During his lackluster speech at the Democratic National
Convention, Barack Obama mocked Republicans for prescribing tax
cuts as the solution to every problem. Interestingly, Obama and the
Democrats have had their own stock response line to every problem
-- it's George W. Bush's fault.
Blaming the current economic mess on tax cuts, as Obama and his warm up act, Bill Clinton did, is a bit bizarre, but the Democrats don't have a whole lot to work with. Tax cuts had nothing to do with the financial panic of 2008 or the real estate bubble that preceded it. At no time in American history can a tax cut be shown to have caused a recession. Perhaps there is some new theory being pushed by left wing economists, always looking for reasons to justify government taking away more economic freedom from individuals, that allowing people to keep more of their money results in an uncontrollable urge to borrow irresponsibly.
There was a lot of blame to go around -- in both the public and private sector -- for the real estate bubble and resulting financial panic. But "deregulation" was not a cause and Democrats have never actually forwarded a coherent argument making this case. The real culprits on the public policy side were government mandates put on Fannie Mae and Freddie Mac supported by President Bush, but pushed by Democrats. From 2005 to 2007, driven by a mandate by HUD that 50% of Fannie and Freddie's loans were to be "affordable," Fannie and Freddie purchased over $1 trillion of lower quality subprime and Alt-A loans, which in turn stoked the demand for, and hence the profitability of, those types of loans. This is a big reason why nearly 40% of U.S. home mortgages were lower quality subprime or Alt-A loans when the housing bubble burst. It wasn't deregulation that increased the demand for lower quality loans (just the opposite, actually) and deregulation didn't cause a lot of people who should have better understood the risks from buying, or insuring, pools of low quality loans.
Read more: http://spectator.org/archives/2012/09/25/no-more-excuses
Blaming the current economic mess on tax cuts, as Obama and his warm up act, Bill Clinton did, is a bit bizarre, but the Democrats don't have a whole lot to work with. Tax cuts had nothing to do with the financial panic of 2008 or the real estate bubble that preceded it. At no time in American history can a tax cut be shown to have caused a recession. Perhaps there is some new theory being pushed by left wing economists, always looking for reasons to justify government taking away more economic freedom from individuals, that allowing people to keep more of their money results in an uncontrollable urge to borrow irresponsibly.
There was a lot of blame to go around -- in both the public and private sector -- for the real estate bubble and resulting financial panic. But "deregulation" was not a cause and Democrats have never actually forwarded a coherent argument making this case. The real culprits on the public policy side were government mandates put on Fannie Mae and Freddie Mac supported by President Bush, but pushed by Democrats. From 2005 to 2007, driven by a mandate by HUD that 50% of Fannie and Freddie's loans were to be "affordable," Fannie and Freddie purchased over $1 trillion of lower quality subprime and Alt-A loans, which in turn stoked the demand for, and hence the profitability of, those types of loans. This is a big reason why nearly 40% of U.S. home mortgages were lower quality subprime or Alt-A loans when the housing bubble burst. It wasn't deregulation that increased the demand for lower quality loans (just the opposite, actually) and deregulation didn't cause a lot of people who should have better understood the risks from buying, or insuring, pools of low quality loans.
Read more: http://spectator.org/archives/2012/09/25/no-more-excuses
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