Economy Crisis Caused by Good Intentions

It's a perfect storm. Soaring food prices and world hunger. Soaring oil prices and inflation. An imploding housing market. Banks going under. A weak dollar. A growing trade deficit. Foreigners buying up our businesses. GM in trouble. Lay-offs everywhere. The dizzying collection of problems is still growing. No wonder the economy is hurting!


And all this somehow came from good intentions? Is there something bad about good intentions? Not at all. Good intentions are infinitely better than bad intentions.. But when good intentions are applied unwisely, they lead to bad things. The trick is to not cause more harm than good when we mean well. It's the old "unintended consequences" pitfall. It seems that solutions to glaring problems are never, ever, simple.


Take one part of this perfect storm at a time. What about soaring food prices and world hunger?


Good intentions, on the part of environmentalists, was the cause. The World Bank now says 75% of the big jump in food prices came from using agricultural land to produce biofuels. Whose ides was that? Governments. Why did they decide to shift from food production to biofuel production? According to Stratfor, it was the pressure carefully built over the years by a well-funded environmentalist campaign, which climaxed a couple of years ago. Governments saw they had to do something, and chose biofuels as their best way out of the pressure. Good intentions, disastrous result.


What about soaring oil prices, with resulting inflation in other products and services? Again, good intentions played a decisive role. Demand for oil has been growing, true, and that was from markets, not good intentions. But supply also was artifically limited - that is, not by markets, but by government decisions. And where did those decisions come from? From decades-long, intensive pressure from environmentalists. Good intentions, no doubt about it. But terrible results, especially for the poor.


But what about the housing crisis? Again, good intentions, very good intentions. It has been an American ideal that everyone should own their own home. So over several administrations, there has been a push to get more people into home ownership. Just one problem: there are many people who cannot afford their own house, no matter how much help you give them. You can get them into owning a house, but they are high risk for not being able to keep it.


One of the major tools for getting people into home ownership has been very low interest rates. And that did help people with marginal credit buy homes. But low interest rates also do other things. One is that they attract everyone - not just the low-income - into buying real estate. This leads to a housing boom, and builds up the economy. It also leads to borrowing on your home equity and spending the money on consumer goods, or maybe entertainment and vacations. That fuels the economy even more. But it makes a "bubble." And bubbles are going to burst. And when they do, it will push the whole economy down.


Who made the very low interest rates? Who encouraged the housing boom by expanding institutions like Freddy Mac and Fannie Mae? The government. Why? Compassion and good intentions. They meant well, no doubt about it. Some of them also "did well by doing good," true, as we are beginning to find out. But even that would not have been possible without the good intentions of most of the government.


Meanwhile our housing bust is behind the collapse of banks and financial institutions. It is behind much unemployment and the cause of many lay-offs. If we have a recession, it will probably succeed in being the biggest cause.


Our housing bust is even behind much of the speculation that helped drive up oil prices. Why? Investors no longer wanted to invest in the housing market, so they turned to commodities like oil instead. But remember - it all started with very good intentions.


Our very low interest rates also have played a prime role in the weakening of the American dollar. One result has been foreigners buying up prime American properties and companies. When the dollar is weak, they want equity, not just any old investment.


As to the woes of General Motors, a huge problem for them is pension plans that they probably cannot finance. How did they get such lethal pension plans? Through the unions. When unions are really strong, they can kill a company by over-rich benefits. But when a company dies, those jobs are gone, and often pension plans too. Where are the unions then? And how do such things happen? Through good intentions, for sure. But with a bad result.


What can we do? Start with respecting the few big oil companies we have left in America, so that all oil giants are not foreign state-owned companies. Get out of the way, and let our guys drill and build new refineries. Stop with the biofuel subsidies. Let the market decide interest rates, and who will own their own homes.


But first of all, stop the madness! Good intentions are wonderful, but also very, very dangerous. They sap the brain and overwork the adrenals. Stop trying huge efforts and expenditures for big problems. Let the efforts evolve more slowly, not be suddenly created on a massive scale, to be done overnight. Use feedback loops to see how it is all working out. Do smaller pilot projects to see if new ideas will work. Junk bad programs, build on the ones that are working, listen to experts - all of them, now just the ones that agree with you.


Most of all, stop trying to fix everything through the government. That can be really hard in an election year, when politicians tend to promise big fixes for big problems, or alleged problems. Governments don't do small-scale stuff - only big programs, expensive enough to have a prayer of working before the next election.


