Suitably Flip

A Salient SOTU Snippet

Having read some of the advance excerpts, I couldn't bring myself to watch the State Of the Union last night.  Just wasn't feeling up to enduring over an hour of the same tired arguments in favor of ever-expanding government intrusion and the demonization of success and wealth creation.

Have you noticed that Obama and his ilk never get around to defining what actually constitutes "fair share"?  Two obvious reasons: 1) there's no way to credibly argue that the top 1%'s fair share would be more than 40% of the overall burden, double their share of aggregate income (or that the bottom 50% are somehow overburdened at 0%), and 2) if they were to quantify the "little bit more" they're asking for in order to achieve fairness, they'd lose the ability to trot out the same "fair share" argument when they need to pay the tab on their next trillion dollar adventure.

As long as the numbers are left out of the equation, the same class-baiting rhetoric about fairness and inequality can be recycled ad nauseum (as it literally was last night).

Anyway, ranting about the President's pro-tax ravings isn't really the point of this post...

I did wind up tuning in briefly toward the end of the address and as luck would have it, I clicked over at the precise moment the President was uttering what might rank as the single most anAmerican thing I can recall a politician saying (giving Obama the benefit of the doubt here; it's possible the timing of my channel change was no coincidence and the speech was riddled with such heresies):

That’s why we need smart regulations to prevent irresponsible behavior.

It's a brief sentence and a simple enough concept, but it seems to cut to the heart of the drastically divergent view this administration has of the country's guiding philosophies, particularly as regards the interplay between government and the private sector.

This is a question with an obvious answer, but Obama's remark requires that we ask it.  Do we elect a government to prevent us from acting irresponsibly?  That's the very definition of a nanny state.  Only - unlike Bloomberg's New York, where the nannyism concentrates on banning legal-but-societally-unacceptable behavioral choices at the individual level - Obama's nanny state seeks to impose institutional behavioral controls, banning legal activity through executive fiat, red tape asphyxiation, subsidy, and selective taxation.

The plain fact is that we don't need regulations (no matter their ostensible smartness) to prevent irresponsible behavior.  If behavior is truly irresponsible, it has its own deterrents and disincentives, else (and this is the key bit...) by definition it wouldn't be irresponsible.

Note we're not talking about illegal behavior.  We already have laws that prevent, deter, and punish illegal behavior, and that includes financial fraud, the low-hanging fruit Obama likes to pluck when seeking to justify ever-more-burdensome financial regulation.  Any behavior that's legal, but irresponsible, including that to which Obama was referring, namely the sale of mortgages to uncreditworthy borrowers, carries large disincentives for both irresponsible parties.  The lender incurs a risk of loss of principal that outweighs the fees and interest derived from the loan, while the homeowner incurs an undue risk of foreclosure and ruin.  Left to their own devices, few private market participants will engage in value-destroying transactions (and even fewer will repeat the mistake).  As for those who are dumb enough to do so, it's not government's responsibility or prerogative to stand in their way.  If it were, there'd be no meaningful difference between government ruling on the soundness of your housing decisions and the government demanding a transaction-by-transaction review of your stock portfolio, your choice of profession, college, major, or daily caloric intake, all in the name of preventing you from engaging in irresponsible behavior.

Obama pivoted off the "smart" financial regulation theme after bluntly asserting that more regulations make the free market work better, and for good reason.  Dwelling on this note invites intellectual scrutiny into the tacit claim that mortgage lenders are apparently stricken with either horrible math skills or a perverse appetite for losing money.  Why else would they systematically engage in value-destroying behavior?  Neither affliction sounds particularly plausible, yet it happened, so rather than worry about the why, let's focus on how the federal government can induce them to change their ways.

Of course, the filthy secret is that the activity was not value-destroying from the perspective of the mortgage lender (or at least was rationally perceived not to be).  Since there was a secondary market on which to syndicate a limitless number of such loans - a market with an artificially robust appetite for bum loans due to implicit government guarantees - the normal feedback mechanism that curtails irresponsible behavior was interrupted.  Likewise, borrowers arguably had good reason to believe that loans their banks were willing to make were loans they would be able to pay off.  Missing from that analysis, however, was a realization that their banks would have been far less inclined to make such loans without a government-backed secondary market on which they could offload the risk.

Obama insists that the housing crisis illustrates the inevitable flaws in free enterprise that will eventually bring the whole works crashing down if government doesn't keep tightening the yoke.  But it takes a very rare capacity to withstand cognitive dissonance in order to look at what happened and not come away at least wondering whether ever-so-well-intended federal yokes might've been among the corrupting elements.  The degree to which the statist dogma must be ingrained that it yields a policy prescription of yet more government control, that it preserves the fantasy that institutions are so irretrievably evil and people so irretrievably dumb that their interaction can only continue to produce extinction-level pickles, is something I don't think I fully appreciated about this administration until I heard those words.

Those 10 little words, with eerily similar sentiment, may have finally one-upped Reagan's nine most terrifying words in the English language.

