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Source link: http://archive.mises.org/8736/to-think-these-people-want-us-to-let-them-rule-us/

To think, these people want us to let them rule us

October 9, 2008 by

The presidential debate was revealing. Obama took it upon himself last night to “Correct history”. According to Obama “the biggest problem in this whole process was deregulation of the financial system”. “Its not enough to help those at the top, Prosperity is not just going to trickle down”. We therefore need a middle class tax cut. Obama further claims that “A year ago I went to Wall Street and said we need to reregulate”. The solution to our problems is therefore “much better regulations in the financial system”.

Can Mr. Obama name even one act of deregulation signed into law in the past eight years? The fact of the matter is that financial markets are among the more regulated areas of commerce in the USA. While Obama seems oblivious to this fact, it might be reasonable to assume that he does not believe his own words.

Unfortunately the candidate of the other major party appears no better on these issues. According to McCain “The system in Washington is broken”. How is it broken? Special interest money has corrupted Washington. What McCain does not understand is that politics works largely through special interest lobbying. In other words, special interest bias is in the very nature of large activist government. Special interests are easier to organize than broader more encompassing interests. Given the relatively high cost of organizing ‘the people’, we should expect special interest bias in politics. The system is not broken, it is working as badly it should. Given that we have a system that delivers bad results when it is working as it should, it does not need to be fixed, it needs to be deconstructed.

One woman asked both candidates “How can we trust either of you with our money when both parties got us into this crisis?” This is an excellent question. It would seem that the answer is that we should not trust either candidate. Obama wants to exploit the current crisis to promote new regulation. He must therefore blame the current situation on mythical deregulation. Obama rails against the failed policies of GW Bush. However, he is proposing a tax cut, some new spending, and new regulation. This is roughly the same set of policies that Bush delivered. If Obama knows that he is misrepresenting the facts, then he is a demagogue whom we cannot trust. If he believes his own words, then he is deluded to the point of being dangerous. Either way, we should expect further trouble from an Obama presidency.

McCain is proposing more regulation and spending, including the recent bailout. McCain also gained notoriety for saying that interest rates should be zero. The boom that led to our current crisis was produced largely by artificially low interest rates, courtesy of the Federal Reserve Bank. Neither candidate is speaking to the real issues at stake in this election because both are wedded to the policies that are to blame. McCain believes that Washington is broken because he is an idealist. He is enamored with an idealistic vision of democratic governance. We can therefore expect little or nothing in terms of positive change from a McCain presidency.
It is sometimes said that there isn’t a dimes worth of difference between the two major parties. This saying has never been more true than in this election.

{ 23 comments }

JD October 9, 2008 at 11:14 am

I used to be terrified of an Obama presidency because of his socialist agendas of wealth redistribution, socialized healthcare, punitive taxation on the business class, and protectionist trade policies. But, I realized that we are already a very socialist nation and that the party in power currently has promoted as many central planning policies (Homeland Security, expansion of the FED and Treasury’s power, No Child Left Behind to name a few). Just read the article about gas price fixing by governors of southern states (Which one of those I call home). I came to realize it won’t really matter which candidate we get because both don’t see the truth: Government Intervention is the problem.

Neal W. October 9, 2008 at 11:18 am

Even if you were to grant Obama that deregulation occurred, his problem (and a general problem of liberals) is that he thinks deregulation=no regulation. Deregulation could be potentially bad if it unearths regulation that is worse than the regulation enacted to fix the prior regulations unintended consequences.

Truth is, you would have to shave away many layers of regulation before you got to true deregulation.

JR October 9, 2008 at 12:11 pm

Isn’t this article addressing the second debate?

Joe October 9, 2008 at 12:12 pm

I’m expecting an Obama presidency. Will it be that bad? Clinton had a Democrat congress at first and he didn’t accomplish much. I have a feeling our next president one be a one-term wonder.

fundamentalist October 9, 2008 at 12:38 pm

Joe: “I have a feeling our next president one be a one-term wonder.”

Exactly. The economy and relationship with Iran will be similar to what Jimmy Carter faced. It will take the entire term of the next president to see any improvement in the economy and he’ll be blamed for that. Plus, Israel will attack Iran sometime in the next two years.

Obama: “…the biggest problem in this whole process was deregulation of the financial system”.

Just two weeks ago the Europeans were bragging that their financial system was in no danger because their banks faced far more regulation and better regulation than US banks. However, regulation didn’t save them. Of course, both presidential candidates are too ignorant to be aware of any of this.

Curt Howland October 9, 2008 at 12:52 pm

I made the mistake of listening to the Diane Reem show on NPR. Two “economists”, both talking about deregulation as if there had been any deregulation at all. I felt like screaming, but of course they never take my calls or my email.

Ralph Fucetola JD October 9, 2008 at 1:19 pm

Alas, the old “not a dime’s worth of difference” doesn’t work anymore…. with hyperinflation the necessary results of either of these candidates’ election, we’ll have to say “not an Amero’s worth of difference” knowing that an Amero is likely to be worth lots less than, say, a pre-1964 silver dime…”

burgreen October 9, 2008 at 1:22 pm

So, who says any of us have to vote for either of these bozos?

I don’t understand why the third party alternatives are not thriving at this point in time (besides influence of the massive and intentional media blackout).

But are we not smarter than to fall for the media’s there-are-only-two-parties ruse?

Enjoy Every Sandwich October 9, 2008 at 1:27 pm

Although I am mostly unschooled in economics, I can’t help but notice that when politicians and other chatterers declare that the cause of the problem is “deregulation”, they never specify which regulations they’re referring to. Apparently, it is considered rude to ask them to be specific; journalists never ask. And, of course, asking them to establish the cause-and-effect relationship is utterly out of bounds.

