Wednesday, October 08, 2008

Not just irony, but hypocrisy: liberals criticize McCain's socialist proposal

During last night's debate, McCain proposed a $300 billion plan that will buy up mortgages and refinance them. Some call it "ambitious," while Obama and his supporters say it won't work. But why the criticism from the same people who supported the $300 billion "housing bill" (which, unfortunately, already has begun -- one week ago today)? Congress eagerly passed it and Bush even more eagerly added his signature. McCain's proposal is merely an amplification, expansion, whatever you want to call it, of what the FHA is doing. If McCain's plan "won't work," then how can we expect the existing one to work when it does the same thing? Albeit on a smaller scale, and perhaps not with precisely the same details, but both have the same bottom line: Peter and Paul get to pay taxes to pay off part of Mary's mortgage, never mind that Mary alone got herself into the trouble.

The reason it won't work, the critics say, is because it will buy up or refinance homes at greater than their true value. Gee, as if the first $300 billion wasn't doing that? As if the federal government isn't already doing that with the absurd $700 billion to buy up "distressed" securities that nobody would buy at the prices the federal government is offering?

And the federal government in the housing and securities bailouts is using its own subjective valuation methodology it can, while imposing mark-to-market on private lenders. As my ThreeSources friends and I recently discussed, the FDIC forces lenders to stop lending, despite any cash deposits on hand that could easily be lent out, if the lenders suddenly find themselves with negative net assets under mark-to-market -- notwithstanding that subjective valuation could very well mean that what's worthless today could be worth a lot in the future (tomorrow, next month, in 20 years, any time frame that buyers and sellers use when making a voluntary trade). Subjective valuation means that a piece of land might be worth $1 per acre today, because that's what neighboring land has been selling for, notwithstanding oil deposits that today's technology cannot reach or extract. Yet a bank might be willing to lend money today based on the land's possible future value, as is the bank's right to take such a risk (and depositors can pull their money out if they don't like the risk).

Hypocrites all around. They're not arguing over how much to spend, only how. May they all drown in their own bile.

Even without McCain's addition to this year's socialism, the sheer amount of new federal spending means that the next president, Republican or Democrat, will likely hike taxes by the most ever. I can't see how bond markets will support the massive debt required to fund everything, putting aside the immorality of making our children and grandchildren pay for our profligacy today! There will be a point at which investors will balk at buying more U.S. bonds -- yes, even ours! They'll judge that the U.S. economy couldn't possibly withstand the higher tax rates required to pay off all the debt. We might be at that point sooner than we'd like to think. Thanks to Bush rubber-stamping Democrats' social spending, and Democrats reciprocating by funding his wars, federal debt has surged over $4.3 trillion since Bush took office. And we still have a few months left, God help us.

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