Tag Archives: Thomas Sowell

Commentary

Michele Bachmann: hot photos from her vacation on the beach

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Rep. Michele Bachmann

Before we see the hot pictures of Michele Bachmann from her vacation on the beach, let’s take a look at this Wall Street Journal article and find out what sorts of economics books Michele Bachmann reads on the hot beach possibly in her bathing suit.

Ms. Bachmann is best known for her conservative activism on issues like abortion, but what I want to talk about today is economics. When I ask who she reads on the subject, she responds that she admires the late Milton Friedman as well as Thomas Sowell and Walter Williams. “I’m also an Art Laffer fiend—we’re very close,” she adds. “And [Ludwig] von Mises. I love von Mises,” getting excited and rattling off some of his classics like “Human Action” and “Bureaucracy.” “When I go on vacation and I lay on the beach, I bring von Mises.”

Consider Thomas Sowell’s “The Housing Boom and Bust”. Here’s a photo of that book which Michele Bachmann reads on the hot beach possibly in a swimsuit:

Picture of book Michele Bachmann reads on the hot beach
Picture of a book Michele Bachmann reads on the hot beach

The Wall Street Journal explains more:

As we rush from her first-floor digs in the Cannon House Office Building to the House floor so she can vote, I ask for her explanation of the 2008 financial meltdown. “There were a lot of bad actors involved, but it started with the Community Reinvestment Act under Jimmy Carter and then the enhanced amendments that Bill Clinton made to force, in effect, banks to make loans to people who lacked creditworthiness. If you want to come down to a bottom line of ‘How did we get in the mess?’ I think it was a reduction in standards.”

She continues: “Nobody wanted to say, ‘No.’ The implicit and then the explicit guarantees of Fannie Mae and Freddie Mac were sopping up the losses. Being on the Financial Services Committee, I can assure you, all roads lead to Freddie and Fannie.”

Consider Walter Williams’ “Liberty vs the Tyranny of Socialism”. Here’s a picture of that book which Michelle Bachman reads on the hot beach possibly in a bathing suit:

Photo of a book Michelle Bachman reads on the hot beach
Photo of a book Michelle Bachman reads on the hot beach

The Wall Street Journal explains more:

Ms. Bachmann voted against the Troubled Asset Relief Program (TARP) “both times,” she boasts, and she has no regrets since Congress “just gave the Treasury a $700 billion blank check.” She complains that no one bothered to ask about the constitutionality of these extraordinary interventions into the financial markets. “During a recent hearing I asked Secretary [Timothy] Geithner three times where the constitution authorized the Treasury’s actions, and his response was, ‘Well, Congress passed the law.'”

Insufficient focus on constitutional limits to federal power is a Bachmann pet peeve. “It’s like when you come up to a stop sign and you’re driving. Some people have it in their mind that the stop sign is optional. The Constitution is government’s stop sign. It says, you—the three branches of government—can go so far and no farther. With TARP, the government blew through the Constitutional stop sign and decided ‘Whatever it takes, that’s what we’re going to do.'”

Does this mean she would have favored allowing the banks to fail? “I would have. People think when you have a, quote, ‘bank failure,’ that that is the end of the bank. And it isn’t necessarily. A normal way that the American free market system has worked is that we have a process of unwinding. It’s called bankruptcy. It doesn’t mean, necessarily, that the industry is eclipsed or that it’s gone. Often times, the phoenix rises out of the ashes.”

Consider Milton Friedman’s “Capitalism and Freedom”. Here’s a pic of that book which Michelle Bauchman reads on the hot beach possibly in a bikini:

Pics of a book Michelle Bockman reads on the hot beach
Pics of a book Michelle Bauchman reads on the hot beach

The Wall Street Journal explains more:

“For one, I believe my policies prior to ’08 would have been much different from [President Bush’s]. I wouldn’t have spent so much money,” she says, pointing in particular at the Department of Education and the Medicare prescription drug bill. “I would have advocated for greater reductions in the corporate tax rate and reductions in the capital gains rate—even more so than what the president did.” Mr. Bush cut the capital gains rate to 15% from 20% in 2003.

She’s also no fan of the Federal Reserve’s decade-long policy of flooding the U.S. economy with cheap money. “I love a lowered interest rate like anyone else. But clearly the Fed has had competing goals and objectives. One is the soundness of money and then the other is jobs. The two different objectives are hard to reconcile. What has gotten us into deep trouble and has people so perturbed is the debasing of the currency.”

That’s why, if she were president, she wouldn’t renominate Ben Bernanke as Fed chairman: “I think that it’s very important to demonstrate to the American people that the Federal Reserve will have a new sheriff” to keep the dollar strong and stable.

