The Audacity of Capitalism

Well, I ain’t no Rhodes Scholar. And I understand that macro economics is a complicated and multi-faceted organism that cannot be understood by most of us, ‘the great unwashed.’ However, if one applies core principles to any situation it helps to cut through the murkiness and the nuance of political correctness and rhetoric.

As I write this, the President and both houses of Congress are trying to craft legislation to acquire some $700 billion worth of mortgages that may or may not be worth even half that amount. Say what? Since when is it the purview of the Federal Government to own private property? Keep this in the back of your mind whenever anyone talks about government spending: the government DOES NOT generate revenue. It only takes in revenue in the form of taxes, most of them confiscatory. Whatever money government spends it has confiscated from you and me. Since its our money, do we want to own three-quarters of a trillion dollars worth of risky assets?

Instead of burdening future generations with more debt, why not let the free market correct itself? Is a bailout needed? Yes. Should it come in the form of massive spending and thereby federalizing even more of the country’s market? In my humble opinion, no. Despite what many are saying, this mess is not a failure of capitalism. This is a result of what happens when free market forces are artificially manipulated. These sub-prime loans that are at the root of these precarious assets were made often at great risk and against standard loaning principles. This was done for two reasons; a stick and a carrot. The stick: pressure on lenders through political correctness backed by legislation to ease lending regulations. The carrot: Fannie and Freddie who would buy up these mortgages. A house of cards that inevitably came tumbling down.

So what should be done as a ‘bailout’? I say let capitalism work. Cut capital gain and corporate tax rates. That will free up capital that was otherwise set aside to go to Washington. Suspend federal taxes on gasoline for a time. That will serve two purposes. Cut, cut, cut! Why can’t government ‘suffer’ in all this instead of taxpayers? Why can’t the government do with less instead of forcing us to suck it up? While we’re at it, why don’t we cut spending on any number of unnecessary government programs?

By the way, studies prove that cutting taxes increases revenue to the government. So there you go, everyone wins! One problem, taxing has become a tool for social architecture and fairness (Barack Obama said so himself) instead of simply a means to raise revenue. The last thing the Washington ruling class wants is more money in the pockets of their loyal subjects. So while a simple answer to stimulate the market would be to cut taxes, government is standing in the way of that, for more reasons than just hoarding power. Don’t forget we’re neck deep in an election process and that this issue is being exploited for votes.

I’m a proud capitalist pig. I believe in the unfettered workings of the free market system. In a free market, institutions that engage in questionable lending practices are driven out of the market by companies with stronger assets, seamlessly. The free market easily phases out obsolete and waning products and replaces them with the newest mousetrap, seamlessly. The seams are put in place by Washington. Let’s get Washington out of the market and back to its Constitutional duties; mainly providing for a common defense and taking the occasional census.