mitigated by the democratic process. But, is it really an exercise of democracy when a majority imposes burdens on a minority, burdens that the majority does not share?
Now, unlike some of my libertarian friends, I do not see this as a reason to dispense with all government, for I believe that at least some government is needed. But where I suspect that I differ with Mr. Cornwall is over its size, location (local, state, federal), and its efficacy. We will probably get into more detail concerning this later on so let me just say that I believe that as a general rule government should be small and decentralized as much as reasonably possible, and that its mandates should allow for choice and freedom when possible. In addition, I would guess that we have significant disagreements when it comes to the definition of some terms and phrases, such as justice for all, safety net, and what is or is not equitable.
Finally I would point out that when it comes to the “the lure of power politics” one sure way to exacerbate the problem is to either increase the power, or to concentrate it. “Big government liberals” do both, increasing the role and influence of government’s power, while centralizing it at the federal level.
In short, drawing from my reply, because of love, I agree with many of the goals, particularly of tending to needs of “the least amongst us.” However, because of my view of truth, I would differ on the ability of a large federal government to actually accomplish this, and frankly believe that such a government is far more likely to only make matters worse.
Paul Ryan
Given the announcement over the weekend in this weeks debate sponsored by my publisher, Energion we were also asked to address the pick of Paul Ryan.
I think this was a great pick. There are generally two factors in picking a VP: Who will help get the candidate elected, and who will help them govern, these are not the same thing. Given that Ryan is one of the most knowledge people when it comes to the budget, and also one of the most reform-minded, I think this pick shows that Romney is focused on governing in general, and actually addressing some of the long term problems that have been growing larger and more threatening with each passing year.
That said, the choice of VP will ultimately pale in comparison to the importance of the candidates themselves. As such Romney’s choice of Ryan is actually more important than any strengths or weaknesses Ryan brings to the campaign. For me the choice is a good indication that Romney really intends to get spending under control, and the his speeches along these lines may be more than just promises made in the heat of a campaign, they may actually be what he intends to do, and if so that will be a very good thing.
Faith, Politics and the Election
This is the first post in a debate sponsored by my publisher, Energion on the upcoming election. The starting question is:
How does your faith inform your decisions during this election season, including both thinking and actions leading up to the election (involvement, etc) and your vote?
Let me start by stating up front that I do not see my view, in any way, as being “the Christian view.” It is very easy when laying out one’s views, particularly in such a short space, to take the positive affirmations I make as somehow implying criticism of others who have reached somewhat different conclusions. That is neither my belief nor my intent. I fully believe that there are devoted and believing Christians who reach very different conclusions, just as Christians do in so many other areas. That one, or both sides may be wrong is not a reason for criticism, but for dialogue and prayer.
My starting point, at least for this question, is that I believe we should be involved. In short, I take the verses that talk about our relationship to the state to basically mean that we should be good citizens. In a democratic form of government this means that we should take an interest in government and that we should vote.
We are to be the salt of the world, and while I do not believe this is primarily a political command–far from it–neither do I think that this excludes politics. While it is easy to be discouraged and fatalistic, after all, God is in control; what can we do; the same could be said of witnessing. While it is true that there are a lot of unsavory people involved in politics, I would argue that this calls for wisdom and caution, not avoidance.
So if we take involvement as a given, and if not, the rest of this is pretty much meaningless, how then should we be involved? As with everything else in the Christian world, this will vary significantly from person to person. A few will be called to be active, and fewer still to run for office. For most it will simply be a matter of becoming well enough informed so that one can cast a considered vote.
But this raises the question, how will you decide for whom to vote? After all Jesus is not running and no one else will live up to his standards. Everyone will be deficient in one way or another. While true, this is no more relevant to picking someone for City Council or President than it is for picking someone to be your pastor. The bottom line becomes who is the best person, among the candidates, for the job.
Now here I am going to step on some toes, and I apologize in advance, but voting for someone who cannot win is, in my mind, an act of selfishness. To me this is removing oneself from the final decision so that one can feel good about themselves, whether it is a vote for Ross Perot in 1992, or Ralph Nader in 2000. In this election, either President Obama will be elected to a second term, or Mitt Romney will be elected to a first. Voting for any other candidate is the same as not voting. It removes one from the decision making process and leaves it to others to make the decision.
As for what shapes my decision, that is probably best summed up by 1 John 3:16-18.
This is how we have come to know Love: The Messiah gave his life for us. We, too, ought to give our lives for our brothers. 17 Whoever has early possessions and notices a brother in need and yet withholds compassion from him, how can the love of God be present in him? 18 Little Children, we must not express love merely by our words and manner of speech; we must love also in action and in truth. (ISV)
A full exposition of these verses would take more space than I have, so let me just highlight a couple of points. First, we as Christians do have a duty to those in need, as Christ sacrificed for us, we too should sacrifice for others. This is not just a command to give of our excess, of what we can spare or afford. After all could Christ “afford” his life?
Secondly, notice that verse 17 talks about withholding compassion, not about withholding possessions. Our primary duty is not to give, but to love. All that we do must stem from a true love for those in need.
Finally, our love cannot just be an expression of concern, but it must work itself out in our actions and in truth. In fact the concepts of Truth and Love are central to much of John’s message and finding the correct balance between them is extremely difficult, as these two often seem, at least to us, to be in conflict.
Of course, trying to take the concepts of truth and love, which are difficult enough on their own, and apply them to public policy is not an easy process, which is why Christians can and do reach such different conclusions. Applying them to a choice of flawed men running for office is even harder, which will probably become apparent in the following weeks.
This is one of the reasons why, while I may politically differ with other Christians, I am not going to question their commitment to God or their faith merely because they reach different political conclusions than I have. Again such disagreement should call, not for condemnation, but for more dialogue and prayer, as we all seek to live our faith in love and in truth.
