The United States has a problem.
That problem is the size, scope and power of its government.
We have a series of on-going economic crises, yes, and those stem from the problem.
The 'Housing Crisis' starts not with 2007 but back in the late 1960's when HUD lobbied President Nixon to create an agency to allow for the packaging of home loans with government guaranteed security on the risk of those loans. Yes one government agency was telling the President that we needed more government! It seemed like a good idea at the time, no doubt, but what this did is allow the large commercial banks to have guaranteed risk portions in their portfolio dedicated to residential lending. These large organizations could out-compete local S&L's who could not take on such wide and varied risk as the larger entities could. S&L's remained tied to what made sense for lending in a local market and the intervention of GNMA created a national market that had risk tolerances above and beyond what normal lending practices for the S&L's would allow. This meant that the S&L's had to seek to diversify their risk portfolio into areas they had never been in and, as inexperienced players, they went down in the 1980's. To get to the S&L crisis of the 1980's you have to have GNMA created by President Nixon.
At that point a home was still just a home, however, and not an upwardly increasing value property. Prior to the 1960's home base valuation would go up at 1% per year, if you were lucky, thus a home was not an investment that would appreciate but a roof over your head. After the creation of GNMA came a slow but steady rise in home valuation above the rate of inflation. This was tied to other regulations that were illiquid until certain dates, which is to say 401(k) plans and IRAs. These were protected assets that you could carry over after a bankruptcy, while a home became subject to bankruptcy proceedings. Consumers shifted their savings patterns away from reducing mortgage debt (via pre-payments or ahead of schedule payments) to put money into safer vehicles, like those provided for in the tax code. Those investment vehicles meant that money was tied into them for the long term, protected and could appreciate faster in value than a home could. Thus the home now became a secondary investment vehicle because the next round of regulations loosened up the Loan To Value ratio for lending. With less stringent loan regulations comes higher home prices as people can expect to ask more than their prior 1%/year appreciation and GET IT.
Were the banks involved?
Yes, they were, at every step of the way.
Are they the sole culprits?
No. The influence of Congress in its role to allow the creation of new regulations that allowed greater risk to flow into the system, while urged on by the banks, was something that was taken up by those Congresses. No one forced them to do it and no President was forced to sign on to these bills. To change the playing field you needed Congress and multiple Congresses obliged through vehicles like the Community Reinvestment Act in the 1980's, and then the loosening of requirements on how much had to be put down to get a loan in the 1990's. By the early 2000's the NINJA loan (No Income, No Job or Assets) along with highly leveraged ballooning loans were the vehicle pushed by the regulatory atmosphere that was enabled by the regulators via the Congressional bills to do that.
Fannie Mae and Freddie Mac played large roles in this, as well, since they could use their money to lobby Congress directly. This is an instance of a quasi-governmental agency getting a direct line into Congress, which means that the regulators and facilitators could now spend their money on politics to woo legislators. Today these two entities continue to bleed the US treasury in ill founded loans that are guaranteed for risk by Ginnie Mae.
Thus we now have as culprits: Congress, large commercial banks, quasi-governmental agencies, government agencies, Presidents and those doing the asking for so much money on their homes.
These are the pre-conditions for a bubble and the agencies, quasi-governmental agencies and regulations (along with regulators) are still around unchanged since the housing bubble popped in 2007-08. Not a single one of them has even been 'adjusted' by two Presidents. No Congressional majority or minority in either party has even SUGGESTED killing off the source of the rot and returning to basic and fundamental local economic institutions assessing local risk for local lending.
Mind you this isn't the FIRST TIME that the government has sought to reshape the physical landscape via housing policy. That goes back to Harry Truman and the Housing Act with its repercussions seen via a retrospective of those blacks who lived in areas deemed to be 'ghettos'.
Next up is the EPA started by... President Nixon.
Do not ever try to tell me that Nixon was in any way, shape or form a 'conservative'. These agencies he created are Progressive monuments to governmental power.
Throw in the Dept of Energy with the EPA and you have a nasty pot just needing the right legislation (like the Endangered Species Act) plus activist regulators (seeking to 'expand' their Congressional mandate), plus an overly regulated mining and oil industry (via the Interior Dept.) and what you get is a strategic attack on the energy infrastructure of the United States dedicated to stopping industrial production and impoverishing American citizens. Strangely enough the EPA didn't need to exist at all as States were already implementing their own regulations to stop pollution, clean up air and water, and didn't need federal help to do that. Burning rivers stopped before the EPA even existed due to those regulations. Simple observation shows that you cannot apply the same environmental regulations from sub-arctic tundra to sub-tropical swamp land. It doesn't work. And if you need to change it via local environmental needs the place to do that is the most local of areas, the State or local government, not at the highest end which is the federal government.
