This is both an interesting, and scary graph. The most important thing to me is not just the sheer magnitude of the Obama deficits, but the respective trends of both administrations.
Note that the Bush deficit was decreasing every year until 2008, when it got hammered by the TARP (at least I’m assuming that’s the cause, though it could also be a result of the slowing economy throughout the year, not to mention Congressional spending increases under the Democrats starting in late 2007). Note also that this was happening despite the evil Bush “tax cuts” (which obviously weren’t really tax cuts — they were just tax rate cuts that actually were reducing the deficit, despite the out-of-control spending by the Republican Congress).
In contrast note that the Obama plan is ever-increasing deficits after 2012, whether you believe administration or CBO projections. And though they decrease in the near term, they never get as low as the worst Bush deficit before they start to sky rocket in the teens. This, simply put, is fiscal insanity. And increasing taxes on “the rich” (as they’d surely love to do if they could get away with it) isn’t an option. There simply isn’t enough money there, and if there were, it would tank the economy even more, with even larger deficits from reduced tax receipts and automatic increases in non-discretionary wealth transfers. Also, estimate the integral under the curve. That’s an accumulating debt, with an ever-increasing proportion of the deficit going to interest, particularly when people become reluctant to loan money to a budding Weimar at low rates.
People who will be protesting on Wednesday won’t be protesting against a party. They’ll be protesting against a government completely out of control. But unfortunately for the Democrats and the left, they will be seen as the much larger part of the problem, because the Republicans are now at least giving lip service to reduced spending and reduced government. But they’re going to have to work very hard to live down their spending spree of the “compassionate conservative” (read, “progressive lite”) Bush years.
[Evening update]
“Liberal doughboys afraid of tea parties.”
Liberal bloggers and media groups can’t get the Tea Party phenomenon out of their heads. It wasn’t supposed to be this way, to them. Ordinary people getting together to protest against the liberal establishment. There is a cognitive disconnect. There must be a plot; the vast right-wing conspiracy at work.
So true to form, Media Matters sounded the horn that this was not a real protest, it’s a Fox News segment. Kind of a made for T.V. reality show, with a cast of tens of thousands. Think Progress joined in with “Spontaneous Uprising? Corporate Lobbyists Helping To Orchestrate Radical Anti-Obama Tea Party Protests.”
And the netroot blogosphere heard the call. FireDogLake proprietor Jane Hamsher posted “What Part of ‘FNC TAX DAY TEA PARTIES’ Don’t You Understand?” Hamsher also promoted “citizen-organized protests” which were unlike the “Fox-organized” Tea Parties; I guess she didn’t catch the irony of promoting counter-protests to protest other people promoting protests. Anyway, almost no one showed up for the counter-protests.
Gee, I think I have one of those in comments.
[Monday morning update]
More tea-party panic:
What’s the big deal? ACORN, MoveOn, and Soros get to pull puppet strings year after year, and that’s ok. But God forbid Fox News puts so much as its imprimatur on Tea Parties! No way! That’s too sinister, too insidious; and makes the whole movement illegitimate and inauthentic. Whatever…
Jane Hamsher and Oliver Willis are probably asking “Who the hell are this Tea Party bunch? Where did they come from?” I’ll tell you who they are, Jane and Oliver. They’re your worst nightmare: they’re small-governmenters first and party-loyalists second.
And we’re not laughing with you, Jane and Oliver. We’re laughing at you.
[Bumped]
[Update a few minutes later]
More on Crazy Jane and the other panicked and paranoid leftists (like my commenter):
She’s implying because freedomworks listed the Texas Tea parties and Dick Armey is part of freedomworks that the Tea Parties, Houston in particular, are being organized by “Corporate lobbyists”. Houston Tea Party has never spoken with Freedomworks or Dick Armey, though we do know that Freedomworks has offered legal advice to different Tea parties, we’ve not sought it. None of that should imply they are running the show unless you go to the point of just making stuff up.
The “Corporate lobbyist” line is a laugh. Felicia is a local Mother of two who worked with some local grassroots groups like Raging Elephants. I was someone who was trying to be apolitical the past 4 years until I took a good look at was going on, and I was laid off last week and currently unemployed. There are other organizers and volunteers with us. None of them come close to the description “Corporate Lobbyist”.
