October 7th, 2012

Thomas Sowell: On a Roll


Prof. Thomas Sowell is one of our favorites.  Our second post, March 25, 2012, highlighted what Sowell calls his “favorite book”:


That book – A Conflict of Visions – presents his view that there is a basic conflict between two visions of the role of government, a conflict the Founders resolved one way in 1789, but which has been contested since the beginning of the Progressive movement, and which has led Americans to our current political divide.

Sowell is on a roll.  In a recent article, he highlights another topic – the 2008 housing bust.

Our view is this:   had The Second Bill of Rights and The New Federalist Papers been in place, the nation would have been spared much of its current economic trauma.

Please read the entire article:  it is well worth the time and effort.  Excerpts follow:


The Brass Standard

Politics takes a lot of brass.  And Bill Clinton is a master politician.  His rousing speech at the Democrats’ convention told the delegates that Republicans “want to go back to the same old policies that got us into trouble in the first place.”

That is world class brass.  Bill Clinton’s own administration, more than any other, promoted an unsustainable housing boom, which eventually and inevitably led to a housing bust that brought down the whole American economy.

Behind all the complex financial processes that reached to Wall Street and beyond, there is one fundamental fact:  many people stopped making their mortgage payments.

Why did that happen? Because mortgage loans were made to people who did not meet the long-established qualification standards for getting a mortgage loan.  And why did that happen?  Because the Clinton administration threatened lawsuits against lenders who did not approve mortgage loans to minority applicants as often as to white applicants.

In other words, racial quotas replaced credit qualifications.  A failure to have racial statistics on mortgage approvals that fit the government’s preconceptions was equated with discrimination.
. . . . . . .

What was the evidence for all the lending discrimination that the government was supposedly trying to prevent? Statistics.

In the year 2000, for example, black applicants for conventional mortgage loans were turned down at twice the rate for white applicants.  Case closed, as far as the media and the government were concerned.  Had they bothered to look a little deeper, they would have found that whites were turned down at nearly twice the rate for Asian Americans.

Had they bothered to check out average credit scores, they would have discovered that whites had higher average credit scores than blacks, and Asian Americans had higher average credit scores than whites.
Such inconvenient facts would have undermined the whole moral melodrama, reducing it to a case of plain economics, with lenders more likely to lend to those who were more likely to pay them back.  Once lending standards were lowered, in order to meet racial quotas, they were lowered for everybody.  Deadbeats of any race could get mortgage loans, and most were probably not minorities.

Democrats like to blame the ‘greed’ of business, rather than the policies of government, for problems.  But lenders don’t make money by lending to individuals who don’t pay them back.  That is what government forced lenders to do, beginning under the Clinton administration.  And the eventual collapse took down the economy.
It takes brass to defy the facts.  And Bill Clinton has brass.”

Prof. Sowell’s analysis reminds us of (i) F.A. Hayek, (ii) another prior post, http://www.thenewfederalism.com/the-substance-of-individual-freedom-and-liberty-rights-number-49/and (iii) essay Number 49 of The New Federalist Papers (Valerius).  Here is an excerpt from Valerius:

“The pattern Hayek saw in the 1940’s predominates in twenty-first century America—ever bigger failures in central planning lead to even bigger promises to get it right with the next, more comprehensive central plan.  The unintended casualty is an increasingly cynical citizenry, ever more suspicious of government institutions that perennially promise—but can’t achieve—agreement on everything.”

Here is Hayek, from The Road to Serfdom, at p. 104.

“It may be the unanimously expressed will of the people that its [legislature] should prepare a comprehensive economic plan, yet neither the people nor its representatives [can] agree on any particular plan.  The inability of democratic assemblies to carry out what seems to be a clear mandate of the people will inevitably cause dissatisfaction with democratic institutions.  [Legislatures] come to be regarded as ineffective “talking shops,” unable or incompetent to carry out the task for which they have been chosen.  The conviction grows that if efficient planning is to be done, the direction must be “taken out of politics” and placed in the hands of experts—permanent officials or independent autonomous bodies.”

Is there a lesson for us?  When collectivist plans over-promise, and then fail, factions don’t blame the plan or the futility of collectivist planning.  Instead, factions wrongly deflect blame to our constitutional institutions.

With The Second Bill of Rights in place, this cycle, driven by factions, will be substantially interrupted, as the Founders intended.  Our  September 13, 2012 post explains how.  http://www.thenewfederalism.com/obliging-government-to-control-itself-taming-the-regulatory-state/

The Second Bill of Rights is presented in 50 short essays that comprise The New Federalist Papers.  We hope you will dig much deeper into these ideas by getting and reading our new book.  Come to your own conclusions.

To help us rekindle individual freedom and liberty in the United States, click on the Book link above or go directly to Amazon:  http://www.amazon.com/gp/product/0984876405/

With malice toward none, and charity for all!


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