White Hats, Dim Bulbs
November 19, 2010 by
S.M. Oliva
Today Federal Trade Commission Chairman
Jon Leibowitz appeared at a White
House political event to explain how agency is “fighting for the middle
class.” He opened with a dubious history lesson:
- Sixty-six years ago, Franklin Delano Roosevelt signed the GI bill
into law, and the American middle class was born – born of a government
program that put millions of returning World War II veterans through
school and into their first homes.
- Sixty-six years later, unemployment, foreclosures, and financial
scams threaten to shake that middle class apart; sadly a solider
returning home from Afghanistan today is more likely to find a notice
throwing his family out of their house than he is a program putting them
into one.
- And though there are many in public service – many of us in this room
today – who strive to continue FDR’s commitment to justice for the middle
class, too many families feel abandoned by Washington, left to drown in a
sea of bad guys and black hats.
- At the FTC, we want to reclaim the white hat for the U.S.
government.
Our own Thomas DiLorenzo took issue with the myth of the G.I. Bill
as enabler of the middle class in a
1997
op-ed:
- the public purpose of the G.I. Bill was to smooth the transition from
military to civilian life after the war. But ulterior motives were also
present. Washington Keynesians wrongly feared the economic consequences
of putting this many people in the private sector at once; better to let
them flounder around in schools for a few years.
- Left-liberals wanted universities to be “democratized” and purged of
traditional notions of merit and class. These ideologues saw veterans as
a helpful tool (90 percent were eligible to receive funds) in this
egalitarian effort. Moreover, colleges and universities across the
country wanted government subsidies, just as they do today.
- There’s a myth that most veterans would not have attended college
without federal government help. In fact, myriad programs existed at all
levels of society. Virtually every major church, civic organization, and
large corporation raised money to provide them, and most states
established loan programs as well. These could have worked without
negative effects on schools. But they were preempted by the feds and
history’s largest infusion of public dollars to education.
- In 1946, the program’s first year, the government dumped $1.3 billion
on higher education. This may not seem like much today, but it was then
the largest program giving direct payments to individuals, exceeding
unemployment benefits, Social Security (by four times), military
retirement (by one third), and even agricultural subsidies during the
heyday of rural central planning. Two years later, it had exploded in
cost by 250 percent.
Curiously, the topic of Leibowitz’s remarks today was not higher
education, but mortgages, specifically new FTC mandates regarding
so-called mortgage rescue companies. Leibowitz said “[h]undreds of
thousands of consumers have lost hundreds of millions” because of
scammers who promise to help homeowners modify their loans in exchange
for upfront fees.
I don’t doubt that such scams exist. But for Leibowitz to put on his
“white hat” and claim the government is here to protect the middle class
is really ignoring the forest for the trees. It was the feds who
precipitated the mortgage crisis in the first place by encouraging the
“middle class” to live beyond their means and take out extravagant
mortgages while simultaneously subsidizing (and regulating) the lenders
through Freddie Mac and Fannie Mae, disabling the market’s mechanism for
weeding out bad loans. Any “mortgage rescue” scams currently in operation
owe their existence to decades of federal policy that over-inflated the
housing market. Chairman Leibowitz doesn’t appear to offer any relief for
the underlying causes, only a minor symptom.
Leibowitz’s invocation of the G.I. Bill demonstrates his inability to
grasp the problem. Just as that federal intervention inflated the higher
education market by falsely associating economic wealth with college
degrees, the housing boom preached a false message that rising home
prices equated easy money. It’s a scam so obvious that you’d think the
FTC chairman would have recognized it. Of course, Chairman Leibowitz has
spent the bulk of his professional life inside the Washington suburbs
where wealth and the middle class are synonymous with government
expansion so it’s perhaps unreasonable for him to see that which should
be obvious.
http://blog.mises.org/14704/white-hats-dim-bulbs/
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