Re: Iowa Caucuses

The Iowa caucuses results are now old news. New Hampshire's primary is tomorrow. If I'm going to make any insightful comments after the former, and before the latter, it better be today.

Being from the Midwest originally, I perhaps have a different perspective on Iowa than many Easterners.

Regarding Hickabee, I think he's just a flash in the pan who got lucky by tapping into the Iowan evangelical base. That isn't going to be happening twice.

Just last night, on Fox News' panel of the leading five Republican Presidential candidates (Giuliani, Thompson, Huckabee, McCain and Romney), Huckabee scored nearly the worst of the five with Fox's focus group. One of the group's members, when asked what she didn't like about Huckabee, promptly said,

"I am voting for a President, not a minister."

Apparently, though I missed the opening of the debate/panel, Huckabee fumbled the very first question badly. Several focus group respondents thought he 'waffled 3 or four times' on just this first question.

Romney, on the other hand, was the nearly-unanimous choice among the focus group for his responses, his experience, and his leadership-projecting demeanor.

Personally, I was moved by a Wall Street Journal editorial shortly before the Iowa caucuses by an Iowan. He noted that not since Jimmy Carter had Iowa's choice led the nation after the ensuing election.

Thus, I have even stronger feelings that Hickabee's 'win' in Iowa is an aberration.

Thompson, my personal, unelectable favorite, was the nearly-unanimously worst performer on the Fox panel last night. He was characterized by the focus group members as,

"an actor," and

"he has good ideas but communicates poorly."

That's pretty much where I am. If I could wave a wand to get my wish, I'd make him President. But the reality is that he is too thoughtful and slowish for today's media environment. He's likable, experienced in legislative government, but just not dynamic enough in a race that features Hickabee and Romney.

I'd like to believe that Thompson could be someone's running mate, but I'm not sure that would ever happen.

To me, the biggest question for the Republicans is whether Giuliani's 'wait for the South' strategy will work, or whether he'll be hopelessly behind and running short of funds after ceding Iowa and New Hampshire.

I expect either Romney, Giuliani or McCain to eventually be the party's nominee. Hopefully, one of the first two.

As to Iowa's results for the Democrats, I will admit that I could not be more pleased. Obama Bim Baden and John-boy Edwards both beat Hillary.

Confusion to our enemies! Can it get any better than this for a start?

Obama is long-term unelectable. As Kim Strassel wrote in a Journal editorial recently, Obama claims to want 'change,' but change to what?

He claims to want to 'unite,' but his real message, if you listent closely, is old-school American politics,

'Let's get the White House, and then use our control of Congress, too, to ram our 'changes' down everybody's throats!'

As Rudy Giuliani said last night on the Fox News panel, Democrats all want 'change,' and, in fact, in an election without an incumbent, everybody is for 'change.' The question is, change to what?

I don't believe many people will, once the voting booth curtains close, actually vote for Obama. He's just too green and inexperienced. Do you really want this guy at a table across from Putin's successor, the Iranian President, or the Chinese leader? I don't. He's a baby with literally no accomplishments to his name.

And, no, he's not like Abe Lincoln, also from Illinois. Lincoln was a combat-tested leader of militia in the Blackhawk Wars, a successful local trial attorney and noted state legislator at a time when states had comparatively more control and influence over its citizen's lives than they arguably do today.

And, despite Peggy Noonan's belief, Obama is playing the race card, hard, by implicitly daring people to not be for him, thus being racist.

Edwards may have tapped into some disaffected Iowans, but his message of doom and corporate greed doesn't have legs. People vote for positive visions, not vengeful agendas. Edwards continues to stump for demonizing and crippling the US private sector, according to John-boy's own personal opinions.

But the fact that each of these two inept Democratic Presidential candidates beat Hillary shows she is now damaged. She can't make people like her.

Her shrill, braying plea the next day in New Hampshire,

'Ask us anything you want to know about us!' conveys her newly-desperate condition. And who's this 'us,' anyway? The legendary Team Billary?

I believe her loss in Iowa will push Hillary further into the sort of panic mode that will reveal her true, innate, unlikable and untrustworthy self. Her armor is cracked, blood has been drawn.

