Friday, April 11, 2008

Economics for the Simple Minded

Let's see, we are in the midst of one of the great economic meltdowns in recent history, and what do John McCain and dear irrelevant President Bush think about all this.

Well, as you may recall, a week or so ago, John McCain rolled out to great fanfare, his assessment of the mortgage crisis and how it should be fixed:

"A sustained period of rising home prices made many home lenders complacent, giving them a false sense of security and causing them to lower their lending standards. They stopped asking basic questions of their borrowers like "can you afford this home? Can you put a reasonable amount of money down?" Lenders ended up violating the basic rule of banking: don't lend people money who can't pay it back. Some Americans bought homes they couldn't afford, betting that rising prices would make it easier to refinance later at more affordable rates. There are 80 million family homes in America and those homeowners are now facing the reality that the bubble has burst and prices go down as well as up.

Of those 80 million homeowners, only 55 million have a mortgage at all, and 51 million are doing what is necessary -- working a second job, skipping a vacation, and managing their budgets -- to make their payments on time. That leaves us with a puzzling situation: how could 4 million mortgages cause this much trouble for us all?"

So the problem was simply that overall Americans had been irresponsible in buying homes they could not afford and that we needed to do something about these pesky 4 million mortgages that were in trouble because the people holding them were out on vacation and not working hard enough. As McCain said, "Let’s start with some straight talk: it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers."

Having now decided a week later that his "straight talk" was just idiotic, naive, and more bamboozlement, McCain is running far away from his speech and proposals. Mr. Straight Talk has apparently decided that perhaps Americans who are losing their homes do not like to be told it is because they are not working hard enough and are lazy. Perhaps those who are in danger of losing their homes should follow Mr. Straight Talk and just marry an heiress.

Speaking of straight talk, our increasingly irrelevant President tried to explain yesterday how being the first president ever to cut taxes in a time of war made economic sense. As Salon points out: "Lincoln raised taxes to pay for the Civil War. McKinley raised taxes to finance the Spanish-American War. Wilson raised the top income tax rate to 77 percent to afford WWI. Taxes were raised, multiple times, to help the nation pay for WWII, Korea and Vietnam. Even the first President Bush raised taxes after the first war with Iraq to, you guessed it, keep the deficit from spiraling out of control."

President Bush yesterday defended this insane financing of an unpopular war by trying to place it in historical context. Basically he argued that his idiocy and irresponsibility are not as bad as those that came before him in spending on defense and war. Yet, speaking of straight talk, "today's defense spending is 14% above the height of the Korean War, 33% above the height of the Vietnam War, 25% above the height of the 'Reagan Era' buildup and is 76% above the Cold War average. In fact, since the September 11, 2001 attacks, the annual defense budget -- not including the costs of military operations in Iraq and Afghanistan -- has gone up 34%. Including war costs, defense spending has gone up 86% since 2001."

So John McCain says you are on your own if you are losing your house and doesn't care if we have troops in Iraq for a hundred years, while President Bush keeps passing the cost of this war on to those generations to come.

Seems like a winning formula for the fall election, don't you think?

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