Indeed the federal charter we call the US Constitution allows for States to get together and ask the federal government for help in setting up a multi-State organization to deal with cross-border issues. So long as it does not tread on federal powers, such organizations are the way for States to deal with common problems across their borders. The federal government doesn't run such organizations, the member States do. This concept was also brought up under the recent health care debates to allow multiple States to pool their requirements, de-conflict them and create their own multi-State based insurance requirement system for those wanting to get health insurance. What these sorts of agencies do is cut the federal government out of the regulatory loop because it has no power to start that loop in the first place.
Not to harp too much on Republicans but the next place of rampant graft, corruption and federal policy going where it shouldn't is in the Dept. of Agriculture started by... President Lincoln.
Hey! He couldn't be right all the time.
The Dept. of Agriculture was a key government instrument for helping to expand farming into the Soutwest of the US. It encouraged the type of straight furrow, high water farming that was the norm in the Mississippi direct drainage basin in place that had a bit less rainfall. A bit less when we got to them, at least. What this did is encourage the expansion of farms with government help so that these techniques were used when the local natives didn't use nor want them at all. Why didn't they want them? Dry spells lasting years to a decade or more which cyclically go through the region due to Pacific wind currents. The result is known as the 'Dust Bowl' and it was miraculously 'ended' by USDA people wanting tree wind breaks planted and examining the idea of contour farming. Oh, the rains returned, too. The plus side of all this was knocking down the western locust so we don't get swarms of them going over the great plains every couple of years. That was due to farming in Colorado and Wyoming... of course those farms are now becoming uneconomical so they are dying out and you can expect the locust to come back as their population was only cut down to wild areas, not eliminated.
Isn't that great?
Along with 'modern' farming policy comes the draining of the Oglalala Aquifer which sits under a number of western States and is utilized for dry, upland farming via irrigation. Note this is not native dry, upland farming which used little irrigation, but the reduction of a deep aquifer that has a re-charge time that no one has measured but an inch a year for a few hundred feet of it begins to tell you of the time frames involved. Sounds like a good, multi-State organization is needed here instead of the corrupt blunderbuss of the USDA. No scalpel needed, just ignore the problem until it becomes a 'crisis' and expand government to 'solve' it! Gotta love how that works, huh?
Next on modern farming is turning food into fuel. What an asinine idea! You can't eat ethanol... well you can but its not a great foodstuff, unlike beer... and the conversion rate of corn to ethanol is excellent but ignores the fact that such policies are hitting the third world, and soon the first world, hard. Mexico has a problem in that their old, rural agricultural system that helped to sustain their population went north in search of jobs. First to the cities and then, when those manufacturing jobs from the US went overseas to places like Thailand and Vietnam, those migrants decided that the US was a great place to get illegal jobs. This was great while corn was cheap via the US, but corn has gotten very expensive because human food corn is now being replaced by corn to make ethanol, which I go over in this article. Now with jobs running scarce in Mexico along with food where is the money at? Why criminal organizations, of course! Jobs disappearing due to globalization is one thing, but food disappearing due to asinine farming policy of a neighboring nation is another.
Then there are the subsidies to agriculture beyond just paying people not to farm. Those are about 12-15% of the USDA budget and go far beyond corn to such things as setting price floors for some crops (like sugar beets) and guarantee payments.... plus payments to those farmers owning a farm in one State and not farming there to get their payment in another State.
Isn't that great?
The US government 'protects' certain crops NOT through long-term storage of a small percentage each year in case of famine but by paying people who can't compete in the world market and paying others NOT to compete in the world market, both on the taxpayer dime. Thankfully the current generation of farmers is in their late '50s and early '60s and as we aren't encouraging the next generation to take up agriculture as a business...
What problems could we POSSIBLY get from that?
Why I haven't even hit on the 'entitlements' yet, and I have already covered all of the energy and food production for the Nation under the lovely control of the federal government via regulations that only suit the feel-good Congresscritters and the petty tyrants in the bureaucracy wanting to control the Nation.
Who needs Islamo-Fascists when you can get the home grown regular sort at home?
Of course we also have the other sort to deal with overseas, too... not that we will have any energy or food to deal with them.
Mind you the rest of the planet depends on our food supply and the fact that China has not had a good harvest and even some dustbowls recently points out that they are on the brink of a catastrophe. There are already food shortages in the kleptocracies in Africa, but that is normal and cyclical... having governments that were relatively stable dictatorships go under to such things is a different matter...
The next President?
Name the one that will aim to take out, not manage 'better' or 'reform' but REMOVE any or all of the following: USDA, EPA, FHA, Fannie/Freddie/Ginnie, select parts of the Dept. of Interior, Dept. of Energy.