Though I'm not a Democrat, I believe Hillary will, eventually, beat Obama for the nomination. Her funding and organization may well finally edge the babe out, but at the cost of a deeply flawed and weakened candidate who lacks passion and an impassioned voter base.

For what it's worth, the Fox News New Hampshire focus group last night felt that Romney, their favorite, could beat the Democrat they believe will win the nomination, Obama Bim Baden.

I think the important aspect of Iowa, though, is that Hillary was caught looking ahead to see Edwards and Obama both in front of her. Panic must now be truly setting in. How many early contests can Hillary afford to lose?

Wouldn't it be wild if, with all the front-loaded primaries this year, the Democrats, and/or, for that matter, the Republicans, ended up with one of these two dilemmas:

-a genuinely 'open' convention in which no one candidate has yet achieved the necessary votes to win their party's nomination?

or

-a 'winner' with whom the party is actually not happy, by the time they get to the convention?

The early packing of delegate selections could well hand someone unqualified, such as Obama or Hickabee, a victory that their party knows can't be sustained in the general election.

Perhaps an important outcome from the 2008 elections will be another trip to the drawing board to attempt to arrange state primary schedules so that they neither disenfranchise late states, nor unduly hurry the process. Perhaps either a later, one-day primary date for all states, or a carefully crafted grouping of several states together on one day in each of several consecutive months.

Whatever it is, I think this year's primary scramble will leave both parties seeking a better way in 2012.

John Edwards' Scary Plans For Corporate America

On Wednesday, the Wall Street Journal published an editorial from ultra-liberal, class-warrior Democratic Presidential candidate John Edwards.

I found the editorial so shockingly socialist and terrifying that I'm reposting it in its entirety, in italics, below. The bolded sections are those which cause me the most fright, and on which I'll comment among the piece's italicized paragraphs.

My Plan to Stop Corporate Abuses
By JOHN EDWARDS

THE WALL STREET JOURNAL

January 2, 2008


The basic bargain of America -- that everyone should have a chance to work hard and build a better future -- is falling apart. Families are working longer hours, but skyrocketing education and health-care costs, the foreclosure crisis, and stagnant incomes have made it harder for working Americans to provide a better future for their children.

Not everyone in America is struggling. Investors on Wall Street took home a record-setting $38 billion in bonuses this past year, even after losing millions in the credit meltdown.
In 1960, the average CEO made 41 times what the average worker made. But in 2005, the average CEO made over 400 times the average worker's salary. The share of corporate profits going to CEO pay has doubled since the 1990s. Meanwhile, the value of the minimum wage has plummeted 30% since 1979.

Investors are not just 'on Wall Street,' and haven't been for some time. The investors of which Edwards writes are your basic trade, municipal and educational workers' union and corporate pension funds.

Next, as the Economist noted this past year in a special section article, corporations are some 4 times larger, by asset size, than they were in the 1960s. Thus, CEO scope of control is at least, on average, 4 times as large. Much of the rise in CEO incomes has to do with supervision of, and accountability for, larger amounts of assets. But CEO tenure has decreased markedly in the forty-plus years since 1960.

Get your facts straight, John-boy.

Don't get me wrong -- it is a good thing that some Americans are doing well. The son of working-class parents, I have been blessed with extraordinary success in my own life and now want for no material thing. The problem is that the successes of the U.S. economy are no longer shared. Forty percent of all economic growth over the past 20 years has gone to the top 1% of American families.

Edwards evidently is unaware that, in America, the bottom segment of income earners is not stagnant. See this post.

The success of the U.S. economy demands that Americans uphold their country's values: fair reward for work and opportunity for all. To meet these goals, America must renew its basic bargain with the middle class and remove the stranglehold that entrenched corporate interests have on Washington.

I don't recall any political "bargain," between any class and our government. In fact, the salient feature of America is that government generally keeps its hands off of the economic life of its citizens. We like it that way. But to my knowledge, our bureaucratic government has made no 'bargain' with me. I won't even see my Social Security contributions again. How's that for a 'bargain,' John?

The first thing America needs to do is to make affordable, high-quality health care a part of the social compact. Not only are health-care costs putting a huge strain on American families and U.S. competitiveness in the global economy, but a system that leaves 47 million Americans without health care is a moral disgrace. As president, universal health care will be my No. 1 domestic priority.

