The collapse of the Obama administration’s mortgage relief program comes at a time when establishment Democrats are refusing to acknowledge the failure of government to spur economic growth. What’s worse, the administration’s Keynesian acolytes are beginning to call for more new spending, even in light of the program’s collapse.
The mortgage program was initiated in February 2009, less than a month after Obama took office. It offered $75 billion to homeowners who saw their home values fall far short of the money they owed to banks for loans. Another $200 billion was guaranteed to corrupt government entities such as Freddie Mac and Fannie Mae, which fostered much of the housing and bank crises in the purported interest of social justice. These government institutions offered loans for little to no down payment with promises of continuing and unending equity. When the housing bubble burst, so did this promise to homeowners; they were forced into foreclosure or into the arms of a government bailout.
But for many, a bailout hasn’t come. It was reported this week that nearly half of those who were part of the mortgage program have been forced to drop out due to an inability to provide proper documentation, including proof of employment. Such documentation is lacking because many homeowners, thanks to 10-percent national unemployment, have no jobs. The program has continued to complicate a housing mess that has roots as far back as the Carter and Clinton administrations.
This news should alarm the administration and encourage it to take an immediate pro-growth stance toward the economy, but most indications are that it won’t. Some Democrat politicians are calling to make the Bush tax cuts permanent or to institute other pro-growth solutions, such as temporarily suspending payroll taxes. However, this sensible approach runs contrary to the background of administrations officials, who are short on real-world private sector experience, and long on the teachings of economists like Paul Krugman.
To understand the economic priorities of the administration is to understand Krugman. The mortgage program is rife with the tendencies of his type of economics. The New York Times columnist and Nobel prize-winning economist has led the call for more spending, and even a second stimulus, claiming the first one wasn’t effective enough — despite the failure of the initial program. He’s attacked more libertarian suggestions, such as Rep. Paul Ryan’s economic roadmap, with farcical claims of budgetary malfeasance and improper scoring.
Ryan has refuted all of these claims, but this surely won’t curtail Krugman’s weekly screeds in the New York Times, which are often low on facts and ideas, and replete with ad hominem. His approach to economics and opinion writing is best illustrated in his book “Conscience of a Liberal.”