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Source link: http://archive.mises.org/2388/bovard-bush-to-end-scarcity/

Bovard: Bush to End Scarcity

August 22, 2004 by

James Bovard has written a biting editorial in this week’s Barron’s Online Nothing Down: The Bush administration’s wrecking-ball benevolence ($ – paid site). Bovard critiques Bush’s plan to make federally subsidized home loans available to people who do not have the money to make the down payment on a home. The article features a number of astonishing quotes indicating a total unfamiliarity on the part of the Bush administration with the economic concept of cost.

Bovard writes, “Bush is determined to end the bias against people who want to buy a home but don’t have any money.” Indeed, it is the cost of anything that limits anyone of us from purchasing it. What next – abolishing prices altogether? The total abolition of scarcity cannot be far behind.Some additional quotes:

  • A White House Fact Sheet issued June 17, 2002, declared that Bush’s agenda “will help tear down the barriers to homeownership that stand in the way of our nation’s African-American, Hispanic and other minority families. … The single biggest barrier to homeownership is accumulating funds for a down payment.”
  • Federal Housing Commissioner John Weicher said in January 2004 that “the White House doesn’t think those who can afford the monthly payment but have been unable to save for a down payment should be deprived from owning a home,” National Mortgage News reported.
  • While zero-downpayment mortgages have long been considered profoundly unsafe (especially for borrowers with dubious credit history), Weicher confidently asserted: “We do not anticipate any costs to taxpayers.”

{ 14 comments }

Tim Swanson August 22, 2004 at 10:47 pm

I hope a War on Hunger ensues next – I’m absolutely famished.

Koen Swinkels August 23, 2004 at 6:45 am

wow, this isn’t even funny anymore…

Koen Swinkels August 23, 2004 at 6:53 am

I guess things stopped being funny a long time ago…

Weicher confidently asserted: “We do not anticipate any costs to taxpayers.”
note how he doesnt say: ‘there won’t be any costs to taxpayers’, just ‘we do not anticipate…’.
Literally speaking, that is probably true…

Michael August 23, 2004 at 7:06 am

Actually, Tim, a government War on hunger might be just the thing this country needs to reduce the obesity problem I keep hearing about. Something like 40% of all Americans are considered obese, right? A government War on Hunger would fix that pretty quickly.

jeffrey August 23, 2004 at 8:40 am

(because the author sent me full text, here it is)

Barron’s
Editorial Page August 23 2004

Nothing Down
The Bush administration’s wrecking-ball benevolence

By JAMES BOVARD
ONE OF THE PROUDEST ELEMENTS of President Bush’s “compassionate conservative” agenda has been government financial support to home buyers for down payments. Bush is determined to end the bias against people who want to buy a home but don’t have any money. But he is exposing taxpayers to tens of billions of dollars of possible losses, luring thousands of moderate-income families into bankruptcy, and risking the destruction of entire neighborhoods.

Bush began pushing his down-payment plan in 2002. The administration’s rhetoric echoed the grand works of President Lyndon Johnson’s Great Society. A White House Fact Sheet issued June 17, 2002, declared that Bush’s agenda “will help tear down the barriers to homeownership that stand in the way of our nation’s African-American, Hispanic and other minority families. … The single biggest barrier to homeownership is accumulating funds for a down payment.”

If true, the comment shows how much times have changed. The biggest barrier to homeownership for minorities used to be racial prejudice and unequal access to credit. Now, it’s just the same lack of thrift that afflicts people of all races.

Nevertheless, Congress passed Bush’s American Dream Downpayment Act last fall. It authorizes federal handouts to first-time home buyers of up to $10,000 or 6% of the home’s purchase price, whichever is greater, to anyone with income 20% less than their local median income. In San Francisco, where the median income is more than $113,300, a family of four with an income of up to $90,500 is eligible for this freebie.

The president is also urging Congress to permit the Federal Housing Administration to begin making zero down-payment, low-interest loans to low-income Americans. The administration forecast that zero down-payment mortgages could be given to 150,000 home buyers in the first year. Federal Housing Commissioner John Weicher said in January 2004 that “the White House doesn’t think those who can afford the monthly payment but have been unable to save for a down payment should be deprived from owning a home,” National Mortgage News reported. While zero-downpayment mortgages have long been considered profoundly unsafe (especially for borrowers with dubious credit history), Weicher confidently asserted: “We do not anticipate any costs to taxpayers.”

Character Building
So down-payment handouts are now part of building up the American character. Bush proclaimed on June 16, 2003: “Homeownership is more than just a symbol of the American dream; it is an important part of our way of life. Core American values of individuality, thrift, responsibility, and self-reliance are embodied in homeownership.”

