May 07 2014

TDS/TCR (The Rose)


Challenge from the Right

My Name Is Roger Murdock

This week’s guests-

The Daily Show

The Colbert Report

Be prepared to hate on Pete Schuck. In addition to the typical 1%er c.v. (Cornell, Harvard, Simeon E. Baldwin Professor Emeritus of Law and Professor (Adjunct) of Law at Yale Law School) and his militant ‘No Lables’ ‘Fix The Debt’ Versailles Viliage Washington Consensus centrist books (Targeting in Social Programs: Avoiding Bad Bets, Removing Bad Apples; Meditations of a Militant Moderate: Cool Views on Hot Topics; Immigration Stories; Foundations of Administrative Law; Diversity in America: Keeping Government at a Safe Distance; and The Limits of Law: Essays on Democratic Governance) is undoubtedly on to whore his latest- Why Government Fails So Often: And How It Can Do Better.

By Schuck’s reckoning, “unmitigated disasters” include the war on drugs and the ethanol program. As he also points out, a key harm resulting from many programs is “government-promoted moral hazard,” in which public policies encourage people to engage in risky behavior, often causing immense collateral damage. The federal government’s promotion of home-ownership via Fannie Mae (ticker: FNMA) and Freddie Mac (FMCC), essentially government agencies, helped bring “catastrophic damage to the larger economy” in the Great Recession of 2008-09. And lest we expect government to learn from such egregious mistakes, Schuck reports that “more than five years later- and even with all the benefits of hindsight– the Federal Housing Administration (FHA) is following those agencies’ catastrophic examples.” The italics are Schuck’s.

There is also moral hazard from the $1.2 trillion federal program that guarantees student loans. Its “debt overhang,” born of risky behavior, “threatens to retard the recovery,” a situation that has been likened to “the subprime mortgage disaster.” And yet the program is empowered by Congress to calculate its risks according to a formula that equates the chance of student default with the chance that the U.S. Treasury will default on its debt. “This absurdity,” reports Schuck, “enabled Senator Elizabeth Warren and some colleagues to erroneously claim, with straight faces, that the student-loan program is highly profitable- despite the huge default losses.”

As for why government fails so often, the author cites public choice theory. Appropriately dubbed “politics without romance,” public choice theory posits that people in politics are about as self-interested as people in business or in nonprofits. So, for example, politicians motivated by the desire to get re-elected can please their constituents by spending borrowed money that won’t have to be paid back until long after they leave office. Taxpayers who might be hurt by those policies have little or no incentive to inform themselves and get politically active, given their limited chance of affecting the outcome. By contrast, the private sector has the lash of profit and loss to channel self-interested behavior into productive ends.

Ick.  Now I need to take a shower.

Bette Midler is of course, Bette Midler.  This is probably my all- time favorite song of hers ever, even though she’s done a ton of great and more upbeat stuff.

Makes me cry every time.

Now I’m not sure what she’ll be talking about, could be her ingrown toenail, but the last thing she did was the 2014 Oscar’s In Memoriam.

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