Second, America also needs to adapt retirement savings to the modern work environment. In the past, it was common for people to stay with the same company their entire career, and so it made sense for pensions to be connected to employers. Today, the average American worker will probably hold jobs with multiple companies.

As president, I will create a new universal retirement account requiring every business to automatically enroll its workers in at least one plan: a traditional pension, a 401(k) or an IRA. Workers will be able to choose to have their contributions deducted automatically from their paychecks, and they will be able to carry these accounts with them from job to job.

Is this guy for real? This 'news' is about a decade old. Does anyone even have defined-benefit pension plans anymore? Please tell me this guy is more current than this.

America can't allow fundamentally healthy companies to go into bankruptcy just to avoid keeping their promises to employees, or to emerge from bankruptcy with millions for executives and nothing for workers. As president, I will ensure that corporations honor the pension promises they've made to workers, by giving workers a claim for lost pensions, just like lost wages.

Third, American companies should be run for the benefit of workers and shareholders as well as insiders. Today, too many companies in America are putting far too much of their earnings into excessive CEO and executive pay, when this money could be going to increased worker salaries, better benefits and investments in plants and equipment.

Really? Is John Edwards about to become the economic central-planning czar for the US economy? I thought that failed in Russia a few decades back. Who better to allocate money among competing interests- labor, capital, materials- than the market, via investor purchases and sales of equity shares? What in God's name does John-boy think he's going to do that is so much better than the market? He's so socialist that he makes FDR look like a Reagan Republican conservative.

As president, I will immediately cap untaxed deferred compensation for executives. I will also give shareholders new rights and responsibilities so that they can call shareholder meetings, remove directors who aren't acting responsibly, and have a say on executive pay.

Sorry, John, but the market already provides the ultimate protection- inexpensive buying and selling of equity shares. As I have written on my companion business blog, The Reasoned Sceptic, any minority shareholder who thinks he can, or should affect corporate policies of this nature should have his head examined. Unless he's a hedge fund or private equity investor looking to actually control the firm, he should just buy better-performing companies, and leave the mediocre to badly off ones alone.

Globalization, technology and demographic change have transformed the U.S. economy. Corporations have adapted, but the basic bargain with America's workers has not. We are living in a 21st-century economy, but are asking American workers to compete with a 20th-century set of tools.

How's that again? I don't see corporations struggling to use "a 20th-century set of tools." They seem to be doing fine competitively, where productivity matters. But when it's just labor costs, who really wants to try to compete in a downward wage spiral with Southeast Asia or Africa?

In order to fulfill its obligation to future generations of Americans, the U.S. must restore balance between America's corporations and America's working families. Only then will it be able to guarantee that anyone who is willing to work hard and do the right thing has the opportunity to share in the nation's prosperity.

I truly did not realize anything was out of balance. In fact, many families now own shares of American private enterprise. As to "America's working families," they have the ultimate mobility- within the US, or abroad. If they don't like the jobs on offer, they are more than welcome to seek elsewhere.

Mr. Edwards, a Democrat and a former senator from North Carolina, is running for U.S. president.


In summary, I found this screed to be incredibly small-minded, naive and dangerous. Perhaps that is why the Journal ran it prior to the Iowa caucuses.

Given Edward's second-place finish there, I thought it worth doing my part to circulate his wacky ideas in their entirety, and original form.

If Edwards ever becomes President, I think the economic horror of low growth and high inflation of the Carter years will look like heaven on earth by comparison.

Revisiting The New Deal, Employment & Private Investment

Monday's Wall Street Journal, the last edition of 2007, featured a wonderful editorial by Amity Shlaes entitled "The New Deal Jobs Myth."

She begins her article with these passages,

"Is a public-sector job really as good as a job created in the private sector? I've been wondering about this a lot lately, in part because I just finished a book about the period of the first great American experiment in public job creation, the New Deal. Critics have written that I failed to appreciate the value of New Deal emergency jobs. But the quality of government-paid jobs is also relevant because of the Democratic presidential candidates' interest in that 1930s experiment.

