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Doing More of the Things That Caused the Financial Meltdown


Here’s part of a speech that Candidate Obama gave in Ohio in October 2008, a few weeks before he was easily elected president of the United States.

Part of the reason this crisis occurred is that everyone was living beyond their means—from Wall Street to Washington to even some on Main Street. CEOs got greedy. Politicians spent money they didn’t have. Lenders tricked people into buying homes they couldn’t afford and some folks knew they couldn’t afford them and bought them anyway. We’ve lived through an era of easy money, in which we were allowed and even encouraged to spend without limits; to borrow instead of save.

Here the president identifies several state actions that caused or enabled the financial meltdown, ranging from problems in the financial sector to the collapse of housing prices. He noted both monetary and fiscal policy that made money incredibly cheap, thus incentivizing anybody who could to borrow more and more money. The government spent too much money AND he tips his hat to government programs designed to increase the percentage of people who owned homes.

Yet, all he has done since he took office is to do more of the same things that got us in this mess in the first place — just at a bigger scale. The extension and expension of the $8,000 tax credit is a good example of that. The cost of the whole thing is $11 billion. And who wants to bet it will be more, not to mention the terrible distortions such a program introduces to the economy?

This morning, even the Washington Post and the New York Times editorialized against the tax credit.

Here is the Post:

The credit is a bad idea. It merely shifts demand from elsewhere in the economy to one sector government has chosen to help — having been urged to do so by a powerful lobby — and from the future to the present.

And here is the Times:

Congress threw good money after bad this week when it voted to extend and expand a wasteful home buyer’s tax credit set to expire at the end of the month.

Note that the New York Times has nothing against the government spending more money than it has already. It just wants the money spent on other bad programs.


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