Finally, Mr. Jacoby seems to have the absurd expectation that if we just did a few things (like “lower taxes!”), then the economy would quickly right itself — or at least show an improvement in its polling. He seems to think that we are still facing a minor recession.
Please share widely!
If rebate checks is an acceptable idea, and current House leadership seems to think so, then why would some tax cut be any less effective: 1) cut the rate 2) immediate cash savings to taxpayers 3) hope/expectation that they’ll spend the tax saved much the same as the rebate check.
All they do is increase the National Debt. I read an analysis that less than 20% went to new spending with the remainder going to paying of debt and savings… Great!
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p>If they are gong to do a stimulus at least make is meaningful. Tie it to the purchase of a car or something that will help the economy vs. just paying credit card bills or saving it for a rainy day.
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p>And ya, I just double checked the meaning of REBATE – a return of part of the original payment for some service or merchandise; partial refund. So… maybe we should send them to the people who actually PAID TAXES otherwise call it a *&^%ing gift which is what it is! And ironically, many of the people who actually paid taxes will not get the rebate (they make too much money) UGH!
Win-Win: The government issues a $5K, fully refundable rebate check good against the purchase of a new GM, Chrysler or Ford.
Because the last round of rebate checks worked out so well? (Hint: they didn’t).
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p>The key is that people didn’t spend the money, by and large. They either saved it, or (more likely) used it to pay off debt. That doesn’t help the economy.
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p>Now’s not the time to RAISE taxes, I agree…but money can be better spent on things other than two-step debt payoff.
In municipal finance (at least in my town) there’s a general rule: one-time revenue sources don’t work to cover ongoing expenses. That’s applicable in our situation now. People need a way to cover their mortgage, heat, electricity, etc. every month. Jobs, well paying ones at that, are the key, not a one-time rebate check.
…Jeff Jacoby pretends to understand basic logic. The conclusion must be shown to follow from the premises and on that count he fails miserably.
is because we didn’t regulate enough. Gosh, if only we had regulation, this wouldn’t have happened. Let’s solve problems by regulating! Hooray Regulating!
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p>Long story short: intellectual honesty is totally out of style. When I’m done cutting taxes and regulating to solve all our problems, I’m going out to buy the latest KC and the Sunshine Band record.
Well, the Wall Street banks were financing long-term debt on a revolving system of short-term loans. That might have worked if the economy never suffered a disruption like the mortgage crisis (also caused, arguably, by a lack of regulation). Given the market conditions, they all had to take these risks. Regulation would have eliminated the competition that forced them out on that limb. Perhaps, Lehman Brothers would not have gone under.
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p>This seems extremely obvious to me. It doesn’t seem like a mindless cheer leading for regulation. Nor does any liberal not made of straw argue that we can regulate our way out of this debacle.
To you and laurel: I was commenting more on that fact that everyone seems to be afflicted with a bad case of the oversimplification sickness. Jeff Jacoby seems to be under the impression that a tax cut is a good solution ot every problem, and many on your side seems to blame under regulation as the stand-alone problem for the financial mess.
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p>So, while cutting taxes would certainly help, and under regulation is certainly a problem, people like to take one concept and cheerlead it rather than read the entire envelope of causes and solutions.
… seems to be a viable prescription to the problem, hardly an oversimplification. Your assuming that liberals love regulation for regulation’s sake. There is no evidence of this. Tax cuts for all economic problems… that that’s a simplification. There is plenty of evidence of conservatives loving tax cuts for tax cut’s sake.
… you’ve picked a bad example as this simple concept (regulation) is all there is needed to explain the situation.
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p>
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p>Pay attention, I’m only gonna say this once:
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p> — Mortgage brokers were not regulated
— The CDOs they packaged were not regulated
— Swaps covering the CDOs were not regulated
— Investment banks went to the regulators (SEC) and specifically asked for (and received) waivers on debt ratio regulations.
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p>Shady lenders hid their misdeeds and sold too much dynamite to the fuse companies who were allowed to store dynamite, matches and the fuses right beneath the gas tank… Hmm… At any point the government ought to have stepped in and said ‘you can’t do that.’ (i.e., REGULATION). They did not.
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p>It’s pretty straight-forward here. Comprehensively: regulation would have prevented this problem. It is as simple as that. Even Greenspan has said it: People did things they ought not to be allowed to do. I can’t put it any more straight-up, straight-out, straight-forward than that.
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p>
I was watching 60 minutes or something like that later at night, and this woman was on who lost a boatload of money on the mortgage market. The interviewer was like “you didn’t read any of the loans you got?” and she was like “uh…no?”
