The House recently passed legislation to reform the Federal Housing Administration, which is facing a potential taxpayer bailout thanks to all the bad mortgages that it has backed. When the housing bubble burst, the FHA rushed in to prop up the market and now insures approximately 30 percent of new mortgages. In 2006, the figure was just 3 percent.
In a recent speech to real estate interests, former Clinton HUD secretary Henry Cisneros preposterously claimed that the recent housing meltdown “occurred not out of a governmental push, but out of a hijacking of the homeownership process by some unscrupulous interests.”
The Declaration of Independence cites as an example of King George’s tyranny: “He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.” To prevent a similar situation in the new United States of America, the Founders assigned the federal government limited powers.
We are being bombarded with sensationalist stories in the press about state and local governments having to “slash” programs because of a lack of revenues. These stories typically revolve around the question of whether the federal government will continue supplementing “essential services” provided by state and local government.
President Obama is proposing to give the states another $50 billion. However, that would amount to another bailout for state and local government employees and their unions. The president claims that more deficit spending is necessary to sustain the nascent economic recovery. But the only thing the money would sustain is the excessive wages and benefits government employees enjoy at the expense of the private sector.
President Obama has instructed federal agencies to come up with spending cuts equal to five percent of their discretionary budgets for fiscal year 2012. The 2012 fiscal year doesn’t begin until October 2011. Why wait ?
We argued in October that “regime uncertainty” was stifling the economy’s ability to recover. Businesses are more reluctant to invest or hire when Washington pursues a policy agenda that could be detrimental to their bottom lines. The phrase was coined by economist Robert Higgs who observed that FDR’s anti-business policies prolonged the Great Depression.
I have posted a new essay on federal worker pay. The essay gathers together ideas and data from my recent blogs on the topic.
The nation is facing a fiscal emergency. Debt is exploding and federal spending exceeds revenues by more than $1 trillion a year. To fix the problem, policymakers should pursue reforms on two paths.