For the first time since the inauguration of the One, a breath of optimism has reached Wall Street. I’m not surprised. I don’t want to minimize the economic difficulties that face us—there’s been a lot of bad news, and there’s going to be more—but, as the One has now proclaimed, despite having mocked John McCain for making the same point, the economy is fundamentally sound. The banks that are in trouble are actually sound businesses that had very small units that made very large and very bad bets. The housing collapse and foreclosure crisis is concentrated in a few places:
California, Florida, Arizona, and Nevada are in trouble. The rest of the country is basically fine. A change in the insane mark-to-market accounting rule, which forces banks to assign mortgage instruments of uncertain value the all-too-certain value zero, would do wonders to restore confidence and transparency in the markets. (It was the merest hint of such a change that led to last week’s rally.)
So, why has the stock market been tanking? Why have I been predicting doom and gloom? Not because of the economic fundamentals, but because of political decisions. The Obama administration seems to want to recreate the 1970s or even the 1930s by attacking free markets and private businesses. When Republican Senators demand that insurance executives commit harikari, it’s clear that our political leadership is bad beyond description. Here’s my bold plan for economic recovery:
1. Replace mark-to-market accounting rules with mark-to-performance. Overnight, bank balance sheets improve, a market for mortgage instruments reemerges, and the stock market rallies.
2. Cut federal spending. Eliminate earmarks. Give the President line-item veto authority. Recognize that Congress has become the site of a massive tragedy of the commons, and that deep institutional reforms are needed to counteract that tendency.
3. Cancel the bailouts. Let companies go into Chapter 11. Let people who can’t pay their mortgages lose their houses. Didn’t we want more affordable housing? And wasn’t buying a 2,000 square foot house in San Bernardino county for $1.2 million obviously a risky thing to do?
4. Reject “card check,” i.e., Tony Soprano intimidation legislation, and pass a federal “right-to-work” law. Recognize that unions, whatever virtues they might once have displayed, now figure among the primary enemies of the future.
5. Admit that global warming is a hoax based on pseudoscience and political grandstanding, announce that carbon—an element necessary to life, and the foundation of organic chemistry—is not a pollutant, and denounce carbon taxes and cap-and-trade schemes as the attacks on capitalism and civilization they plainly are.
6. Cut taxes. How about a 15% flat tax on all income from all sources, with just a personal exemption of $5,000 for each person in a household? Worried that you might lose out? How about giving people the option: you can pay what you owe under the current scheme, or under that one?
The Obama administration, of course, is pushing in the opposite direction in every single case. That explains most of our current woes. They aren’t worse only because the pushing seems increasingly incompetent.