[…]Ms. Bachmann attributes many of her views, especially on economics, to her middle-class upbringing in 1960s Iowa and Minnesota. She talks with almost religious fervor about the virtues of living frugally, working hard and long hours, and avoiding debt. When she was growing up, she recalls admiringly, Iowa dairy farmers worked from 5 a.m. to 10 p.m.

Her political opponents on the left portray her as a “she-devil,” in her words, a caricature at odds with her life accomplishments. She’s a mother of five, and she and her husband helped raise 23 teenage foster children in their home, as many as four at a time. They succeeded in getting all 23 through high school and later founded a charter school.

Michele Bachman is actually willing to pass a lower corporate tax rate than even Tim Pawlenty’s 15% rate:

If she were to take her shot, she’d run on an economic package reminiscent of Jack Kemp, the late congressman who championed supply-side economics and was the GOP vice presidential nominee in 1996. “In my perfect world,” she explains, “we’d take the 35% corporate tax rate down to nine so that we’re the most competitive in the industrialized world. Zero out capital gains. Zero out the alternative minimum tax. Zero out the death tax.”

The 3.8 million-word U.S. tax code may be irreparable, she says, a view she’s held since working as a tax attorney at the IRS 20 years ago. “I love the FAIR tax. If we were starting over from scratch, I would favor a national sales tax.” But she’s not a sponsor of the FAIR tax bill because she fears that enacting it won’t end the income tax, and “we would end up with a dual tax, a national sales tax and an income tax.”

Her main goal is to get tax rates down with a broad-based income tax that everyone pays and that “gets rid of all the deductions.” A system in which 47% of Americans don’t pay any tax is ruinous for a democracy, she says, “because there is no tie to the government benefits that people demand. I think everyone should have to pay something.”

On the stump she emphasizes an “America-centered energy policy” based on “drilling and mining for our rich resources here.” And she believes that repealing ObamaCare is a precondition to restoring a prosperous economy.

[…]Ms. Bachmann also voted for the Republican Study Committee budget that cuts deeper and faster than even Mr. Ryan would. “We do have an obligation with Social Security and Medicare, and we have to recognize that” for those who are already retired, she says. But after that, it’s Katy bar the door: “Everything else is expendable to bring spending down,” and she’d ax “whole departments” including the Department of Education.

Below are some links to learn more about Michele.

Campaign speeches, interviews and debates

Speeches:

Reactions from her recent debate performance:

Profiles of Michele Bachmann:

And here are some of her media interviews and speeches in the House of Representatives.

You can contribute to her campaign right here. You can be her friend on Facebook here and also here.

This post was linked by:

And tweeted by Kathleen McKinley and Robert Stacy McCain.

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Commentary

Thomas Sowell explains why third-world countries are so poor

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Thomas Sowell

Mary sent me this article from TownHall.com.

Excerpt:

The idea that the rich have gotten rich by making the poor poor has been an ideological theme that has played well in Third World countries, to explain why they lag so far behind the West.

[…]There is obviously something there with very deep emotional appeal. Moreover, because nothing is easier to find than sins among human beings, there will never be a lack of evil deeds to make that explanation seem plausible.

Because the Western culture has been ascendant in the world in recent centuries, the image of rich white people and poor non-white people has made a deep impression, whether in theories of racial superiority– which were big among “progressives” in the early 20th century– or in theories of exploitation among “progressives” later on.

In a wider view of history, however, it becomes clear that, for centuries before the European ascendancy, Europe lagged far behind China in many achievements. Since neither of them changed much genetically between those times and the later rise of Europe, it is hard to reconcile this role reversal with racial theories.

More important, the Chinese were not to blame for Europe’s problems– which would not be solved until the Europeans themselves finally got their own act together, instead of blaming others. If they had listened to people like Jeremiah Wright, Europe might still be in the Dark Ages.

It is hard to reconcile “exploitation” theories with the facts. While there have been conquered peoples made poorer by their conquerors, especially by Spanish conquerors in the Western Hemisphere, in general most poor countries were poor for reasons that existed before the conquerors arrived. Some Third World countries are poorer today than they were when they were ruled by Western countries, generations ago.

It’s sad, because when I talk to many people from other countries, like Mexico and Greece, they blame the United States for their own bad decisions, instead of imitating United States policies. Maybe if Mexico and Greece stopped blaming others and started trying to imitate the best countries, then they would be more like Chile. A few decades ago, Chile made a decision to re-make their economy to be more American than America. And the result is that they are seeing record economic growth. Prosperity has nothing to do with skin color – just with policies. Chile embraced good economic policies and now they are much richer than before. The main thing to do is to make sure that you have economists in charge, not community organizers. Canada has an economist in charge, and they just scored DOUBLE the GDP growth of the United States. Knowledge matters.