And no, this woman is nuts, Fox News is not organizing the Tea Parties, they’re just jumping on board (like a lot of people are trying to). But she’s seeing Dick Armey and Fox News as the boogeymen in the closet…
So… I’ve had my LMAO moment for the day. How about you? 🙂
Edit: More on this silliness:
If we’re being organized by “corporate lobbyists” then where the heck is my check?
Yeah, me too. How do I get in on this hot “corporate lobbyist” action?
Of course you can cut income tax rates on people who get full refunds. It’s not like the money wasn’t withheld from their paychecks.
According to Form W-4 line 7, if they received a full refund and are expecting a full refund, then they don’t have to have any money withheld. So yes, it could be like their money was never withheld from their paychecks (except for FICA, but everybody wants social security, right?).
> And if FreedomWorks wasn’t involved why does their website say things like:
Because they’re trying to gain some credit by association.
Here’s a somewhat similar example. Obama during the campaign said that he was organizing anti-war protests. Does that mean that he started the anti-war movement? Does that mean that he controlled the anti-war movement?
Rand: There is such a thing as a negative income tax — Milton Friedman was a fan.
Paul: I think Obama’s tax plan is more than fair for you. If you disagree, build your electronics in Puerto Rico.
Andy: Obama never said he’d “launched” the anti-war movement, or called his website the anti-war “HQ”. That’s what FreedomWorks claims about the tea parties. And I’m not saying that FreedomWorks controls the tea parties, just that they’ve played a major role, and that their clients stand to benefit financially.
Paul: To elaborate, how is this worse than Bush? If you’re grossing $500k a year selling electronics you probably aren’t netting more than $250k. So your taxes aren’t going up. If you are netting more than $250k, congratulations, you’re in the top 2%. You’ll see a slightly higher tax rate on the income over the $250k line, and the 95% of tax payers who are less fortunate than you will be better off at tax time. And that has you all worked up?
There is such a thing as a negative income tax — Milton Friedman was a fan.
I didn’t say there wasn’t. And in fact I’m open to a negative income tax under some circumstances. But we should call it what it is, and not continue to promulgate the lie that that it is a “tax cut.”
Jim,
If you add up, income, state income, sales, ssi, sdi, property taxes, vehicle taxes gas taxes, etc…
Then over 50% of my income goes to the government.
The direct marginal income tax rate on the inventory I could not sell in Q4 is 9.3+35 = 44.3 I have proven over and over I can take capital and create American job and wealth, yet you take the capital from me and give it to someone that has proven they can’t run a profitable business (GM, AIG ), its not only wrong its stupid.
I hate when the comments get off on a tangent about the little things instead of the big picture the post was about. Jim et. al. seem okay with deficits that will burden MY children and grandchildren for years to come. I don’t know how any parent could look at those numbers and think they are okay. How anyone not a partisan ideologue could look at those numbers and think economic growth will be sustainable with such a debt burden has no grasp of how much money is involved. The tea parties ARE grassroots. The organized groups are Johnny-come-lately people jumping on the band wagon. Look at who started the organizing. Did other groups help? In some cases, yes. I thought the stories about organizers finding out what’s involved were telling because you never heard about who did all of the legwork fro the anti war protests. Who got the permits, the insurance, the security? When you look at the overt bias in the media supporting the buff arms, the dog and the One it’s no wonder people are organizing.
Paul: That was all true before Obama. And while it feels wrong to bail out failing businesses, if the alternative is a longer recession that will cost you more than the bailout, it’s a smart move.
Bill: Don’t complain to me about deficits unless you voted against Reagan and both Bushes. They’re the reason the debt is so high, and they’re the reason Obama’s deficits will start so high. To support the GOP prior to 2009 and only now get concerned about debt is the height of hypocrisy.
I’m not okay with huge deficits. It’s one reason I opposed the Iraq war. It’s why I think we’d be better off with $300B of defense spending (rather than $500B+). The median American got nothing out of the Bush years, while the wealthy, defense and homeland security contractors, and resource extraction companies made out like bandits. Those are the places to start looking for savings now.
Reading through this, I’m struck by how similar this is to the circumstances after September 11 in 2001 and 2002. A single party was in control of Congress and the presidency and huge budget deficits were incurred in order to deal with a huge national crisis. When Bush did it, he managed to create the largest deficits in US history along with two wars and an immensely costly occupation in Iraq.
The question then is what will Obama and the Democrats in Congress do with this current crisis? Unfortunately, the first thing I see is a deficit several times larger than any previous deficit as a percentage of GDP since the Second World War. In fact, deficits in the 20th Century have only been higher than this during the two world wars. I don’t see the current circumstances as being worthy of this level of spending.
