Today Federal Trade Commission Chairman Jon Leibowitz appeared at a White House political event to explain how agency is “fighting for the middle class.” He opened with a dubious history lesson:
Sixty-six years ago, Franklin Delano Roosevelt signed the GI bill into law, and the American middle class was born – born of a government program that put millions of returning World War II veterans through school and into their first homes.
Sixty-six years later, unemployment, foreclosures, and financial scams threaten to shake that middle class apart; sadly a solider returning home from Afghanistan today is more likely to find a notice throwing his family out of their house than he is a program putting them into one.
And though there are many in public service – many of us in this room today – who strive to continue FDR’s commitment to justice for the middle class, too many families feel abandoned by Washington, left to drown in a sea of bad guys and black hats.
At the FTC, we want to reclaim the white hat for the U.S. government.
Our own Thomas DiLorenzo took issue with the myth of the G.I. Bill as enabler of the middle class in a 1997 op-ed:
he public purpose of the G.I. Bill was to smooth the transition from military to civilian life after the war. But ulterior motives were also present. Washington Keynesians wrongly feared the economic consequences of putting this many people in the private sector at once; better to let them flounder around in schools for a few years.
Left-liberals wanted universities to be “democratized” and purged of traditional notions of merit and class. These ideologues saw veterans as a helpful tool (90 percent were eligible to receive funds) in this egalitarian effort. Moreover, colleges and universities across the country wanted government subsidies, just as they do today.
There’s a myth that most veterans would not have attended college without federal government help. In fact, myriad programs existed at all levels of society. Virtually every major church, civic organization, and large corporation raised money to provide them, and most states established loan programs as well. These could have worked without negative effects on schools. But they were preempted by the feds and history’s largest infusion of public dollars to education.
In 1946, the program’s first year, the government dumped $1.3 billion on higher education. This may not seem like much today, but it was then the largest program giving direct payments to individuals, exceeding unemployment benefits, Social Security (by four times), military retirement (by one third), and even agricultural subsidies during the heyday of rural central planning. Two years later, it had exploded in cost by 250 percent.
Curiously, the topic of Leibowitz’s remarks today was not higher education, but mortgages, specifically new FTC mandates regarding so-called mortgage rescue companies. Leibowitz said “[h]undreds of thousands of consumers have lost hundreds of millions” because of scammers who promise to help homeowners modify their loans in exchange for upfront fees.
I don’t doubt that such scams exist. But for Leibowitz to put on his “white hat” and claim the government is here to protect the middle class is really ignoring the forest for the trees. It was the feds who precipitated the mortgage crisis in the first place by encouraging the “middle class” to live beyond their means and take out extravagant mortgages — while simultaneously subsidizing (and regulating) the lenders through Freddie Mac and Fannie Mae, disabling the market’s mechanism for weeding out bad loans. Any “mortgage rescue” scams currently in operation owe their existence to decades of federal policy that over-inflated the housing market. Chairman Leibowitz doesn’t appear to offer any relief for the underlying causes, only a minor symptom.
Leibowitz’s invocation of the G.I. Bill demonstrates his inability to grasp the problem. Just as that federal intervention inflated the higher education market by falsely associating economic wealth with college degrees, the housing boom preached a false message that rising home prices equated easy money. It’s a scam so obvious that you’d think the FTC chairman would have recognized it. Of course, Chairman Leibowitz has spent the bulk of his professional life inside the Washington suburbs — where wealth and the middle class are synonymous with government expansion — so it’s perhaps unreasonable for him to see that which should be obvious.
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He’s a pretty brave and reckless liar, to get up and tell whoppers like this which depend on everyone accepting that America did not have a substantial middle class until 1945. There was an increase in home ownership after WW2 but it’s not like it went up from near zero. Based on the current rates of underwater mortgages, defaults and foreclosures, the period from 1945-present can be seen as a bubble caused by Bretton Woods I and II, and not on anything particularly positive accomplished by federal welfare programs.
One can only hope that the FTC’s recent apparent surge in power and influence is also the last gasp of a bubble that’s about to pop.
The GI Bill and the Marshall Plan caused the US to miss the normal post war recession when the troops came home. The building of the freeway system provided good union construction jobs, enabled the new middle class to get their dream of a job in the city and a house in the suburbs. This created a market for new cars and good union jobs in Detroit . . . the law of unintended consequences gave us urban sprawl and air pollution. During those days the workers got 80% of the net from increased productivity.
The unintended consequence of the Marshall Plan and assistance to Japan was Europe and Japan getting new machine tools on the US taxpayer’s dollars and they began to build better cars than the Republicans who owned the American auto industry wanted to build. In their arrogance our owners thought the patriotic American public (“Sucker born every minute,’ P. T. Barnum) would buy anything American but the worm turned against Detroit.
About that time the effect of the above mentioned policies began to fade but our owners realized that the newly rebuilt Japanese and Korean industry would be happy to make stuff for American companies. The owners learned to keep 80% of the net from increased Japanese production and it has been down hill for the American working people ever since. Of course, Libertarians are to smart to be working class people so all is well in the Libertarian community of movers and shakers.
There’s that 80% again….where’s it come from?
Do you really think only Republicans own big businesses or that Democrats don’t receive mucho bucks from ‘the rich’?
‘God’ only knows how much better off we’d be without all the unnecessary interventions of the GI bill, state highway construction and various other plans of your god the State.
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