Credit crisis over; all that's left is to bulldoze some homes
I'm so glad the credit crisis is over.
What, it's not? But clearly now that UBS and Deutsche Bank have done a few more writedowns, and Lehman's preferred stock offering has sold like hotcakes, and the Dow rose nearly 400 points yesterday as a result, it really, truly is over. And this morning, Ben Bernanke himself said "much" of the shakeout has already taken place. If you can't believe him, who can you believe? Surely not that doom-and-gloomster Nouriel Roubini?
Besides, any additional trouble that might have yet to work its way through the system would be solved with a crackerjack idea that Wall Street Journal columnist Holman Jenkins has today — have the federal government bulldoze all the excess housing stock that was built during the bubble.
Ahem. OK, I can't sustain the sarcasm any longer.
The Jenkins column really must be seen to be believed, seeing as it proposes with a straight face, "using tax dollars to buy and demolish foreclosed, unoccupied or half-built houses in selected markets." As he explains, "Knocking down surplus homes would be the most efficient and equitable
way to spend taxpayer dollars. It can proceed experimentally. It can be
turned off quickly when the need evaporates."
Look, I know the WSJ editorial page, both before and after being consumed by the Murdochtopus, was a bastion of neocon nutballdom when it came to foreign policy. But at least it could be relied on for a somewhat free-market outlook. Not pure Austrianism of course, but at least an outlook generally informed by the sort of philosophy Ronald Reagan ran on in 1980 — you know, lower taxes, lower spending, less regulation, the knowledge that government wasn't the solution to the problem but rather the problem itself.
Yes, the WSJ editorialists have performed increasing intellectual contortions during Bush 43's reign to keep the party line, adopting Cheneyesque "deficits-don't-matter" rhetoric to justify a 60% increase in the national debt. But buying up foreclosed properties for the purpose of destroying them!? (And counting on bureaucrats to know the precise moment "when the need evaporates"? That's rich.)
Leave aside Bastiat's broken-window fallacy. Where have we heard of such measures before? Oh, yes…
At the heart of the
early New Deal were the National Recovery Administration (NRA) and the
Agriculture Adjustment Act (AAA). Created in Roosevelt's first hundred
days, they sought to promote recovery by propping up prices. The idea
was to improve incomes and halt bankruptcies. The AAA tried to
eliminate agricultural surpluses (pigs were slaughtered, crops
destroyed) and paid farmers not to plant. The NRA allowed companies in
the same industry to set wages, prices, and working hours in an effort
to check "destructive competition." This approach rested on a
remarkable contradiction: the way to get recovery, which requires more
production, is to have less production. There never has been much
evidence that it worked, and the Supreme Court found the NRA
unconstitutional in 1935. [emphasis mine]
This is the state of America 2008: A "conservative" president who has spent us into oblivion, cheered on by a "free-market" editorial page endorsing policies straight out of the New Deal. Any more of this brand of "faux" capitalism and the true advocates of laissez-faire will be discredited by association for decades — just as they were after 1929, and for the same reasons.
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