Is individuality something that the Feds have any competence to try to mass produce?

Is thrift something which can be fertilized with billions of additional dollars of deficit spending?

Is responsibility something which can be maximized through political grandstanding?

Is self-reliance so wonderful that the government should subsidize it?

The Bush “American Dream” act and the zero down-payment plan are modeled after down-payment assistance programs that have proliferated in recent years. These programs, often engineered by nonprofit groups, routinely involve a home builder giving a “charitable contribution” to the nonprofit, which then provides the home buyer with money for the down payment. The price of the house is sometimes increased by the same amount as the builder’s “gift;” in other words the builder gets a tax deduction on some of his profit. Almost all the mortgages created with down-payment assistance end up being underwritten or guaranteed by either the Federal Housing Administration or by Ginnie Mae (the Government National Mortgage Association).

Free down payments carry catastrophic risks. The default rate on mortgages from the largest downpayment-assistance organization, Nehemiah Corp., is 25 times higher than the nationwide mortgage-delinquency rate, according to department of Housing and Urban Development Inspector General. The default rate on Nehemiah mortgages quadrupled between 1999 and 2002, reaching almost 20%. HUD currently has no idea how many of the loans that the FHA is underwriting are closed with down-payment gifts. It appears that the department does not want to know.

Destructive Creation
President Bush’s policies are pouring fuel on a fire that is already ravaging many neighborhoods in the U.S. While the percentage of Americans who own homes has risen in recent years, the foreclosure rate is rising much faster, tripling since the early 1980s. The percentage of FHA single-family home loans that have defaulted rose 54% between 1999 and 2002, reaching 4.25%. Payments on roughly 12% percent of all FHA mortgages are past due.

Millions of American homeowners are at risk of sustaining collateral damage from this debacle. We should recall the role of a similar program launched in 1968 to provide federally insured mortgages to poor people. The result was a disaster, and not just for the poor people who could not actually afford the mortgages they were given. Since most families in the program had almost no equity in their homes, they had nothing to lose if they ran into financial difficulty. It was often cheaper to abandon the houses than to repair them. Neighbors who were not in the program found themselves surrounded by abandoned homes, and their property values — built over years of individual effort, thrift, responsibility, and self-reliance — vanished.
National Journal said in 1971 that the Federal Housing Administration was “financing the collapse of large residential areas of the center cities.”

The FHA continues wreaking devastation in some neighborhoods and cities across the country. A 2002 study by the National Training and Information Center found that between 1996 and 2000, 21% of FHA borrowers in low-income areas in Baltimore defaulted and 25% of FHA borrowers in low-income areas in the New York City borough of Queens defaulted. The National Housing Institute, a non-profit research group, noted in 2002 that concentrations of FHA defaults in cities have “turned the American dream of homeownership into the neighborhood nightmare. Community organizations around the country have witnessed firsthand the devastating effects of abandoned housing and the ensuing crime, drug trafficking, prostitution, child abuse and disinvestment.”

Homeownership carries far more financial rude surprises (such as the cost of major repairs) than does renting. If people get into a house they cannot financially handle and they go bankrupt, they are worse off than if they had never received down-payment assistance.

Bush administration officials stress how the new policies especially benefit minorities and often imply that the homeownership gap between races is caused by bias. But federal studies prove otherwise. A 1995 Federal Reserve Board study examined more than 200,000 mortgage loans and found that “blacks defaulted about twice as often as white borrowers.” Blacks are almost twice as likely as whites to have bad credit ratings among people of the same income class, according to a 1999 survey by Freddie Mac.

Borrowing Time
These down-payment initiatives are key planks in the Bush re-election campaign. Bush will get the applause and political credit now, while the defaults from the program will not surge until sometime after November 2004.

Transferring the risk of homeownership from buyers to taxpayers does not endow virtue in America. Giving people a handout that leads them to financial ruin is wrecking-ball benevolence.

Rather than boosting the number of people dependent on government for a roof over their heads, the Bush administration should devote its energy to dismantling HUD, the fountainhead of foolish housing policies, and the biggest single blight on urban America.

JAMES BOVARD is the author of the just-published The Bush Betrayal (Palgrave) and Feeling Your Pain: The Explosion and Abuse of Government Power in the Clinton-Gore Years (Palgrave, 2000).

Robert Blumen August 23, 2004 at 9:19 am

Re: the war on Hunger…”The single biggest barrier to people eating out at fancy restaurants every night is their inability to accumulate the funds to pay for the food, wine, and tip”, said a Bush administration spokes person. Bush is determined tio end the bias against people who want to eat out all the time but don’t have the money.

