Cures for Our Economic Disease
david white <
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2009-02-02 20:37:35 GMT
http://www.house.gov/htbin/blog_inc?BLOG,tx14_paul,blog,999,All,Item%20not%
20found,ID=090202_2647,TEMPLATE=postingdetail.shtml
Texas Straight Talk
A weekly column
Cures for Our Economic Disease
I have recently had several opportunities on various news programs to discuss
the economy and what is wrong with the so-called economic stimulus package.
I have said over and over what we shouldnt be doing, and now Id like to
explain what we should be doing.
But to improve the situation, you must first have a solid grasp of how we got
here. Government policies and central planning created the housing bubble,
now going bust. About a decade ago the government made expanded
homeownership and affordable housing a public goal. Through Fannie Mae,
Freddie Mac and the secondary mortgage market the government incentivized
creative, low down-payment, more widely available mortgage products, and
discouraged the market-proven lending standards of the past. The Federal
Reserve kept interest rates artificially low, which added more fuel to this
fire. Many related sectors temporarily flourished because of this, and many
people got into homes they otherwise could not have afforded. The increased
demand for housing sent prices soaring until in many markets housing became
even more unaffordable, necessitating even more creative mortgages, and
impossibly leveraging homeowners. Many risky investment vehicles such as
mortgage-backed securities, derivatives, credit default swaps grew out of
this unsustainable situation. As the foreclosures began, the house of cards
started to tumble. Too many people have confused the symptoms and the pain
of the bust with the problematic policies that caused the bubble, which is
really what needs to be treated.
First of all, just as the best cure for a hangover is not to drink so much,
the best cure for a recession is a recession. It is time to sober up and
return to free market sanity, risk and reward, supply and demand, without
political intervention. Politicians are good at catering to the needs of
special interests, but very bad at determining what needs to take place in
the market. Government should stick to punishing fraud and enforcing
contracts. When they use the tax code, bureaucratic departments and their
manipulative rules and regulations to dictate social and economic behavior,
we end up with distortions and malinvestments. Bailing out banks, continuing
failed Fed policies and strapping the taxpayer with toxic debt will worsen
the pain, and punish the innocent.
If Congress really wanted to do something helpful, it would cut taxes.
Ideally, we would repeal the income tax altogether and get the IRS off the
economys back, which would be a huge boon. We should also cut spending.
Cut every unconstitutional department and program, every wasteful
governmental encroachment on the peoples liberty and money, starting with
our massive overseas empire. The cost of our empire is bringing us to our
knees, just as the Soviets empire did to them. Congress should also abolish
the Federal Reserve and take back its responsibilities to ensure sound money,
safe from the manipulations of powerful banking interests.
These things would constitute real change, real economic stimulus. The plans
being bandied about Washington are just more of the same. As long as no one
seriously considers the cure, we are unfortunately destined to prolong the
disease.
Posted by Ron Paul (02-02-2009, 02:27 PM) filed under Monetary Policy
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