It’s the Over-Regulation, Stupid!

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First, Ms vanden Heuvel walks on her own eggshells by mentioning small business. Small businesses that are successful grow to be medium-sized and large businesses, with their owners getting taxed along with the proverbial ‘top 1%’ of income earners, the ‘rich’ who supposedly don’t pay their fair share. So which is it, they’re virtuous when they’re broke and can’t get a loan, but evil and greedy if they succeed and earn profits?

If private credit markets are a choke point, it’s worth asking, what’s choking them? Could it be that the attitude and policies of the current regime – having the least combined private sector business experience in recent memory, if not longer, especially in the White House – are making entrepreneurs and bankers wonder if lending and borrowing is worth the risk?  After all, even if the venture succeeds, or perhaps especially if it does, it becomes a target for micromanagement, taxation and expropriation.

“Federal loan guarantees” – here we go again.  When the 800-pound gorilla in the room ‘guarantees’ a loan (promises he’ll make the taxpayers pay for it in the case of default), then the lender is at liberty to be slothful in due diligence; the underlying risk of the business venture, creditworthiness or good character of the borrower matter less and less to the banker, because he’s not acting as a banker anymore, just a pawn of politicians playing Santa Claus. Again, that’s how the financial crisis of 2008 and countless other crashes and recessions were sown; government-induced distortions of price and risk signals sweep failure under the rug until the rot infects the whole house.

Vanden Heuvel proposes to punish people for hoarding (that is, managing their own resources according to their own best self-interest and thereby embarrassing the regime). Leftists are hostile to private property, and if we don’t do with ours what they think we ought, then we’re going to be ‘visited’. We must appreciate her (inadvertent?) honesty, admitting that the 1-2% tax rate on hoarding is only INITIAL.  Do we need reminding that that’s exactly how the income tax started?

Pause briefly to contemplate each of her phrases:

  • “Mr. Pollin estimates…” (well that’s a confidence-builder!)
  • “this combination could generate about three million new jobs” (where have we heard phrases like that before?)
  • “if it succeeds” (what principles of economics suggest that it is likely to succeed?)
  • “in pumping about $300 billion” (there’s been a lot of pumping, a hundred billion here, a hundred billion there, until we start talking about real money…)
  • “into productive investments.” (What are those? Answer: something that private citizens, businessmen, entrepreneurs, investors and speculators do; not legislators, administrators and bureaucrats.  And, the more productive, the more tax revenue paid by the rich-who-aren’t-paying-their-fair-share).

“This plan should get bipartisan support.” Why? What’s in it for Republicans? What’s in it for anybody?

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  • jbtrevor

    Excellent analysis…

  • Lance Winslow

    Yes, the reality is that over regulation is the real problem, academics don't get it because they've never run a business – those who can't teach syndrome. Further, why would a small business want to go into more debt right now to expand considering the health care law rules, and all the uncertainties of what ridiculous regulation these bureaucrats might come up with next.

  • Dan

    From all that's happened over the decades, I believe there needs to be a 4th Monkey. Traditionally, we've had the the See No Evil, Hear No Evil, and Speak No Evil monkeys. The 4th should be one that holds a wrench in his hands sitting next to a set of gears. Fast forward to the 4th monkey inserting the wrench and then crying, "Foul".

  • USMCSniper

    Yaron Brook: “Most people believe the Great Depression was caused by an ‘excessively’ free market–and they regard the massive expansion of government intervention under FDR as its cure. But as many economists have demonstrated, it was government intervention that caused and exacerbated the Depression–from the massive tariffs of Smoot-Hawley to a series of disastrous interest rate hikes by the Federal Reserve to antibusiness measures such as the National Recovery Act. “Few acknowledged this at the time, however. The Great Depression–a failure of government intervention–was called a failure of capitalism, and was used to justify even more government intervention. We are seeing this same process repeat itself today. “There is overwhelming evidence that our current crisis is the result primarily of government intervention in the economy, from the Fed’s inflationary policy of keeping interest rates artificially low to the creation and regulatory coddling of Freddie Mac and Fannie Mae to the government’s quasi-official policy of bailing out large financial institutions deemed too big to fail. But despite such evidence, this crisis is once again being blamed on too little government regulation and control of markets.

  • Patrick Henry

    For some time I used to give the benefit of the doubt to the left, deciding that they're misinformed, or simply stupid. Today, I'm convinced that they know exactly what they're doing. Destroying capitalism from within and eventually replacing it with some form of facism or socialism as their objective – always has been, always will.

    Its the equivelant of learning that your neighbor really did try to shoot you, it wasn't the gun accidently going off for the third time. The importance of this understanding has to do with my actions going forward. I can't resign myself to hoping that none of this will effect me or my family. I must take full responsibility for my situation.

    The question for defenders of liberty is, 'How do we educate more people, more quickly?' and 'How do we fight back more forcefully against people who would enslave us, without getting ourselves arrested or causing a backlash and hastening the end?'

  • Jim

    If we had regulation the bogus bond rip would never gotten as far as it did.

    A means of shedding some light on the dark economy was proposed by the head of the FCTC. She was ignored and disparaged by the banking industry . They claimed shedding light on the hidden trading would bring about economic collapse.
    This rejection occured during the Clinton administration.

  • Doug

    The CRA zombie lie again. So tiresome.