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Let's have a browse through Barack Obama's economic policy plan.
The very first paragraph tells me Obama is in favor of expanding Federal power over the States: "Obama's STOP FRAUD Act provides the first federal definition of mortgage fraud…" and "Obama's bill requires the Government Accountability Office to evaluate and report to Congress on various state lending practices so that state regulations that undermine consumers rights can be identified and hopefully eliminated." (emphasis added). Firstly, it is not clear to me why "mortgage fraud" merits treatment different from any other kind of fraud. And granting arguendo that it does, why should it be handled at the federal level? Neither question is addressed.
About mortgage loan disclosure, it says "As president, Barack Obama will enact laws to ensure that all prospective homebuyers have access to accurate and complete information about their mortgage options." This betrays a fundamental misunderstanding of the President's job. Presidents do not enact laws. Presidents enforce laws. Legislators enact laws. If Obama is serious about this, he should introduce the legislation while he's still a legislator!
Obama wants to create a mortgage tax credit that is, if I'm reading this correctly, 10% of income up to $500. I understand and agree with the argument that the tax-deductibility of mortgage interest favors those with high incomes, but the solution isn't to expand the subsidy so everyone gets a bite. We should instead eliminate the tax deduction for mortgage interest. Of course I don't want peoples' taxes to go up a lot, and I sympathize with the idea of providing a benefit to low-income / non-itemizing people, so let's replace the tax deduction for mortgage interest with the simple elimination of the 10% federal tax bracket (tax at 0% instead of at 10%).
Then Obama wants to create another $500 tax credit, this time allegedly to offset payroll taxes. This is too complicated! How about we simply put the upper end of my 0% tax bracket at $10,000? That would save people about $1,100 compared to today's taxes.
Then there's this:
In theory, this is a good idea. People who take advantage of this would risk paying more tax than necessary, but he said it would be optional, so I could still hire a tax preparer. The real problem here is the implementation. How exactly is the IRS going to deliver pre-filled tax forms to everyone without creating enormous identity theft problems? The potential for disaster here is overwhelming.
Oh, look, another tax credit! "Barack Obama will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans…" No. No. A million times no. Higher education is expensive because it is subsidized. This will only make things worse. Besides, I have yet to hear any good argument why education deserves to be subsidized in the first place. (Although I'll admit I'm harder than most to persuade.)
My, my, Obama loves tax credits. We also have this: "Barack Obama will reform the Child and Dependent Care Tax Credit by making it refundable and allowing low-income families to receive up to a 50 percent credit for their child care expenses." Why, pray tell, should children be subsidized?
Would you believe Obama is a tax cutter too?
While I love the idea of eliminating income taxes for people (why limit it to seniors?) making less than $50,000 per year, the consequence stated here simply isn't true. These people would still need to file state tax returns! And wouldn't they have to file federal returns anyway if they want to obtain any of the basketfuls of tax credits Obama wants? Whoever wrote the document ought to have known better than to claim something so transparently wrong.
Changing topics to consumer credit:
There is no reason for the government to do this. I am appalled by the thinking that "having X would be nice" is somehow a legitimate motivation for "the government should provide X". Besides disagreeing with this on principle, I think it's a bad idea to pretend there is a single reasonable set of consumer-friendly standards to judge against. And I can already imagine the army of lobbyists that would descend on this thing.
As is well-known, Obama wants universal (read: compulsory) health insurance, about which I could complain almost endlessly. There's only one point I cannot resist making. How does he propose to afford universal health insurance and tax cuts and tax credits? The federal budget is already in deficit and there is nothing in his economic plan that suggests he knows how to pay for the things he wants.
Ah, yes. While we're thinking about it, what other industries should we have the government pick winners and losers in? (P.S., if this turns out like Oregon, hydroelectric power won't count as renewable!)
Constructing a replica of the Great Pyramid of Giza in the Arizona desert without automated machinery would also create hundreds of thousands of new jobs. But what about the other things these people would create if they weren't involved in a government boondoggle?
Speaking of this misguided, Obama would "in the case of China in particular [put] an end to an artificially devalued currency that puts U.S. companies at a perpetual disadvantage." The undervaluation of the renmimbi is in fact a subsidy to American consumption. Imagine my surprise that Obama would put the interests of businesses ahead of consumers! (He'd probably change his stance, if he understood.)
On the pandering front:
Bread and circuses! Porn and YouTube!
In a return to economics:
Yeah, let's be sure to close that barn door now. There is a real problem here in that the credit ratings of these securities were (with benefit of hindsight) much too high. But I for one can't see what good will come of a federal investigation. The actual culprit — the Federal Reserve — is easily fingered. I doubt that the credit rating agencies have a special culpability in this; they were following the same market signals (as distorted by the Fedear Reserve) as everyone else.
I do wish the outrage directed at the lenders / borrowers / homebuilders / rating agencies were focused at the correct target. But it's not going to happen outside economic circles, unless Ron Paul gets his way.