Paul Krugman‘s latest idea is so obviously bad, ill-conceived, and damaging that I was tempted to avoid wasting time on it. However, his most recent inane economic proposal merits highlighting simply to put to rest the oft-heard idea that these people simply haven't had enough time to effect positive economic change.
Specifically, Krugman wrote that debt counselors need the ability to modify mortgage loan documents on already outstanding home loans. To quote his recent article, Nobel Paul supported
... giving mortgage counselors and other public entities the power to modify troubled loans directly, with their judgment standing unless appealed by the mortgage servicer. This would do a lot to clarify matters and help extract us from the morass.
No, Paul, it would not.
Loan terms like principal amount, interest rate, payment dates, default interest, collateral, and foreclosure provisions have evolved to produce a vibrant home loan market in which banks willingly participate to risk capital for relatively low interest rates. Granting a third party the right to change those terms after a loan has been underwritten and priced will chill the market for home loans, producing a mortgage loan scarcity and increasing interest rates as banks avoid risking capital in such an unpredictable venture. Those banks would simply redirect capital to loan markets where rule of contract law is still observed, maybe to car loans, business loans, or credit cards. This redirection is called freedom. Freedom obviously stands in the way of liberalism.
Nor should anyone be soothed by the laureate's "unless appealed" language. Even if the proposal allowed a lender veto of the counselor's modification, this process would establish the data collection and control mechanism by which class-envious technocrats could wage a media war on non-compliant banks. For example, the teleprompter would very likely say, "[Greedy] Bank refuses to forgive mere 5% of principal and defer some interest on millions of low-income loans, causing starvation for minority widows and orphans" (see BP or Target). Krugman's proposal clearly and intentionally exposes lenders to having loan terms changed by third parties (and "mortgage counselor" has such an ACORN ring). It is noteworthy that the Center for American Progress, the group that thinks for President Obama, originated this terrible idea and now has obviously also commandeered Krugman's once-functioning brain. But the CAP/Krugman proposal is only the latest in the list of dumb ideas that the liberal echelon has sought to implement. The already enacted list (that apparently only Joe Biden can appreciate) is long and includes:
- $814 billion of one-time tax rebates and social programs, wasteful "weatherization," and unproven battery investments
- A cash for clunkers program that moved some car sales around
- A home buyer's tax credit of debatable value that served up a "big bowl of nothing"
- 99 weeks of unemployment benefits, incentivizing sloth
- New taxes on small businesses, businesses which represent half of reported income and a similar amount of employed workers
- Elimination of the oil and gas depletion allowance
- $50 billion for new roads, railways, and runways, funded by new taxes, despite that we are now told by the president himself that "shovel ready" jobs don't exist
- ObamaCare taxes, except on UAW health plans
- A payroll tax holiday, offset by ObamaCare provisions that make it costly for businesses to hire
- ObamaCare 's eightfold increase in the number of form 1099s required of businesses
- An already unpopular $30-billion loan fund for firms with five hundred employees or fewer
Liberals clearly have a simplicity allergy, not to mention a fondness for the same old bad ideas in bulk. And yes, the definition of insanity remains doing the same thing over and over again and expecting different results.
The one thing Obama, the Democrat Congress, and their hapless cheerleaders don't need is more time. It has only been two years, but the bad ideas are overwhelming, ample, and costly. Pat Caddell nailed it: "These are naive idiots who've come out of academia and have never done anything real in their lives, and they are actually in power." Winston Churchill famously observed that Americans will always do the right thing, but only after they have tried everything else. The Obama Democrats have crammed just about "everything else" into a two-year period, providing a real public service by giving the voter high visibility into what doesn't work, that being liberal economic policies. No one who is paying the slightest bit of attention can conclude otherwise. Time's up.