Dennis Sperduto August 23, 2004 at 10:18 am

This Bush administration proposal highlights just how interventionist and statist both major political parties have become. I don’t think I am too far off the mark in asserting that proposals such as this are spoken either by economic illiterates, or politicians in the worst sense of the term. And while we are on the subject of entitlements, in addition to eliminating hunger and enabling everyone to eat out at fancy restaurants, everyone also has a right to a college education, whether or not the individual has saved anything towards this goal.

Steven Kane August 23, 2004 at 11:54 am

From Dennis: “This Bush administration proposal highlights just how interventionist and statist both major political parties have become.”

Both parties have always been inverventionist and statist. The idea that the Republican party once stood for things like reduction of the size of government is a myth.

Adan Lerma August 23, 2004 at 1:01 pm

Enforcing non-scarcity is as inefficient and morally backward as the currently enforced scarcity.

Dennis Sperduto August 23, 2004 at 1:16 pm

Steven,

Good point. I was actually trying to convey two thoughts, which I did not manage to do very well. At least since the Wilson administration, I would argue that for most of the 20th century the Republican party was modestly less interventionist regarding domestic economic policy than the Democratic party. During the second half of the 19th century up until the progressive era, the Democratic party was the relatively free market party. Also, for most of the 20th century the Republican party tended to at least talk-up the benefits of the market economy and free enterprise, although generally acting in an interventionist/statist manner. Apparently the large majority of Republicans, as illustrated by the Bush administration, have even given up their verbal support of free enterprise. I agree with you, and would argue that there is very little, if any, fundamental ideological difference between the vast majority of Republicans and Democrats. Congressman Ron Paul\(R) may be the only real exception.

Chad Bull August 23, 2004 at 2:10 pm

Republocrats
Here is a good article on how there really is no difference between the two major parties. The article is from the New American Magazine(Link).

Republocrats
by Dennis Behreandt

The Republican Party has become a virtual clone of the Democratic Party. One administration may be replaced by another, but there are no major policy shifts.

An examination of Democratic and Republican Party politics in recent decades shows that, no matter how far to the left the Republicans move, the Democrats move even further to the left, enabling both the liberal-left politicians and the major media to continue portraying the Republicans as conservative. Each new bipartisan “compromise” becomes the new “conservative” position justifying future “compromises” that will move the country even further to the left. In fact, over time it has become increasingly difficult to detect any substantive differences between the two major parties.

Political rhetoric and appearances aside, the U.S. government has become more socialistic and more internationalist during periods of both Republican and Democrat administrations. The voters may vote one president out in favor of another, but the basic policies remain intact even when the political leadership changes.

Quigley’s Formula

This is not by happenstance; in fact, it follows a design advocated by Carroll Quigley in his monumental 1966 study Tragedy and Hope. Therein the late Georgetown University professor explained: “The argument that the two parties should represent opposed ideals and policies, one, perhaps, of the Right and the other of the Left, is a foolish idea acceptable only to doctrinaire and academic thinkers. Instead, the two parties should be almost identical, so that the American people can ‘throw the rascals out’ at any election without leading to any profound or extensive shifts in policy.”

In addition to this, Quigley argued, there is one other benefit to having two political parties, each with the same program. Should either party become corrupt or un-enterprising while in office, “Then it should be possible to replace it, every four years if necessary, by the other party, which will be none of these things but will still pursue, with new vigor, approximately the same basic policies.”

What are those “basic policies” that, according to Quigley, are “vital and necessary for America” and “disputable only in details of procedure, priority, or method”? Quigley wrote, “we must remain strong, continue to function as a great world Power in cooperation with other Powers, avoid high-level war, keep the economy moving without significant slump, help other countries do the same, provide the basic social necessities for all our citizens, open up opportunities for social shifts for those willing to work to achieve them, and defend the basic Western outlook of diversity….” Translated: more internationalism and more socialism. Based on the Quigley formula, presidential elections would be little more than debates over “details of procedure, priority, or method,” not major policy differences.

The formula advocated by Quigley in 1966 has been put into practice by the Power Elite, which dominates both major political parties. Quigley was well aware of the existence of this Insider-controlled Establishment, admitting in his book: “There does exist, and has existed for a generation, an international Anglophile network which operates, to some extent, in the way the radical Right believes the Communists act. In fact, this network … has no aversion to cooperating with the Communists, or any other groups, and frequently does so. I know of the operations of this network because I have studied it for twenty years and was permitted for two years, in the early1960′s, to examine its papers and secret records.” One exponent of this network is the Council on Foreign Relations, whose members have dominated both Republican and Democratic administrations since World War II. This network has been so successful in implementing the Quigley formula that Democrat and Republican “rascals” have been thrown out without “any profound or extensive shifts in policy.” Moreover, the Republican Party has become so socialistic that it is now a virtual clone of the Democratic Party.

