Sunday, September 13, 2009

Will We Ever Learn

Starting under Clinton, the U.S. Government pursued policies that encouraged banks to offer loans to people who really couldn't afford houses. Government was happy, because it could point to a great success. Individuals were happy, because they thought they could afford homes. Banks became happy, and adjusted to the new reality. Unfortunately it wasn't reality. It was a socialist inspired dream, that government policy could flaunt the laws of economics and make life better for the poorest in society.

Last forward to 2009. To get the economy moving again, the U.S. Government has offered incentives for people to buy new cars. And the program has been insanely popular. The only problem is that 1/4 of buyers are having second thoughts on whether they can afford the shiny new cars they just bought. The lesson of course is that governments, by intervening in the market, usually do it in a way that is both popular with the people, and in a way that will ultimately make life more difficult for the poor.

Please understand that I am not saying we should abandon all social programs! But the more a government tries the flaunt the laws of economics, the more it ends up hurting the poor. Socialism ultimately leeches away the vitality of a system that generates increasing wealth for all, and replaces it with a system that simply redistributes ever decreasing wealth.


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