To hear the candidates talk, a repeat of 1930s-scale government job creation is dangerously overdue. John Edwards has proposed that government take the lead in creating types of jobs -- "green collar" and "stepping stone" -- to serve the two goals of protecting the environment and giving lower earners new skills. Dennis Kucinich is calling for a new green version of FDR's Works Progress Administration.

Academics are backing the politicians up. Bruce Katz of the Brookings Institution recently suggested that intelligent planning is the key to success: "smart policies and investments on infrastructure can foster productive growth in our economy, sustainable growth."
Given this Edifice Complex, the actual quality of New Deal spending, job creation and growth are worth a second look. The record is less impressive than the rhetoric implies."

This alone is rather scary. Schlaes documents several Democratic Presidential candidates alluding to the need for government-sourced infrastructure and/or jobs programs. Thus, her focus on whether or not the New Deal efforts were all they are now remembered as being.

I should note that even in my youth, during the mid-1960s, it was often acknowledged that Roosevelt's various New Deal programs didn't pull America out of the Depression- World War II did that. Back in post-Eisenhower America, Democrats were regarded as the party that took our country to war. Seems silly to write that now, but it was true- Wilson, Roosevelt, Truman, Kennedy, Johnson. But, I digress.

Putting her finger on the key aspect which differentiates most public and private sector employment, Schlaes writes,

"What was wrong with those public works jobs? Many created enduring edifices -- New York's Triborough Bridge, for example, the Mountain Theater of Mount Tamalpais State Park outside San Francisco, the Texas Post Office murals, which were funded by Henry Morgenthau's Treasury. But the public jobs did their work inefficiently. That was because the jobs were scripted to serve political ends, not economic ones."

Short term, politically motivated job creation might provide some temporary, albeit inefficient, ways of increasing demand by paying people for 'work.' But it can't, in more than the short term, help but become wasteful of a nation's resources. It's rather like throwing Ricardo's theory of comparative advantage into reverse, and pouring resources into things for all the wrong economic reasons.

But this waste wasn't limited to simply labor resources. Schlaes also points out,

"One could interject that such arguments do not take into account the context -- the paucity of other jobs, the dust storms, the deflations, the homelessness, the incomprehensible real privation of the period. But in the later part of the 1930s, the same model infrastructure projects did their part to prolong that privation. The private sector, desperate, was incredibly productive -- those who did have a job worked hard, just as our grandparents told us. But the government was taking all the air in the room. Utilities are a prime example. In the 1920s electricity was a miracle industry. There was every expectation that growth in utilities might pull the country through hard times in the future.

And the industry might have indeed done that, if the government had not supplanted it. Roosevelt believed in public utilities, not private companies. He created his own highly ambitious infrastructure project -- the Tennessee Valley Authority. The TVA commandeered the utility business in the South, notwithstanding the vehement protests of the private utilities that served that area.

Washington sucked up much of the available capital by selling bonds and collecting taxes to pay for the TVA or municipal power plants in towns. In order to justify their own claim that public utilities were necessary, New Dealers also undermined private utilities directly, through laws -- not only the TVA law but also the infamous Public Utilities Holding Company Act, which legislated many companies out of existence. Other industries saw their work curtailed or pre-empted by government as well.

At many points during the New Deal, net private investment was not merely low, but negative. Companies were using more capital goods than they were investing in.

All this tells us that while some companies were gunning their engines for the moment -- the industrial production -- they had little hope for productivity gains in the years ahead. Business no longer believed in business. Five years into the New Deal, companies across the country were mounting what Roosevelt himself described as a "capital strike.""

This is the socialism for which FDR is justly criticized. He inherently distrusted private enterprise, and granted sweeping powers to public utilities while crowding out the private, investor-owned ones. People in the current era seem to forget how rampantly socialist FDR was considered to be. To illustrate his father's economic conservatism, and the Midwest's distrust of FDR's socialist programs and interference with the market economy, my father has told me many times,

"I was thirteen before I knew Roosevelt's first name wasn't Goddam."

I've written elsewhere in this blog that it's unrealistic to believe that civil servants will ever, on average, be motivated to solve a major economic problem better or more quickly than private enterprise. Further, who among us knows of many intelligent, well-educated people who head for middle management jobs in federal cabinet agencies? I'd never trust career administrators in the federal government to solve economic or social problems better than the private sector.