Second, while Obama remains popular, I don’t see that popularity surviving through to the end of the year. There’s been a significant decline since Obama’s inauguration and it will only get worse when the results of this enormous crest of spending are seen. My take is that Obama’s approval ratings will be well below 50% by December.
This decline in popularity combined with the incredible spending surge indicates to me that Democrats are attempting to cash out on the 2008 election ASAP. I will be very surprised if they can retain control of the House given the current circumstances.
Third, there’s been some rather pointless discussion about whether Obama has or hasn’t raised taxes on 95% of the populace. He certainly has raised excise taxes on cigarettes, that alone covers more than 5% of the populace. The carbon cap and trade system will affect everyone, not just the 5% richest people.
Moving on, we also aren’t considering any year after the current financial year. Obviously, Obama will let expire various tax cuts implemented in Bush’s administration, which will result in tax increases. But I wonder how much tax rates will have to be increased to cover some of the current spending.
Finally, the redirecting of federal money to Democrat and liberal lobbying groups is reprehensible. I don’t know if ACORN is getting $5 billion. That sounds a gross exaggeration. However, they are getting a lot of money under the current stimulus plan through HUD.
It also sounds like there’s a lot of non-profits getting money through government these days. I’m currently leaning towards not donating to any charity that receives federal funds directly. Much has been said of the corruption of the charity world by politics and government money, but I see this as a critical problem over the next few years.
Don’t complain to me about deficits unless you voted against Reagan and both Bushes.
You would have to be insane to think that either Gore or Kerry (or Clinton, with a Democrat Congress) would have been better for deficits than either Bush or Reagan. No, I’m not happy with George Bush’s deficits, but that doesn’t mean that I want to double (actually triple or quadruple or quintuple) down on them with a real spender, like Barack Obama. Actually, one of the very few things that I liked about John McCain was that he would at least have been a fiscal tightwad.
And the first two months of an Obama administration, with a Democrat Congress, shows we were right, as the graph above graphically shows.
Some in these comments are asking me not to believe my lying eyes. That chart is unbelievable. People are talking about getting rid of the dollar. This is nothing less than the destruction of America. What a coincidence that it occurs during the presidency of a member of those that for decades have advocated that in their writings.
Oh, I’m sorry, he threw them under the bus… never mind.
“On the expiration of the “Bush” tax cuts, the tax brackets will change as follows:
Brackets 10, 25, 28, 33 and 35 percent will be increased by 50%, 12%, 10.7%, 9.1% and 13.1% percent, respectively, to 15, 28, 31, 36 and 39.6 percent. Those of you at the bottom of the tax barrel will see a 50% tax increase. Still think that those tax cuts are strictly for the wealthy?? Well, have a nice day then. The child tax credit will be cut in half (damn those wealthy families with children) so in reality, the upper and lower classes benefited the most from the tax changes, with the lower class receiving far and away the largest benefit.”
Jim, I didn’t like it but it was better than the alternative. I still wrote my Rep. to oppose budgets. MANY conservatives, including me were against TARP and weren’t shy about saying so. Now, about those tax cuts. Oh, don’t forget the AMT. So Obama gives me 400 and takes back 1680. Must be that new math.
Why did Dems wait until Bush was gone for the 09 omnibus? Because he said he would veto it. So 09 is on the Dems. Complaining about Bush and not Obama when he will double the national debt in 11 years vs the past 75 is the creme de la creme of hypocrisy.
“Mike: Look at more than one poll. Gallup reports today that “Over two-thirds of Americans (71%) have a great deal or a fair amount of confidence in President Obama to do the right thing for the economy.” NYT/CBS reported April 7 that Obama had 66% approval, 24% disapproval. The RCP average of polls (including yours) has Obama at 60/30.”
Why Jim?
Rasmussens track record for accuracy dwarfs Gallups and the others. Why dilute a good data source with noise?
You are whistling past the graveyard. Why not be honest with yourself and admit it?
And he still is doing no better today:
http://www.rasmussenreports.com/var/plain/storage/images/media/obama_index_graphics/obama_index_april_13_2009/213437-1-eng-US/obama_index_april_13_2009.jpg
More good news for democrrats, Republicans about even on the economy now:
http://www.rasmussenreports.com/public_content/politics/mood_of_america/trust_on_issues/trust_on_issues
ken, I have to admit, if I were US President and intent on destroying the US, this would be a very effective first strike. A vast excess of spending coupled with shifting the tax burden onto a minority.