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p>I agree that regulation would have helped this situation — a lot — but I refuse to pretend that a lot of people were stupid, plain and simple.
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p>I don’t want everyone who took these loans to get bailed out. I’m sick of people getting bailed out for making bad decisions when people who made good decisions are stuck paying mortgages they can afford but are burdened by for tens of years.
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p>You know, regulating could have prevented this crisis, but I’m sure that greed and stupidity would have eventually found its way. It always seems to.
… read every single page of every single document (for good or bad). Loan origination kills more trees than maybe any other business.
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p>What typically happens is that the buyer assumes that the lender is in a position where they want to make sure the borrower can pay. It’s not like a credit card company where customers having trouble making payments is a business plan. Lenders are presumed to be concerned with ability to pay. As such, it has been in the past a primary consideration about affordability in the mind of the borrower. The regulations are necessary because the lenders had a fit of willful ignorance about risk.
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p>More here and here
With inches of loan agreements in front of me on the desk at my closing he simply said “you can read these or I can just sum it up for you – YOU PAY YOU STAY – YOU DON’T YOU WON’T“. Pretty simple.
How many people have a lawyer?
One would be foolish to enter into a contractual agreement for what is likely the most expensive purchase made in a lifetime without an attorney. The cost to do so can be included with the mortgage, “no closing costs” style.
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p>If I had not had a lawyer that day I would have read EVERY piece of paper in front of me – twice.
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p>
A lot of hardship has been caused by these bad mortgage deals. I believe it was Mr Lynne who elsewhere pointed out that we rely on experts a great deal in our daily lives. Have you read the research on folic acid well enough to know it is good for you? Do you judge whether that soft spot in your enamel is a cavity? Do you run experiments to figure out how many psi to stuff into your tires? So too, a loan applicant. If the experts say he can afford it, the applicant will believe he can afford it. Legal texts (like sacred texts) can potentially mislead the naive reader. So naive readers, like illiterates, rely on others to read.
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p>The fact remains these borrowers gave loans to people who couldn’t afford them. They then sold those loans to others and said they were better loans than they were. Those others bundled the loans and oversold them again. That’s how we ended up with banks sitting on a huge pile of compost (to avoid Atrios’ more colorful and indelicate term: s***pile).
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p>Whatever you feel about personal responsibility or the importance of reading contracts or the value of vigorous virtue in a hardy land of liberty, we had a product (mortgage debt) being sold above its value.
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p>We like to call that fraud. Apparently it wasn’t.
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p>Why wasn’t it?
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p>Lack of regulation.
and no amount of regulation can quell greed — only a population that isn’t illiterate or gullible can fend of the bastards who lent these loans.
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p>I just don’t think you can fix something like this with regulations alone, nor can you monday morning newscast or however that saying goes and say it could be avoided with simply regulations.
but you can make certain pathways to unjust enrichment too unprofitable to be pursued by sharks. with smart regulation, of course. 🙂
you can raise a generation of people virtuous to not be predisposed to greed and smart enough not to get screwed by those who are.
and how’s that going? humans have been around for how long, and how many pure and virtuous generations have we had? ZERO.
not many.
enacting meaningful regulation while you wait for the rapture, you’ll just perpetuate chaos.
is not a rapture-believing Protestant. Like Mr Lynne, though, I obviously agree with your line of argument.
regulation or enacting it? Goodness.
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p>I’m saying that you can regulate all you want, but it won’t matter in the long run if you don’t go after the other half of the greed/gullible equation.
… clever people find ways to exploit the rules of the time. That is why the rules of the system and their effects must be monitored, adjusted, strengthened, and yes even weakened to suit. Even in your hypothetical society where we “raise a generation of people virtuous to not be predisposed to greed and smart enough not to get screwed by those who are” this will remain true. The simple fact is that there is almost always a competitive edge in doing away with virtue (at least privately… publicly it can have bad consequences). It will remain true in a system where a small minority of people are willing to avail themselves of it.
in reply to my bid for smart regulation. if you mean “and”, then fine. but say so next time.
It was Robespierre’s belief that the Republic and virtue were of necessity inseparable. He reasoned that the Republic could only be saved by the virtue of its citizens, and that the Terror was virtuous because it attempted to maintain the Revolution and the Republic.
But, but, but, a capitalist system runs precisely on greed. Everyone plays “by the rules” and does what he or she can to extract the most from it. In fact, that’s why there are lots of accounting rules and tax regulations.
I have a final in British history (1485-1815) and one of the documents I was looking at studying last night was this one. Creep.