Yet FDR's failed programs have now become a mis-remembered beacon to today's liberal leaders. Rather than budget for infrastructure projects and let contracts to industry, or allow industry to determine the types of jobs it needs, Kucinich and Edwards are busy planning to have taxpayers fund their own visions of new training programs and public works agencies. The faith that America has placed in its profit-driven, entrepreneurial private sector since World War II would soon be replaced by the American version of Soviet central planning.

Schlaes concludes by writing,

"The relevant points for today are simple. The famous "multiplier effect" of public spending may exist. U.S. cities do indeed need new highways, new buildings and new roads, maybe even from government. But these needs should be weighed against damage that comes when officials create projects and jobs for political reasons.

An emergency such as a Great Depression, a Sept. 11, a Katrina, can serve as a catalyst for an infrastructure project and for job creation too. But the dire moral quality of that emergency does not guarantee that the project undertaken in its name will be more efficient than your standard earmark.

In other words, candidates may want to be careful as they climb onto FDR's shoulders. The New Deal edifice may look solid, but it doesn't form a good basis for the American future."

One wonders how much more FDR could have done, had he used Congress to appropriate funds for his visions, but left industry to organize and implement them.

Let's hope we don't let today's liberal Democratic Presidential candidates attempt to repeat the worst features of FDR's multi-term reign.

Pre-Iowa Presidential Editorials

This weekend, Kim Strassel and Peggy Noonan both had thoughtful, thought-provoking editorials in the Wall Street Journal.

I absolutely loved Strassel's piece on Obama Bim Baden. She nailed him accurately as wanting to bring 'change,' without any explanation of what his changes will be. But when she went through the litany of proposals and positions he has espoused, it's hardly change. More like continuing liberalism with more muscle and less compromise.

In that regard, while unsaid in Strassel's piece, Obama is actually somewhat like Hillary. Don't compromise- just bulldoze anyone who doesn't agree with you.

Noonan, on the other hand, wrote, in my opinion, a mixed column. For some reason, she holds candles for two Democratic Senate has-beens: Chris Dodd and Joe Biden. The latter is an acknowledged plagiarist. The former merely an old, puffed-up, self-impressed windbag who so typifies why Americans inherently distrust most Senators.

But Noonan's overall list of who's reasonable and who is not was not bad. Hillary's not. Most of the leading candidates, otherwise, are. She thinks Obama is, but I'm with Kim Strassel on this one. Neither of the two frontrunners on the Democratic side is reasonable.

I do agree with Noonan on what she fails to call, but describes, as character. She believes the next President will have at least one major, unexpected crisis with which to deal, and will need to galvanize the nation's support. She doesn't believe enough Americans will trust Hillary to give her that support, and I agree.

The more I look at world events- Putin, Bhutto, Iran- the more I believe that insufficient numbers of voters will, in the end, be capable of pulling the lever for either Hillary or Obama. They'll say they will, but they won't.

Meanwhile, I'd be okay with Romney, Giuliani or Thompson. McCain's periodic self-righteousness and ignorant stubbornness on campaign finance has always alarmed me. I simply distrust his sensibilities on many issues. Not his bravery or intent, but his basic common sense and intellect.

Hickabee......God, let's hope this guy is just a flash in the pan. He's shallow, liberal, aimless and rudderless. And another Arkansan.

Well, we'll know what the Iowans think in less than a week.

Remembering Benizar Bhutto & Her Corrupt Rule

Without a doubt, Benizar Bhutto's murder this week was a tragedy. It has done nothing but inject more uncertainty and instability into the Pakistani government situation.

However, of all the news coverage of the past week regarding Bhutto's murder, only one mentioned her prior regime's corruption. For example, consider this webpage on Benizar Bhutto's husband's corruption.

One editorial which I read in the Wall Street Journal claimed that Bhutto 'had never been tried for corruption,' or words to that effect.

Maybe not. I think she'd been deposed and left the country ahead of the authorities on both occasions.

Even at the time of each of her two turns as prime minister, The Economist reported Benizar's husband's shady dealings. Does anybody besides me wonder what the Bhuttos used for money when not in power? How have they been able to live without obvious careers, jobs, or other means of support for so long?