“Andrea: Polls predicted the election results very accurately, and they all show much stronger support for Obama than for the Congressional GOP that is opposing his policies. “You can’t trust polls” is the last refuge of someone who doesn’t like what they are saying.”
Yep, and the one poll that called it spot-on is Rasmussen, which you don’t seem to like when your candidate ain’t doing so well anymore.
No kidding Mike, That CBS/NYT poll oversampled Dems by 16%. That kind of oversampling could make Gordon Brown look good.
Rand: The record for the last 28 years is clear: Republican presidents have exploded the deficit, the one Democrat got it under control. You choose to prefer your preconceived theories over the facts in front of you. The idea that the chart says anything about Obama is ridiculous. The chart would look much worse with McCain’s tax plans.
Bill: Bush doubled the debt in only 8 years. Obama isn’t repealing the Bush tax cuts for 98% of taxpayers, and he’s giving a break to 95%. Higher cigarette taxes are good public health policy and good fiscal policy. ARRA includes an AMT fix. If Bush hadn’t left Obama a wrecked economy the deficit would be fine.
Mike: So you only pay attention to the poll with the lowest approval rating for Obama — how convenient for you.
I’m under no illusions that Obama’s popularity will necessarily last, there are a million things that could change. But the idea that the American people will rise up and oppose him because of deficit projections flies in the face of all evidence, past and present. Reagan and George W. Bush presided over huge deficit increases, and it did not stop them from winning reelection. Obama’s approval rating has hardly moved since he signed ARRA and announced his budget. My guess is that the voters will give him a year or so grace period on the economy. If it isn’t improving in 2010, or if it turns south again in 2011 or 2012, he’ll be in trouble. But the deficit has very little to do with whether the economy will be growing in 2011 or 2012.
The record for the last 28 years is clear: Republican presidents have exploded the deficit, the one Democrat got it under control.
Only if one completely ignores what was happening on the Hill during that period. Are you really so monumentally stupid and primitive as to think that the Chief makes the rain fall and the crops grow and deficit reduced? That only the president has such power?
I really don’t understand how you expect that anyone can take you seriously after this absolute bullshit and pathetic attempt to rewrite history.
You continue to make a complete laughingstock of yourself here. Are you a really such a glutton for punishment?
Jim, thing is the 2008-2009 budget shortfall is about the same amount as in Bush’s previous seven years combined (using the graph above), which was already noted as a really bad time for budget deficits. So how does Obama fit into your characterization about Democrat presidents having lower deficits. Sure Obama got the worst hand ever dealt to a new president since Herbert Hoover, but there’s no justification for the current level of spending.
To be blunt, I don’t see a “million things” taking down the Obama administration. Instead, I see a poisonous disregard for the future taking down the Obama adminstration.
“Mike: So you only pay attention to the poll with the lowest approval rating for Obama — how convenient for you. ”
So Jim, you happen to ignore the one poll with an unblemished record while citing one of the ones with the worst recent track record which happens to be the one with the highest approval number.
How convient for you.
How’s your whistle holding up?
So Jim, losng 4 of something is bad and losing 8 is better? I’ll remind you again, this isn’t Bush vs Obama, it’s out of control spending vs complete annihilation spending. I don’t think anyone here was happy with Bush spending. Republicans in Congress forgot how they got there. Though they are pikers compared to Pelosi and Reid. So now we have a perfect storm. Obama delegated his budget writing to Pelosi and voila! More spending than ever before in the history of the nation by a trillion dollars with falling receipts. If I punch you in the nose and you say that’s bad. Shooting you won’t be better than a punch in the nose, it will be worse. If spending a bunch of money is bad, spending even more by half can’t be good either.
Andrew Sullivan says Bush is responsible for $32 trillion in borrowing + future unfunded mandates.
http://andrewsullivan.theatlantic.com/the_daily_dish/2007/12/the-cost-of-bus.html
I think a lot of those increases in unfunded mandates (Social Security, Medicare) originated with policies prior to Bush.
Andrew Sullivan went completely out of his mind from Bush derangement several years ago.
Rand:
Only if one completely ignores what was happening on the Hill during that period.
Carter and Reagan had Dem Congresses, which one ran bigger deficits? Clinton and George W. Bush both had GOP Congresses; one ran surpluses, the other doubled the national debt. Any way you slice it, the modern GOP is the deficit champion.