Republican Socialism

Almost all major policy aims and legislative proposals put forward by Republicans these days are unabashedly socialist. In fact, the socialist nature of Republican efforts can be detected in nearly any Bush administration proposal.

For instance, consider the Bush plan on marriage. The administration is proposing a greater involvement for both state-level intervention and federal funding for marriage and family improvement. The Bush budget includes $240 million in federal funding of grants to states to promote marriage. An additional $120 million would fund research programs on marriage promotion. Apart from the absurdity of the runaway bureaucracy of the federal government attempting, through such programs, to be the nation’s marriage counselor, programs like this are fundamentally socialist. Like all socialist programs, these proposals work by taking money from those who earned it and redistributing it to those who did not. It is theft, plain and simple, and no part of a conservative platform.

The Bush marriage proposal, though, is far from the only administration, and therefore Republican, policy that seems a better fit for a socialist Democrat than for a supposedly conservative party and president. Among the many other areas in which Bush has proven to be a big-government champion is education.

Republicans once dreamt of removing the federal government from the classroom, and President Reagan even gave lip service to the notion of abolishing the Federal Department of Education. Though the Constitution nowhere authorizes the federal government to appropriate dollars for federal education programs, the current crop of Republicans, led by President Bush, has made expanded federal education policy a central part of their platform. Indeed, Bush, referring to his administration’s socialist No Child Left Behind Act, praised an expanded federal role for education, saying that “the new education reforms we have passed in Washington give the federal government a new role in public education.”

In remarks made on January 8 of this year at an elementary school in Tennessee, exactly two years after signing the No Child Left Behind Act, Mr. Bush called the legislation historic because, “for the first time, the federal government is spending more money, and now asking for results.” When the education bill was signed into law in 2002, in a point emphasizing the kinship between Republicans and ultra-left Democrats, the reliably socialist Senator Ted Kennedy (D-Mass.) was there to look on. In fact, under Bush and the Republican Congress, federal outlays for the Department of Education have steadily climbed from $35.7 billion in fiscal 2001 to $46.3 billion in 2002, $57.4 billion in 2003, and an estimated $62.8 billion in 2004. That’s a 76 percent increase in three years. In light of this, conservatives may be forgiven for pining for the good old days of the Clinton administration.

Critics can almost randomly throw darts at the administration and hit areas where big government has run amok. One of the biggest spending boondoggles put forward by the Bush administration and passed by Congress was the bloated farm bill of 2002. This bill provided astronomically large entitlements to farmers. In fact, in a speech on August 15, 2002, Bush boasted that the measure “increases direct farm program spending $73.5 billion over 10 years” and that it “contains $243 billion for food stamps.” Such measures are touted by the president’s supporters as compassionate. But compassion for whom? Certainly not for the taxpayers footing the bill.

Indeed, on budgetary matters overall, the president is a big spender. During Clinton’s tenure in the White House, the budget climbed to the almost incomprehensible sum of $1.9 trillion in fiscal 2001. With Mr. Bush in the White House and a Republican majority in both houses of Congress, the federal budget has continued to grow each year. For fiscal 2005, the president proposes to spend some $2.4 trillion.

The “W” Is for Wilson

These days, the Republicans are big spenders abroad and are committed internationalists in foreign affairs. Although the Bush administration has been aggressively interventionist, many harbor the misperception that President Bush is a unilateralist. He is not. Like both his father before him and Bill Clinton, his predecessor in office, George W. Bush favors a world effectively controlled by the United Nations.

Speaking in Britain on November 19, 2003, Bush praised the internationalism of Woodrow Wilson, that president’s famous Fourteen Points, and the creation and aims of the League of Nations. “Bush,” said the Washington Post, “said Wilson had come to Europe after the war to press for the creation of the League of Nations and adoption of his Fourteen Points for peace. ‘Many complimented him on his vision, yet some were dubious,’ said Bush. ‘Take, for example, the prime minister of France. He complained that God Himself had only Ten Commandments.’ Taking a shot at the French before the appreciative British audience, the president added: ‘Sounds familiar.’” In addition, Bush updated Wilson’s Fourteen Points for the 21st century by adding three additional pillars: “strong international organizations, a willingness to use force and a commitment to spreading democracy.”