Perhaps Benizar would have won the next election. Perhaps not. If she had, perhaps this time, there'd be no corruption. More than likely, it would have continued.

Maybe the Pakistanis don't care about the corruption. Perhaps, to them, whichever tribe/group is in power will take its share of spoils.

But the pundit who noted Benizar's prior corruption, and its being the cause of her ouster each time, noted that her party has other qualified candidates to run for prime minister.

It's never a good thing to have political issues settled by violence and murder. But in the aftermath of Benizar Bhutto's death, it seems that nearly everyone has been remembering an angelic, perfect female Muslim leader, rather than the real, decidedly mixed blessing Bhutto was for her country and people.

On Economic Myth #3- US Incomes Are Static

This post is the third in a short series on economic myths prevalent among liberals in the US political scene. The prior two related posts concerning middle class job creation and tax-records-based income inequality, may be found here and here.

Last month, in the November 13th edition of the Wall Street Journal, the paper's lead editorial, entitled "Movin' On Up," provided detailed analysis the mobility of Americans with respect to incomes over time. The piece begins with the passage,

"If you've been listening to Mike Huckabee or John Edwards on the Presidential trail, you may have heard that the U.S. is becoming a nation of rising inequality and shrinking opportunity. We'd refer those campaigns to a new study of income mobility by the Treasury Department that exposes those claims as so much populist hokum."

The Journal article then begins to present data from that Treasury study,

"Much as they always have, Americans on the bottom rungs of the economic ladder continue to climb into the middle and sometimes upper classes in remarkably short periods of time.

The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.

Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years.

The Treasury study found that those tax filers who were in the poorest income quintile in 1996 saw a near doubling of their incomes (90.5%) over the subsequent decade. Those in the highest quintile, on the other hand, saw only modest income gains (10%). The nearby table tells the story, which is that the poorer an individual or household was in 1996 the greater the percentage income gain after 10 years.

At this point, we see that, even if there were as much static income equality as is alleged by liberals, contrary to the information provided in the Journal editorial by Alan Reynolds, the subject of the second linked post, the migration of US income earners up the scale from low to higher levels would make that a benefit, not a drawback. For, if one cannot improve one's income over time, and reach a more disparate level of income from one's prior one, where is the motivation for economic self-betterment?

And, not only does this work for those earning less, but, those earning the highest incomes actually experienced a decline in theirs,

"Only one income group experienced an absolute decline in real income -- the richest 1% in 1996. Those households lost 25.8% of their income. Moreover, more than half (57.4%) of the richest 1% in 1996 had dropped to a lower income group by 2005. Some of these people might have been "rich" merely for one year, or perhaps for several, as they hit their peak earning years or had some capital gains windfall. Others may simply have not been able to keep up with new entrepreneurs and wealth creators."

As the study notes, there is substantial dynamism among Americans with respect to their ability move up or down the ladder of relative incomes. Thus, all of the poorest Americans do not stay poor. Over half of the poorest, by incomes, had moved into a higher quintile of income distribution by the end of the ten-year period. In particular, it states,

"The key point is that the study shows that income mobility in the U.S. works down as well as up -- another sign that opportunity and merit continue to drive American success, not accidents of birth. The "rich" are not the same people over time."

On the subject of inequality of incomes and income mobility, the article notes,

"The study is also valuable because it shows that income mobility remains little changed from what similar studies found in the 1970s and 1980s. Some journalists and academics have cited selective evidence to claim that income mobility has declined in recent years.

The political left and its media echoes are promoting the inequality story as a way to justify a huge tax increase. But inequality is only a problem if it reflects stagnant opportunity and a society stratified by more or less permanent income differences. That kind of society can breed class resentments and unrest. America isn't remotely such a society, thanks in large part to the incentives that exist for risk-taking and wealth creation."

The Journal editorial notes, based upon the recent Treasury study, that not only is static analysis of alleged income inequality a red herring, but mobility of Americans up and down the incomes scale remains similar to what it has been for over twenty years.

The US is not experiencing increased stratification of incomes, nor greater income inequality over time. Rather, our country's economic system remains attractive because of its characteristic of allowing those in the lower ranks of income earners to have a realistic probability of becoming much higher earners over time.