Are you really so monumentally stupid…absolute bullshit and pathetic attempt… complete laughingstock…
Is name-calling the best you’ve got?
Karl:
Sure Obama got the worst hand ever dealt to a new president since Herbert Hoover, but there’s no justification for the current level of spending.
What spending would you cut? The deficit is exploding because revenue is falling, and anti-recessionary stimulus and social spending are rising. Both factors are the expected consequence of a deep recession, which began long before Obama got there. Cutting back on spending at this point would make the recession deeper.
Mike:
So Jim, you happen to ignore the one poll with an unblemished record…
I didn’t ignore it, it’s part of the RCP average. You’re ignoring everything but your favorite poll. Btw, there’s no such thing as a poll with an unblemished record. Rasmussen had Obama winning the New Hampshire primary by 7 points; he lost by 3.
Bill:
I could take this tea party thing more seriously if its participants hadn’t been silent during reasonably good economic times, which is when the government should be able to balance its books, and only sprang to life when there was an economic crisis that threatened millions of the less fortunate. The impression is that it’s okay for the GOP to borrow trillions to pay for tax breaks for the wealthy and an unnecessary war, but we can’t let Democrats try to protect the poor and unemployed from an economic disaster that they had no part in creating.
Rand: Whatever you think of Andrew Sullivan, he was citing the Comptroller General of the United States and head of the GAO, who presumably is not insane.
Sullivan refers to the $32 trillion as “The Cost Of Bush.” That assessment can be true only if the increase is due to new legislation signed into law by Bush. I have a hard time believing that. It seems highly likely that the vast bulk of this increase was inherited from past administrations – especially the architects of our two biggest entitlements, FDR and LBJ.
Most of the fiscal exposure is due to Social Security and Medicare promises. I vaguely recall that Medicare estimates are always increasing, because they’re constantly finding out that the old estimates were off.
Now, Bush did sign Ted Kennedy’s drug entitlement program, and that’s gonna cost big. But double-digit trillions?
The entitlement programs are the easier portion of the fiscal exposure to deal with (political resistance notwithstanding) – simply reduce or cancel the programs. Reneging on debt is a far different story.
> Bill: Don’t complain to me about deficits unless you voted against Reagan and both Bushes.
That’s nonsense.
If deficits are bad, then complaining about them is appropriate even if one previously didn’t complain.
Jim’s argument is basically “you did wrong stuff so I get to do more wrong stuff.”
> they’re the reason Obama’s deficits will start so high.
Obama is tripling Bush’s deficit and that’s Bush’s fault?
> To support the GOP prior to 2009 and only now get concerned about debt is the height of hypocrisy.
Note that Jim avoids the question of being correct.
> I’m not okay with huge deficits.
Jim is okay enough with huge deficits to push them.
Interestingly enough, Jim doesn’t extend the same courtesy to folks who he associates with smaller deficits.
> Obama isn’t repealing the Bush tax cuts for 98% of taxpayers, and he’s giving a break to 95%.
Not if you count the other increased taxes that they’ll be paying
> Higher cigarette taxes are good public health policy and good fiscal policy.
In other words, any tax increase “for their good” doesn’t count….
Obama is tripling Bush’s deficit and that’s Bush’s fault?
Yes. The 2009 deficit was going to be well over a trillion no matter what Obama did — the year started before he was in office. The 2009 deficit is a reflection of the state of the economy, which is Bush’s legacy.
If deficits are bad, then complaining about them is appropriate even if one previously didn’t complain.
The point is that this complaining is transparently insincere. If you only complain about Democratic deficits you aren’t complaining about deficits, you’re complaining about Democrats.
Jim is okay enough with huge deficits to push them.
Yes, when they are better than the alternative, and right now that’s the case. There was no output gap, and therefore little justification for deficit spending, from 2003 to 2008.
Jim, you wrote:
Karl:
What spending would you cut? The deficit is exploding because revenue is falling, and anti-recessionary stimulus and social spending are rising. Both factors are the expected consequence of a deep recession, which began long before Obama got there. Cutting back on spending at this point would make the recession deeper.
Halt the bailouts for starters. Bankruptcy court is for these companies. A deep recession is warranted under the circumstances. Pay only what is required under FDIC obligations. Don’t pay off on what wasn’t insured. Eliminate Fannie Mae and Freddie Mac. Put off ideological programs like universal healthcare and carbon credits.
