My piece published in Saturday’s Daily Camera:
It’s wrong for government to bail out failing businesses, financial institutions, and irresponsible home “owners” who cannot pay back loans. This just rewards people for making poor decisions. This punishes both financially responsible taxpayers and successful businesses that profit by producing what consumers want.
If anything cripples prosperity, it’s rewarding those who squander wealth at the expense of those who create it. The best way to bolster financial markets is to respect the rights of consumers and producers to trade voluntarily according to their own best judgment. But Treasury Secretary Henry Paulson wants to replace such free-market transactions with tax-funded government policies that encourage borrowing. But aren’t such policies the problem in the first place?
As economist Stan Liebowitz summarizes in his “Anatomy of a Train Wreck,” a long history of pro-borrowing policies have contributed to the mortgage mess. Low interest rates, regulations that promote risky lending implicitly backed by Fannie and Freddie, and other policies advanced the politically popular goal of home ownership, or home “borrowership” to be accurate, by those who cannot afford it.
We should not further empower government officials to treat taxpayers like pawns in the world they see as a chessboard. This invites special interests to feed at the government trough at politicians’ benefit and taxpayers’ expense.
Instead, as Harvard economist Jeffrey Miron suggests, legislators should “eliminate those policies that generated the current mess.”
Other references on this issue:
Jeffrey Miron, Ph.D., Don’t blame free markets for the current panic.