More Idiotic Overreaction to The Mortgage Mess: Jesse Jackson's 'Marshall Plan'

Compounding the months-old Congressional hand-wringing over the subprime mortgage mess is an editorial in the Wall Street Journal on 7 December by Jesse Jackson.

A failed Presidential candidate and liberal-issue gadfly, Jackson weighed in with a piece ominously entitled "A Marshal Plan for Mortgages."

His opening paragraph contains this sentence,

"But for the two million homeowners who face foreclosure over the next year because of the subprime mortgage crisis, their New Year's hopes rest not with themselves, but with policy makers in Washington and the investment community on Wall Street."

Wait. They face foreclosure "because of the subprime mortgage crisis?" I thought we had a mortgage crisis because of the behaviors of these delinquent or defaulting consenting borrowers.

Maybe I missed something. Or, more likely, Jackson simply misunderstands the concept known as 'cause and effect.' Perhaps this was not taught in Jackson's bible college?

Then Jackson gets down to his real message,

"It's time for another U.S. government-sponsored Marshall Plan. But instead of reconstructing Europe after World War II, today's Marshall Plan for mortgages would restore homeowners' and investors' confidence and dreams.

We already have a model for such a plan. It has been used successfully several times since the Great Depression, and has always worked. That model is the Reconstruction Finance Corporation. During the Depression, President Hoover used the independent government agency to provide $2 billion in aid to state and local governments, and for loans to banks, railroads and other businesses. Subsequently, President Roosevelt used it to finance the most creative aspects of his New Deal.

If we can save the S&Ls, we certainly can save homeowners with subprime mortgages. And whatever you call the revived agency, whether its middle name is Finance, Trust or even Mortgage, it is needed to rescue those Americans steered into subprime, adjustable-rate mortgages, often laced with hidden fees they never knew about."

He's not shy, is he? Nor stingy with your tax dollars. Even as he mixes metaphors. The title refers to the Marshal Plan, which reconstructed a ruined Europe after WWII, in order to prevent those still-free countries from falling under communism's hold.

However, in Jackson's text, he actually wants the RFC resurrected. Which is it, Jesse? Can't you get your request straight in even a relatively brief editorial?

I won't even touch the 'most creative aspects' of FDR's New Deal, other than to muse that maybe these were the unconstitutional parts subsequently struck down by an unpacked Supreme Court?

But, to Jackson's points. First, we aren't in the Great Depression. We haven't had anything near the equivalent of the original Black Friday of 1929. And the S&L's weren't saved, so much as forced into taking actions that altered their sector forever. Many went out of business, Jesse, because they lent long and borrowed short.

The moral there, and again, now, is that businesses and consumers must be made to pay the consequences for their economic decisions. That's the American Way. You have the freedom to succeed, or fail, Jesse. We can't just start handing out absolution, willy-nilly. Lessons learned by unwise, imprudent investors, lenders and borrows won't be soon forgotten.

Near the end of his plea for governmental intervention, Jackson writes,

"We must move immediately to adopt this Marshall Plan for mortgages or face the prospect of entire neighborhoods and communities becoming depressed and potentially abandoned. Unless we act, the crisis will continue to snowball. On Jan. 1, the interest rates on hundreds of thousands of home loans are scheduled to balloon, triggering an avalanche of foreclosures. Finding a permanent answer to this crisis should be a priority that unites all Americans, regardless of political party, ethnic background or income level. Financial institutions, politicians and local communities must work together to restructure mortgage loans and stem the rising numbers of foreclosures."

Jackson doesn't cite any facts or data in his closing call to arms. And, knowing he's not an economist, I'm not inclined to simply believe his hyperbole. It reads to me like a Jackson homily/diatribe- use the right phrasing and emphasis, and you can skip the facts.

And, by the way, a recent Journal editorial noted that recent analysis is showing that a surprising number of now-troubled mortgages were, in fact, instances of borrower fraud perpetrated on lenders and investors! Painting the entire situation with a broad brush is sure to have a host of negative consequences- rewarding imprudent adult borrowers, as well as fraudsters.

Better to just skip this idea of Jackson's. But if he thinks it's this serious, I'd welcome seeing Jesse donate most of his net worth to the cause and wear sackcloth instead of his usual expensive suits.