I’ve long thought that American politics and the fact that we have an activist/interventionist government when it comes to economic policy leads to a race to see who can pander the most to voters, or at least a sub-class of voters. John McCain’s new “plan” to bail out the greedy and stupid when it comes to mortgages is another data point supporting this theory.
NEW YORK — Amid widespread concerns about the nation’s mortgage crisis, John McCain outlined Thursday a proposal to help “well-meaning, deserving homeowners who are facing foreclosure” and called for a Justice Department investigation into possible “criminal wrongdoing” by unscrupulous lenders.
The proposals marked a shift in tone from McCain’s admonition two weeks ago against adopting a mortgage plan that would be “a multibillion-dollar bailout for big banks and speculators.” That set the Arizona senator apart from his Democratic rivals in the presidential contest, Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois, who have both said there is a need for government intervention to fight the nation’s wave of home mortgage foreclosures and overall economic slowdown.
I’m sorry, but this just completely turns me off to a candidate that I already see as having a nice authoritarian streak to him. Lets translate the phrase “well-meaning, deserving homeowners who are facing foreclosure”. To me I see that as a bailout for people who bought a house that was too expensive for them, or couldn’t resist the temptation of using their homes like ATM machines to tap into the equity (that is now gone, or substantially smaller) of their homes to promote a lifestyle they couldn’t actually afford. In short, Republicans, their presumptive nominee at least, doesn’t give a crap about personal responsibility and making wise financial choices. From there it is a few short steps to, “Well clearly we can’t let these people manage their own money since they make a mess of it anyways.”
The plan would retire old loans that homeowners no longer can pay and replace them with less expensive, 30-year, fixed-rate mortgages that are federally guaranteed.
Some political commentators look at things like that and wonder, “Do these candidates understand economics?” I’m more cynical, I’m sure the candidates understand economics, or at least some of their advisers do and are aware of the problem of moral hazard. However, the benefits of pandering to voters has far greater rewards for the candidates. Of course, this also exposes the fatal flaw to the view of “government would work great if we could just get the right person in there”. The wining candidate can never be the “right person” because to win the candidate must pander and that means policies that are, generally, not good policies. They end up promoting irresponsible behavior such as lowered savings rates, buying a house that is too expensive, and so forth.
About the best thing that can be said about McCain’s plan is that it isn’t as expensive as the Obama or Clinton plans.