Contrary to the prevailing view in the media, Mr. Bush is an ardent supporter of the UN. Welcoming UN Secretary-General Kofi Annan to the Oval Office on February 3, the president enthused: “The world is changing for the better and the United Nations is playing a vital role in that change.” In fact, under Bush, the U.S. has paid its supposed “back dues” to the world body, signed the UN’s Persistent Organic Pollutants Convention, and attempted to justify the war in Iraq by pointing to UN resolutions supposedly authorizing military action. In other areas of foreign policy, Bush has also evinced an affinity for internationalism, being a tireless supporter of NAFTA and its dangerous expansion into the Free Trade Area of the Americas (FTAA).

Based on this record, President Bush is a leftist and an internationalist. Indeed, some allegedly conservative commentators have applauded Bush for his Wilsonian stance. In fact, the Wall Street Journal’s Max Boot, in a June 1, 2002 column entitled “George W. Bush: The ‘W’ Stands for Woodrow,” lauded Bush for his similarities to Wilson. And why not? Bush not only seeks the same internationalist goals Wilson did, he is also a puppet of the same internationalist elite.

CFR Connections

The Council on Foreign Relations (CFR) has long played an inordinately large role in presidential administrations. The body, headquartered in New York City, was organized largely by Edward Mandell House, Woodrow Wilson’s top advisor. Since its inception, the CFR has worked assiduously to maintain control of the presidency, regardless of which party is in office, and direct policy as much as it is able toward the submergence of U.S. sovereignty under the overarching authority of a world government. Just as the CFR played a significant role in both the Clinton and first Bush administrations, it does so today in the George W. Bush administration.

The president himself, while not a member, has the proper pedigree. His father was a prominent CFR member prior to becoming president. Moreover, like his father, George W. Bush is a member of the secret Yale University society known as Skull and Bones. This shadowy organization serves as a sort of “farm team” for the CFR and has produced many prominent internationalists in both parties. It is interesting, for example, that Democratic presidential front-runner and CFR member John Kerry is, like George W. Bush, a Bonesman (see article on page 10).

As in previous administrations, the current Bush administration is well-stocked with CFR members, including Vice President Dick Cheney, National Security Adviser Condoleezza Rice, Deputy Defense Secretary Paul Wolfowitz and Trade Representative Robert Zoellick. (Secretary of Defense Donald Rumsfeld is a former CFR member.) As G. Vance Smith, the CEO of the John Birch Society, has pointed out, “George W. is totally a front-man for and a puppet of” these Insiders.

The dominance of the CFR in presidential politics goes a long way toward explaining how the same basic internationalist and socialist policies are followed no matter who wins any given election. Through CFR influence, Carroll Quigley’s formula, through which American voters would be able to vote the rascals out of office periodically without affecting overall policy, has been implemented. It is, in point of fact, largely impossible for voters to have any beneficial impact on presidential politics at this stage in American history.

For conservatives, does this mean that the game is over and the internationalists have won? The answer, thankfully, is no.

Through the wisdom of the Founding Fathers, the executive branch of the federal government was made far weaker than Congress, the only branch granted legislative authority by the U.S. Constitution.

And Congress was subdivided into two chambers, the House of Representatives and the Senate, with the House possessing unique power over government spending (since all revenue bills must originate in that chamber). Moreover, the House is particularly close to the people, since there are 435 congressional districts, each with its own congressman, and each congressman facing election every two years. The CFR-Insider cabal — even with its control of the major political party establishments and of the major media — cannot possibly dominate 435 congressional races like it can one presidential race.

The internationalists and the socialists have had many successes, but they have not been able to seize total control of this nation despite decades of effort and a relatively complacent electorate. They have done their worst, yet the nation’s institutions remain strong.

All that it will take to finally defeat the internationalist cabal is to build sufficient understanding among the electorate and concentrate grass-roots efforts where they can be most effective: on the Congress. By doing so, the course of the nation may yet be corrected.

Jim Morse August 23, 2004 at 4:00 pm

The sad fact is that so many Republicans, so many Democrats, and so many independents think it really matters who wins the Presidential election.

Wasn’t it Nixon who said “We’re all socialists now”? :-) :-)

Jim Morse August 23, 2004 at 4:03 pm

P. S. I know, I know: what Nixon actually said was, “We’re all Keynesians now”. But a little poetic license, please . . . .

bill wald September 3, 2004 at 11:46 am

“The president is also urging Congress to permit the Federal Housing Administration to begin making zero down-payment, low-interest loans to low-income Americans.”

I suspect this is the equivalent of “micro loans” in third world countries and could be successful if the borrowers are screened for moral standards. This is the catch.

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