Reduce the overhead of hiring US workers. Reduce Social Security taxes (and pay for that by reducing Social Security payouts). Eliminate employer tax rebates and government mandates for employee health plans. Neuter labor union laws. Eliminate the AMA’s monopoly on granting professional status for doctors.
If I could, I would greatly reduce subsidies. Reduce or eliminate farm subsidies, cost plus contracts, education loans, energy subsidies for fossil fuels, nuclear, and renewable. Gradually end entitlement programs like Social Security and the medicare/medicaid programs. Switch the federal government retirement program over to 401Ks.
I would reduce government bureaucracy. For example, there are easy targets like HUD, Amtrak, or the ATF. Just end those programs. A number of others should be repositioned to take advantage of the huge US economy. For example, the defense industry needs to be turned into a far more competitive industry. Any gear which you can’t get three or more competitors for, should eventually be phased out from the US military. This includes such things as aircraft carriers and fighter jets.
And to briefly forestall accusations of naivety, I realize that the US probably won’t implement most of these ever. Jim was just asking what I’d do, if I had this magic wand.
Here’s a tiny tidbit of reform: eliminate OSHA. Let the people who have an actual stake in workplace safety – insurers – write the safety regs. Because of competing insurers the regs won’t be too draconian, and because of the cost of workplace unsafety they won’t be too lax.
> The point is that this complaining is transparently insincere.
Not at all.
And, in some sense, it doesn’t matter. It’s good to oppose bad policy, regardless of the reason for said opposition.
> The 2009 deficit is a reflection of the state of the economy, which is Bush’s legacy.
Umm, Bush pretty much let the left run Fannie, Freddie, and CRA.
Bush’s budgets had less spending than the Dem proposals. (Yup, even the prescription drug monstrosity.)
I note that the dem congress didn’t even bother to pass a budget during 2008. Instead, they ran continuing resolutions, hoping for a Dem president.
The record for the last 28 years is clear: Republican presidents have exploded the deficit, the one Democrat got it under control
All revenue and spending bills start in the house of representatives. The democrats controlled congress during ALL of the deficit spending of the last 35 years while the republican congress was in control during the only time of surplus during that period.
Andy: Fannie, Freddie and the CRA didn’t cause the housing bubble, the financial crisis, or the recession. That’s just GOP wishful thinking.
Dennis: The protests are aimed at Obama. If this was about Congress the protests would have started in 2007. Voters know that a GOP Congress doesn’t mean low deficits — from 2001 to 2007 it was just the opposite.
I recall that Bill Clinton was dragged kicking and screaming to sign those deficit-cutting reforms in 1995.
Anyone think the deficit would have been brought under control if HillaryCare had passed?
> Andy: Fannie, Freddie and the CRA didn’t cause the housing bubble, the financial crisis, or the recession.
Pull my other leg.
Note that Jim thinks that because congressional republicans and bush allowed deficits in 2001-2007, no one can oppose much larger deficits now. I wonder if he’ll complete the circle and insis that his support for large deficits now entitles him to criticize smaller deficits later if they’re under a govt that he doesn’t like.
Shorter Jim – the left is always correct.
Andy: Fannie, Freddie and the CRA didn’t cause the housing bubble, the financial crisis, or the recession.
I agree with the statement superficially, but Jim, you’re missing the big picture. The thing that is missing is the role these organizations and laws played in making a bad situation much worse. Fannie Mae and Freddie Mac, due to their special status with the US government enjoyed cheaper credit than their competitors. They used this advantage to jump into the kinds of investments that triggered the current recession. The CRA probably had modest effect, but it mandated unsound business practices at a time when the markets were already fragile due to systemic risk.
Sure, it’s likely that banks would have engaged in the same sort of behavior even without government interference. But what you miss is that these banks would both be more limited in the damage they could cause and have less incentive to engage in unsound practices.
> Fannie Mae and Freddie Mac, due to their special status with the US government enjoyed cheaper credit than their competitors.
You’re forgetting that the US govt propped up their stock price by giving its ownership by banks special treatment. This pretty much guaranteed that banks would own too much Fannie and Freddie stock, magnifying the damage to the financial sector when Fannie and Freddie went down.
You’re forgetting that the US govt propped up their stock price by giving its ownership by banks special treatment. This pretty much guaranteed that banks would own too much Fannie and Freddie stock, magnifying the damage to the financial sector when Fannie and Freddie went down.
Andy, you can’t forget what you didn’t know. Do you have any references for this so I can look it up?