Washington Should Follow Laissez-Faire

November 29, 2011

Things are really a mess economically in the United States and it isn’t really an exaggeration to say it is all Washington’s fault.  I mean through the easy money policies of the Federal Reserve and the legislative and monetary support of Congress and the previous administration many Americans who couldn’t otherwise afford to buy a house bought one.  This coupled with reckless lending policies on the part of primary lenders due to explicit and implicit government loan guarantees set the economy up for a massive failure.  Then, when their low teaser rates readjusted up and many could not afford their new higher payments the housing bubble burst.  And what was Washington’s response?  It was to provide trillions more in easy money and a policy of encouraging Americans to borrow and spend it to “stimulate” the economy.

Now that, that policy hasn’t worked we are facing a massive debt crisis, with real unemployment north of 16 percent and price inflation eating away at the standard of living in America.

If that is not bad enough, last week it was reported that bailout beneficiaries and mortgage guarantors Freddie Mac and Fannie Mae asked the federal government for more bailout funds.  Freddie asked for $6 billion more bringing that GSE’s total bailout figure to $72.2 billion.  Fannie asked for $7.8 billion more bringing its total Treasury draw to over $120 billion.

The main reason why Freddie and Fannie are still losing money and require more federal largess is because of the policies coming out of Washington.  Freddie reported $4.8 billion in derivative losses alone due to declining interest rates.  Fannie’s president and CEO, Michael Williams claims his firm’s woes are due to homeowners paying less interest on loans refinanced at historically low mortgage rates.  So while Washington brought on the original crisis that forced Freddie and Fannie into U.S. conservatorship, its response to that crisis has only made the financial conditions of those entities worse.

At the end of the day, Henry Hazlitt’s words from his famous book, Economics in One Lesson ring prophetic.

“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

In both instances, Washington’s policies leading to the financial crisis of 2008 and its policies since have helped some groups ( i.e. bankers) and hurt others (Fannie and Freddie).  Since no mortal man can determine with precision how a given economic policy of government or a central bank will affect every group in a society it is best for government and central bankers to abstain from imposing their will on the economy.  Certainly we would be much better off now because our economy wouldn’t be in the mess that it is in.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

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Romney’s Foreign Policy would be Disastrous for America

November 2, 2011

Even though he continues to dwell in the “top-tier” of Republican candidates for president, former Massachusetts’s Governor Mitt Romney continues to draw the distrust of many Republicans primary voters.  Questions continue to surround his positions on the high priority conservative issues of abortion, gun control, taxes, federal spending, and socialized medicine.  Many conservatives are just not sure they can trust Romney given his previous actions and statements on these issues.

But as governor of Massachusetts, Mitt Romney has a relatively blank slate of positions when it comes to foreign policy.  However, his foreign policy appointments to his presidential campaign and recent statements he has made are more than enough to please conservative voters in the Republican Party.  As a matter of fact, they make it hard to determine if Romney is running for President of the United States or prime minister of Israel.

Take Romney’s appointment of Walid Phares to chair the Middle East and North Africa working group of his Foreign Policy and National Security Advisory Team.  Mr. Phares currently serves on the board of ACT! For America, a lobbying group that Politico described as being part of an “effort to transform anti-Islam crusading into a mainstream lobbying effort”.  He has stated that global jihad is already in progress and within a short period of time jihadists will have ten million suicide bombers ready to wreak devastation on the West.  To beat jihadists he is a strong proponent of preemptive strikes and “putting our allies’ forces on existing and new battlefields.”

The problem with Walid Phares is that he sees the world in black and white.  You are either for us or against us.  This of course has been proclaimed before and the consequences of this mentality have been disastrous for America – trillions spent on the War on Terror, two almost decade long wars, and erosion of our civil liberties.  Phares’ anti-Islam/pro-Israel positions will certainly help Romney with neoconservatives.  But, an advisor with such extreme views on Romney’s staff should raise red flags for the rest of us.  Phares’s positions would be great if he was advising a candidate for Israeli prime minister, but he is not.  He is advising Mitt Romney.

Now, if Romney’s appointment of Walid Phares isn’t bad enough, the web site Think Progress Security reports that Romney has admitted that if he becomes president he will leave his foreign policy decisions as they relate to Israel to Israel.  Specifically, when questioned by an Israeli reporter if he would consider moving the American embassy in Tel Aviv to Jerusalem Romney responded, “The actions that I will take will be actions recommended and supported by Israeli leaders. I don’t seek to take actions independent of what our allies think is best, and if Israel’s leaders thought that a move of that nature would be helpful to their efforts, then that’s something I’ll be inclined to do. But again, that’s a decision which I would look to the Israeli leadership to help guide.”

Two points need to be made.  First, Jerusalem is an incredibly sensitive issue.  Every American leader has understood that moving our embassy there was out of the question because it would lend legitimacy to Israel’s claim over that city and immediately squash any hope for a peace settlement between Jews and Arabs.

Secondly, what leader of a country would give up his authority over policy to leaders of another country?  That is called a dereliction of duty and certainly violates the confidence of American voters that their president will advocate for their interests 100 percent of the time.  Romney is running to be our president, not the de facto prime minister of Israel.
At the end of the day, Romney’s appointment of Walid Phares to his campaign staff and his comments on his policy towards Israel are indications of what we could expect from the foreign policy of a Romney Administration.  At the very least, it would be a continuation of Bush/Obama foreign policies. At the worst, it would be an escalation of those policies.  American can ill afford either.