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Milton J. Madison - An American Refugee Now Living in China, Where Liberty is Ascending

Federalism, Free Markets and the Liberty To Let One's Mind Wander. I Am Very Worried About the Fate of Liberty in the USA, Where Government is Taking people's Lives ____________________________________________________________________________________________ "Extremism in defense of liberty is no vice. Tolerance in the face of tyranny is no virtue." -Barry Goldwater-

Friday, September 17, 2010

Examiner Editorial: Poverty is back, and it's no coincidence | Washington Examiner

The economic problems that the US now faces, lays squarely at the feet the American government. This storm was caused by government intervention in a gigantic and important part of the American economy, housing......
That our current economic woes trace back to a housing bubble created by government-mandated mortgages going to millions of people who could never repay them makes President Obama's predicament bitterly ironic. The Community Reinvestment Act of 1977 was intended to ease mortgage standards for minorities and low-income Americans, but it is now notorious for its unintended consequences. In an attempt to alleviate poverty and address homelessness, Congress changed the Community Reinvestment Act in the 1990s to loosen mortgage standards and increase access to affordable housing. Easy credit sent housing values soaring through the next decade until the mortgage market collapsed and took the rest of the economy with it. The result is poverty at record levels and a new flood of newspaper reports of homeless people living in sprawling tent cities.

Obama did not cause the economic collapse, but he should learn the lesson here: When government distorts markets to deal with perceived social inequality, it inevitably produces unintended consequences.
Government policy intended at assisting poor people to buy homes has backfired and now has injured many many of these people by driving them in poverty. In addition to creating sub-prime lending through government fiat, the article does not even address other insidious interventions over decades that created over-investment in housing such as tax breaks for mortgage interest payments and under-capitalized and politicized quasi-government businesses, Freddie Mac and Fannie Mae. These non-market interventions created higher demand, higher prices and greater risk in housing than would have existed without these programs.

Examiner Editorial: Poverty is back, and it's no coincidence | Washington Examiner


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