I can add to that list: Dept. of Education, DoJ (did you know when we had a small government that each agency had to enforce its own little jurisdiction and there was NO DoJ?), BATFE, Dept. of Labor (can't people figure this out on their own), SBA, anything involving the arts & humanities... and the UN and its dues and various hangers-on.
When you are facing insolvency it is time to do away with luxuries and that time is now here. These places can be closed down, their funding removed, and those that are part of the federal government have their property and equipment sold off to generate some final revenue.
Yes, the entitlements have to take a hit. I have a standard prescription for those.
Close off SSA to new entrants. End the retirement age. Turn SSA into a regular spending program and get rid of FICA. Give everyone an account they can spend from that is federal tax free where any investments can accumulate without any hit to them, and then allow spending after holding them for 20 years or 20 years after the date of issuance of the SSA card. In other words find good savings that appreciate even minimally and you are set. Anyone in SSA who wants to get out can, and have such an account in their name immediately with the thanks of the US government to becoming a self-sufficient citizen once again. Once the last person getting payments dies or quits the program, it is ended.
Add Medicare and Medicaid together. Divide by 2. Apportion via Block Grants to the States to spend on health care for their people. Stage this down to zero over 5 years. That is the end of the federal take-over of your medical care, and you are on your own. Lobby your State and local governments or help with charitable institutions to get something to cover those without the ability to get good medical care. The US government sucks at it.
Put together a flat tax for corporations and individuals, remove all other taxes. For those earning under the poverty line the tax can be graduated down, but everyone MUST pay into the US government as it serves ALL OF US without exception. If you can figure out how to live without having a job, then our blessings should be upon those people as they have figured out how to carry their load without burdening the rest of us.
These give a firm and stable position that if you want to 'retire' you must DIY with NO help from the government and if you can't figure out you need health care then charitable institutions are your answer.
Do taxes go up? Yes for those currently paying no federal income tax, but they may find that their new 'tax rate' is actually lower as there is NO FICA around to bite you.
No new taxes are necessary for this: no consumption tax or sales tax. Those are left up to the States as we don't TRUST the US federal government to have such income capability. Look how it has squandered the Progressive Income Tax by jerking everyone around with it.
It starts at the borders.
Not Afghanistan, Iraq, Libya or Timbuktu. We have a massive criminal insurgency threatening to spill over into the US and we have zip, zilch, nada in the way of preparations for it spilling over. Sorry, that doesn't fly and neither do 'open borders' or 'path to citizenship' that doesn't start with an Embassy in a foreign country.
I'm willing to cut down on the illegal immigrant magnets by doing a 'Three Strikes and You're Out' policy for employers:
- First instance, fine and a couple of weeks in the pokey for all involved in the hiring chain from CEO to local approval office in a company.
- Second time is a massive fine (say 10% of the gross income of a business) and a year in Club Fed for all in that hiring chain.
- Third time the company is broken up at auction, never to be reformed and all in the hiring chain go away for 10 years in Club Fed.
There, that is a sane immigration policy in support of our defense policy and should get some of the corporate scofflaws out of the way in no time at all. See how that goes?
I'm sure that would deflate the OWS people in no time and taking the support for the big banks away would collapse their fun little support for tyrannical socialism/communism/progressivism/anarchism. They will hate not having Big Daddy Government to hit up for support, but them's the breaks.
In other words a policy that looks like:
1) A vastly smaller federal government getting back to basics and leaving the States and the people alone, which means ending entire agencies and their regulations all at one go.
2) Ending the entitlements as they cost too much, keeping promises to those on SSA and letting the States figure out if they want something better on their own for medical care.
3) Flat tax, no exceptions, everyone sends a check to the IRS.
4) Defense must start at home at the borders. COIN isn't just for overseas any more.
5) Letting the legal system handle the collapsing banks and corporations either via their own hand in tinkering with regulations that will not sustain them or in hiring those they shouldn't hire. Good companies go unmolested. The bad ones downsize or disappear via normal legal means. Nothing, and I do mean NOTHING, is 'too big to fail'.
Yes, Rome wasn't built in a day.
It was, however, looted in 3.
We are closer to the latter than the former.
For the life of me I can't seem to find a politician who has a clue on what policy is.
Plans come from policy.
Methodology is utilized to enact plans.
If no one has a policy, then their plans are based on nothing, anchored to nothing and entirely too flexible for my taste. I can tell a Presidential Candidate who has no policy in minutes. I am not voting for any who can't articulate what it is as they are, by default, a Progressive. No matter how nice the 'plans' sound, they are words spoken in the winds of opportunism.