News

What was the real cause of the financial crisis?

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From the American Spectator.

Excerpt:

I believe that the sine qua nonof the financial crisis was U.S. government housing policy, which led to the creation of 27 million subprime and other risky loans — half of all mortgages in the United States — which were ready to default as soon as the massive 1997-2007 housing bubble began to deflate. If the U.S. government had not chosen this policy path — fostering the growth of a bubble of unprecedented size and an equally unprecedented number of weak and high-risk residential mortgages — the great financial crisis of 2008 would never have occurred.

In this article, I will outline the logical process that I followed in coming to the conclusion that it was the U.S. government’s housing policies — and nothing else — that were responsible for the 2008 financial crisis.

The inquiry has to begin with what everyone agrees was the trigger for the crisis — the so-called mortgage meltdown that occurred in 2007. That was the relatively sudden outbreak of delinquencies and defaults among mortgages, primarily in a few states — California, Arizona, Nevada, and Florida — but to a lesser degree everywhere in the country. No one disputes that the losses on these mortgages and the decline in housing values that resulted from the ensuing foreclosures weakened financial institutions in the U.S. and around the world and were the precipitating cause of the crisis.

[…]Researcher shows that the turning point came in 1992, with the enactment by Congress of what were called “affordable housing goals” for Fannie Mae and Freddie Mac. These two firms, which were shareholder-owned, had been chartered by Congress more than 20 years earlier to operate a secondary market in mortgages. The original idea was that they would buy mortgages from banks and other originators (Fannie and Freddie were not permitted to originate mortgages), standardize the mortgage document, resell those mortgages to institutional and other investors, and in that way create a national market for U.S. mortgages.From the beginning, Fannie and Freddie’s congressional charters required them to buy only mortgages that would be acceptable to institutional investors — in other words, prime mortgages. At the time, a prime mortgage was a loan with a 10-20 percent down payment, made to a borrower with a good credit record who had sufficient income to meet his or her debt obligations after the loan was made. Fannie and Freddie operated under these standards until 1992.

The 1992 affordable housing goals required that, of all mortgages Fannie and Freddie bought in any year, at least 30 percent had to be loans made to borrowers who were at or below the median income in the places where they lived. Over succeeding years, the Department of Housing and Urban Development (HUD) increased this requirement, first to 42 percent in 1995, to 50 percent in 2000, and finally to 55 percent in 2007. It is important to note, accordingly, that this occurred during both Democratic and Republican administrations.

At the 50 percent level, Fannie and Freddie had to acquire at least one goal-eligible loan for every prime loan that they acquired, and since not all subprime loans were goals-eligible Fannie and Freddie were in effect required to buy many more subprime loans than prime loans to meet the goals. As a result of this process, by 2008, Fannie and Freddie held the credit risk of 12 million subprime or otherwise risky loans — almost 40 percent of their single-family book of business.

But this was not by any means the full extent of the problem. HUD took Congress’s enactment of the affordable housing goals as an expression of a congressional policy to reduce underwriting standards so that low-income borrowers would have greater access to mortgage credit. As outlined in my dissent, by tightening the affordable housing goals, HUD put Fannie and Freddie into competition with the Federal Housing Administration (FHA), a government agency with an explicit mission to provide credit to low-income borrowers, and with subprime lenders such as Countrywide, that had pledged to reduce underwriting standards in order to make more mortgage credit available to low-income borrowers. Moreover, all these organizations were joined by insured banks and S&Ls, which as noted above were required under the CRA to make mortgage credit available to borrowers who are at or below 80 percent of the median income in the areas where they live.

Of course, it is possible to find borrowers who meet prime loan standards among low-income families, but it is far more difficult to find such loans among these borrowers than among middle-income groups. And when Fannie, Freddie, FHA, subprime lenders like Countrywide, and insured banks and S&Ls are all competing to find loans to borrowers in the low-income category, the inevitable result was a significant deterioration in underwriting standards.

So, for example, while one in 200 mortgages involved a down payment of 3 percent or less in 1990, by 2007 it was one in less than three. Other credit standards had also declined. As a result of this government-induced competition, by 2008 19.2 million out of the total of 27 million subprime and other weak loans in the U.S. financial system could be traced directly or indirectly to U.S. government housing policies.

I’ve read Thomas Sowell’s “The Housing Boom and Bust” and this article is a snapshot of that book. It mentions Department of Housing and Urban Development, Fannie Mae, Freddie Mac, the Community Reinvestment Act, the Federal Housing Administration, and so on.

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