Aside from all that, even if the “deregulation” meme is correct that would be a failure of the government–they make and enforce the regulations. What makes anybody think they’ll A) get it right this time and B) keep it right?

R Dub October 9, 2008 at 1:33 pm

Two Thoughts:
1. Obama Presidency is unacceptable because of his view of picking Supreme Court Nominees.
2. The lessor of two socialist evils is McCain because of reason number 1.

Nick October 9, 2008 at 2:03 pm

The other problem with McCain’s hail mary pass is that not only will it cost the government a ton simply to buy up these mortgages, but it could potentially allow these people make money on a bad deal, and leave the taxpayer’s holding the bill. I blogged about that today.

Michael A. Clem October 9, 2008 at 2:10 pm

This financial crisis, more than any other issue, shows how little diversity the alleged Two-Party system actually provides–they’re just two sides of the same coin, not really different at all.

DW MacKenzie October 9, 2008 at 2:51 pm

R Dub.

You may be right, but that is uncertain. McCain might well cut wasteful spending too. He does seem to despise misuse of taxpayer money funds (as he sees it). However, McCain approves of certian uses of taxpayer money that are troubling to many.

DWM, PhD

Franklin October 9, 2008 at 3:09 pm

“….I can’t help but notice that when politicians and other chatterers declare that the cause of the problem is ‘deregulation’, they never specify which regulations they’re referring to….”
Good point. However, I would say that they would have an easy time in answering (Now, I mean easy in the sense that a pol can provide a vague retort that will be acceptable enough for the complicit media and most of the electorate). For example…..

“Ladies and gentlemen, we have an SEC; we have a Treasury Secretary, a President…. Isn’t their job to regulate? What were they doing?! While many factors are causing the present meltdown, let’s take the excess borrowing……”

(I will not cite the uncreditworthy homeowner because the pol will lose the support of his constituency, which is comprised of uncreditworthy consumers. So we’ll just say, “excess borrowing.” Back to the response:

“… Ladies and gentlemen, was there not ‘deregulation,’ in the sense that rules were made more lax, credit became easier to come by? New rules, guidelines, ‘regulations’, were liberalized. Assignment of risk ran rampant and the oversight bodies did nothing. Chaos has ensued!!! I will re-regulate this industry!!!!”

While I am being facetious, there’s a hint of truth that half-baked deregulation caused the mess — allowing more liberalized spending without worry of failure. The banking institutions are generally protected, with regard to risk. No skin off their nose if the risk can be assigned elsewhere. Where is it assigned? To other institutions, other investors, bonds, insurance instruments, and sadly Uncle Sam (the taxpayer).

If money is going to be underwritten by the taxpayer, then the oversight bodies need to ensure that the paper trail of borrowing/investing/assigning is clear and that risk is low. The “watchers”, the regulators, did not do this.

So the time is ripe for the pols to say, “We need more regulation; we need to undo the misdeeds that have been done.”

Don’t expect Wall Street to complain either. The traders, the so-called fat-cats are quite happy with many regulations, so long as their interests are protected; they can keep skimming off the top, and the assignment of risk is a million miles away from their own families’ estates.

Regards,
F.

Curt Howland October 9, 2008 at 3:28 pm

The most absurd thing that was said on the Diane Reem show, was that the “Enron” was the result of deregulation.

Seriously, they said that. Go look it up. Maybe if a few credible Austrians contacted the show, they might get on it.

http://wamu.org/programs/dr/

Lester Hunt October 9, 2008 at 3:33 pm

What kills me is that it would be so easy for McCain to flatten Obama by saying, “Okay, can you name one regulation that was removed during these eight years, causing this mess?” BO keeps sticking out his glass jaw and JM won’t take a swing at it. Some warrior.

Mark October 9, 2008 at 6:59 pm

Exactly, Lester, exactly!

YerMawm October 9, 2008 at 7:11 pm

0% interest rates…LMAO. Yep McCain was right when he said he was clueless about economics.

While we are at it, let’s set the rates negative. I pay the government for the right to live and work in this country as it is, so what’s the diff?

Michael A. Clem October 10, 2008 at 9:25 am

Excellent points, Franklin, including the bit about “deregulation”. The government didn’t deregulate, but “enabled irresponsibility”.

billwald October 10, 2008 at 10:56 am

If something as complicated as the banking industry doesn’t need government controls then how about deregulating something as simple as the freeway system?

DW MacKenzie October 10, 2008 at 11:24 am

At one level you could say that the simplicity of the highway system itself means that the Feds can manage it adequately, so deregulation of finance is more urgent.

At another level you could say that the actual use of the highway system is complex. A vast number industries and individuals use the highway system. The actual marginal costs are therefore not a simple matter. Keep in mind that heavy vehicles cause more wear on highways than lighter ones. This is why we have weigh stations. Heavy trucks cause greater flex in roads, so more small cracks develop. These small cracks increase the damage done by freeze-thaw cycles. The resources used for repair of highways have alternative uses too. The calculation of actual marginal opportunity costs in this case is by no means simple, and not necessarily within the capabilities of governments.

darjen October 10, 2008 at 12:06 pm

billwald,
I would be very happy if that occured.

http://mises.org/journals/jls/3_2/3_2_7.pdf

E. Harding November 28, 2008 at 7:00 pm

Just to show the similarity between the current president- elect and his (former) rival candidates, you may see how they scored on the World’s Smallest Political Quiz here

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