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p>I’m not saying that there shouldn’t be regulations — this I totally agree with. However, people seem to say that regulations would have prevented this, when I’m not sure it would have. We can easily see the problems that happened and say a regulation or another should have been in effect after the fact, but its not always as easy to preemptively regulate away disaster.
… of the system. You design the system knowing that people will game it. The mechanisms that you design into the system that let greed operate within the system without breaking it are rules in the form of laws and regulations. Note that this is not just for protecting the system, but also protecting the people operating in it from self destructive behavior (that can then go on to break the system). The credit default swaps problem is a perfect illustration of this. They were not regulated as insurance and didn’t have leverage limits. While they were a hot commodity people the pressure was to sell them to securities buyers. If to do so, you had to be leveraged by a ridiculous amount, you still did it anyway because failure to do so meant losing market share. The rules and the market incentives (greed) conspired to create a race to over-leverage. Regulation was exactly what was needed here and would have mitigated the effect that greed had in creating unsustainable risk.
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p>I think it was Jefferson who said that if all men were angels we wouldn’t need laws. Well if all people weren’t going to game the system for their own gain, we wouldn’t need regulation.
My curiosity as to why petr awarded me a 6 from my other reply to JoeTS led me to petr’s post from September which makes my point even better than I did with more facts and information.
Are there any new regulations being considered by Congress? If we can identify what exactly went wrong then can’t we fix it? Obviously we could regulate ourselves into a gridlock where nothing could occur, but it seems a return to the “old days” in some areas would b easy to accomplish. Mortgage qualifications would be the first step (as it is happening now). What would be the next logical steps and when can we expect to see them?
and get the real skinny. then let us know what you’ve learned.
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p>thanks.
There needs to be both legislative changes (e.g., making credit swaps subject to regulation) and regulatory changes. (Congress legislates and the Executive Branch regulates.) It will not happen until 2009 after the newly elected people are sworn in and it will take time, as it should because it should be deliberative.
You’ve asked some of these questions before. Asking the same question over and over again in the same manner is boring and obtuse can get a bit uninteresting.
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p>My take on much of this is that it isn’t the “fault” of Republicans so much as it is the fault of conservative ideology. The idea seemed to be the removing as much regulation as possible would let one hundred flowers bloom. Regulation tends to have a lot of inertia, and I can believe it could take some wrenching change to clean out the dead hand of ineffective, anachronistic, or inefficient regulatory requirements. So there were reasons for this conservative view of regulation to have gained ascendancy 28 years ago.
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p>There’s also a structural difference between the GOP and the Democrats. Within the GOP, conservatives form a strong majority; within the Democratic Party, liberals are not the majority — or if we are, it is a bare majority. (This from last time I looked at such polling.) This is born out in Congress. There are plenty of Democrats who on many issues vote like moderate Republicans — “Welducci” Republicans if you like — and who were very happy to pull apart some regulatory apparatus. Certainly it began under Reagan, but just as certainly it continued under Clinton, and it has shipwrecked under Bush.
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p>Getting a wise regulatory regime is not easy. (Libertarians will be more than happy to tell you how difficult it is.) There are unintended consequences galore to consider. There are special interest groups to listen to, plead with, ignore, cajole, embrace, or defeat as necessary. Costs and benefits must be weighed. It’s strenuous and delicate. Like mounting a heavy door.
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p>Since 1980, trying to do so would have been like trying to build a Porsche by hand in a den of saboteurs.
Shall we chuck that too and see how pleasant it is to live here? (The theocrats are applauding me right now). How can a defender of the Constitution such as yourself poo poo regulation? Remove all the traffic signs and lights from your town too, and see how small-scale deregulation was just so useless. And don’t forget to remove all locks from yout house and car doors! Your anti-regulation stance is not very well thought out, imo.
If anything, the Constitution seems to be used more often to chuck out regulations. I’d say, as a theocrat, that the Constitution is good and it supports rules and regulations.
who is getting a bumper crop of tax revenue from sales and income taxes? anyone? anyone out there? no. local governments are hurting because no one can spend money on stuff or even keep their employees any more. there’s your tax cut, jacoby. is it helping? i polled myself, and i say “no”.
In Massachusetts, sales tax revenues are down, but excluding vehicles, it’s only a 2.5% decline.
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p>And in Massachusetts, personal income tax collections have actually increased measuring Y-T-D november 08 versus Y-T-D november 07.
Following Jacoby logic: Obviously, then, taxes are too low. If we raise them even more, personal income will rise even higher.
just curious.
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p>glad to see that MA is doing relatively well so far. WA has some major end of year shortfalls. having no income tax, almost 50% of our state income ceoms from retail sales taxes. the christians aren’t filling the state coffers like they usually do this time of year.