Comments

A Salient SOTU Snippet

Having read some of the advance excerpts, I couldn't bring myself to watch the State Of the Union last night.  Just wasn't feeling up to enduring over an hour of the same tired arguments in favor of ever-expanding government intrusion and the demonization of success and wealth creation.

Have you noticed that Obama and his ilk never get around to defining what actually constitutes "fair share"?  Two obvious reasons: 1) there's no way to credibly argue that the top 1%'s fair share would be more than 40% of the overall burden, double their share of aggregate income (or that the bottom 50% are somehow overburdened at 0%), and 2) if they were to quantify the "little bit more" they're asking for in order to achieve fairness, they'd lose the ability to trot out the same "fair share" argument when they need to pay the tab on their next trillion dollar adventure.

As long as the numbers are left out of the equation, the same class-baiting rhetoric about fairness and inequality can be recycled ad nauseum (as it literally was last night).

Anyway, ranting about the President's pro-tax ravings isn't really the point of this post...

I did wind up tuning in briefly toward the end of the address and as luck would have it, I clicked over at the precise moment the President was uttering what might rank as the single most anAmerican thing I can recall a politician saying (giving Obama the benefit of the doubt here; it's possible the timing of my channel change was no coincidence and the speech was riddled with such heresies):

That’s why we need smart regulations to prevent irresponsible behavior.

It's a brief sentence and a simple enough concept, but it seems to cut to the heart of the drastically divergent view this administration has of the country's guiding philosophies, particularly as regards the interplay between government and the private sector.

This is a question with an obvious answer, but Obama's remark requires that we ask it.  Do we elect a government to prevent us from acting irresponsibly?  That's the very definition of a nanny state.  Only - unlike Bloomberg's New York, where the nannyism concentrates on banning legal-but-societally-unacceptable behavioral choices at the individual level - Obama's nanny state seeks to impose institutional behavioral controls, banning legal activity through executive fiat, red tape asphyxiation, subsidy, and selective taxation.

The plain fact is that we don't need regulations (no matter their ostensible smartness) to prevent irresponsible behavior.  If behavior is truly irresponsible, it has its own deterrents and disincentives, else (and this is the key bit...) by definition it wouldn't be irresponsible.

Note we're not talking about illegal behavior.  We already have laws that prevent, deter, and punish illegal behavior, and that includes financial fraud, the low-hanging fruit Obama likes to pluck when seeking to justify ever-more-burdensome financial regulation.  Any behavior that's legal, but irresponsible, including that to which Obama was referring, namely the sale of mortgages to uncreditworthy borrowers, carries large disincentives for both irresponsible parties.  The lender incurs a risk of loss of principal that outweighs the fees and interest derived from the loan, while the homeowner incurs an undue risk of foreclosure and ruin.  Left to their own devices, few private market participants will engage in value-destroying transactions (and even fewer will repeat the mistake).  As for those who are dumb enough to do so, it's not government's responsibility or prerogative to stand in their way.  If it were, there'd be no meaningful difference between government ruling on the soundness of your housing decisions and the government demanding a transaction-by-transaction review of your stock portfolio, your choice of profession, college, major, or daily caloric intake, all in the name of preventing you from engaging in irresponsible behavior.

Obama pivoted off the "smart" financial regulation theme after bluntly asserting that more regulations make the free market work better, and for good reason.  Dwelling on this note invites intellectual scrutiny into the tacit claim that mortgage lenders are apparently stricken with either horrible math skills or a perverse appetite for losing money.  Why else would they systematically engage in value-destroying behavior?  Neither affliction sounds particularly plausible, yet it happened, so rather than worry about the why, let's focus on how the federal government can induce them to change their ways.

Of course, the filthy secret is that the activity was not value-destroying from the perspective of the mortgage lender (or at least was rationally perceived not to be).  Since there was a secondary market on which to syndicate a limitless number of such loans - a market with an artificially robust appetite for bum loans due to implicit government guarantees - the normal feedback mechanism that curtails irresponsible behavior was interrupted.  Likewise, borrowers arguably had good reason to believe that loans their banks were willing to make were loans they would be able to pay off.  Missing from that analysis, however, was a realization that their banks would have been far less inclined to make such loans without a government-backed secondary market on which they could offload the risk.

Obama insists that the housing crisis illustrates the inevitable flaws in free enterprise that will eventually bring the whole works crashing down if government doesn't keep tightening the yoke.  But it takes a very rare capacity to withstand cognitive dissonance in order to look at what happened and not come away at least wondering whether ever-so-well-intended federal yokes might've been among the corrupting elements.  The degree to which the statist dogma must be ingrained that it yields a policy prescription of yet more government control, that it preserves the fantasy that institutions are so irretrievably evil and people so irretrievably dumb that their interaction can only continue to produce extinction-level pickles, is something I don't think I fully appreciated about this administration until I heard those words.

Those 10 little words, with eerily similar sentiment, may have finally one-upped Reagan's nine most terrifying words in the English language.