Instead, use the market. Instead, use our most capable non-profits. The government is not good at feedback, at checking for results, at pilot projects. Or for turning on a dime or changing course on time or admitting when they are wrong. Or at anything small-scale. The open market can do all that, better and faster. Voluntary associations like our healthy non-profits can do that. That is where our compassionate efforts, and our best intentions, can work out to better results. Then mistakes will come, but they won't be so big, so distorting or do nearly so much harm, so fast, as when done bureaucratically and large-scale by governments.


(Note: this writer has seen much in the way of good intentions with harmful results, in the process of helping some 5000 poor or homeless people up and out of their situations with high success rates, in 3 charities in 2 states, over a period of 18 years. More harm than good is all too common. We can do better!)

Notes:On Fannie Mae and Freddie Mac - http://www.msnbc.msn.com/id/25712431


On how housing crisis developed and proposed legislation, http://www.msnbc.msn.com/id/25707593

Thank You, Tony

They never knew quite what to do about their respect for Tony Snow. The problem was, he wore his Christianity on his sleeve. When he had a Fox News show, he often closed with a short, sometimes frankly Christian editorial on his thoughts about something. That embarrassed a lot of his colleagues in the press. But he just did his work so darned well! No one could help respecting him for his professional excellence and his dependable respect and consideration for others.

When he stepped into being Press Secretary for the President, following the long torpor of McClellan's tenure, it was a welcome breath of fresh air for everyone. And Tony seemed born for the job. Unfailingly courteous but nevertheless an aggressive partisan for the President, he did the daily battle of the pressroom with class and integrity. The press responded with new vigor and seemed to thrive in a more heady press-room atmosphere. They grew fond of him. Heck, they loved him. Nobody could not like Tony Snow.

We all followed his battle with cancer, hoping and praying for the best. His death today was very bad news, and we feel a poignant loss of our own as we grieve with his family. We already miss him and his example. But oh, what a memory he left for us!

Thank you, Tony. Thank you.

(For a video of David Gregory's fine recent interview with Tony, go to http://www.msnbc.msn.com/id/25649744)

Do We Need A New Congress?

The media never tires of pointing to George Bush's low approval ratings, which hover around 30%. But at the same time, they keep ignoring the much-lower approval ratings of Congress. Today one poll reported Congress' approval rating had dropped to 12%. The Rasmussen Poll, 7-1-08, showed a new low of 9%. Single digits! Maybe the fact that they can't even have a vote on letting us drill for more oil could have something to do with it.

With just 6 months left in office, Bush's approval ratings really don't much matter. After all, he's not running for re-election. But Congress is. And we keep ignoring that it is Congress - not the President - that passes laws. Presidents can only propose laws, not pass them. So having a miserable excuse of a Congress can be even worse than having a poor President. And a sorry Congress is what we've got.

Getting a new Congress - that's what we should be working on!

Getting to Know John McCain

Who are our Presidential candidates - really? That is, what is their character? How do they behave under pressure? Or when no one is looking? Would they put us first, no matter what? Can we trust them?

At a gut level we know that strength and quality of character is the single most important thing we want in a President. Leading the most powerful country ever known, day after day, requires the best possible character we can find in a candidate. This Wall Street Journal article (http://online.wsj.com/article/SB120951606847454685.html) is full of the kind of clues we are looking for.

Col. Bud Day, Congressional Medal of Honor recipient, fighter pilot, Vietnam POW and roommate of John McCain at the Hanoi Hilton, said that after he escaped from a North Vietnamese prison during the war and was recaptured, his captor broke his arm and said "I told you I would make you a cripple."

The break was designed to shatter Mr. Day's will. He had survived in prison on the hope that one day he would return to the United States and be able to fly again. To kill that hope, the Vietnamese left part of a bone sticking out of his arm, and put him in a misshapen cast. This was done so that the arm would heal at "a goofy angle," as Mr. Day explained. Had it done so, he never would have flown again.

But it didn't heal that way because of John McCain. Risking severe punishment, Messrs. McCain and Day collected pieces of bamboo in the prison courtyard to use as a splint. Mr. McCain put Mr. Day on the floor of their cell and, using his foot, jerked the broken bone into place. Then, using strips from the bandage on his own wounded leg and the bamboo, he put Mr. Day's splint in place.

Years later, Air Force surgeons examined Mr. Day and complimented the treatment he'd gotten from his captors. Mr. Day corrected them. It was Dr. McCain who deserved the credit. Mr. Day went on to fly again.

Day became the most senior officer at the Hanoi Hilton. So he tapped McCain to lead religious services.

Today, Mr. Day, a very active 83, still vividly recalls Mr. McCain's sermons. "He remembered the Episcopal liturgy," Mr. Day says, "and sounded like a bona fide preacher." One of Mr. McCain's first sermons took as its text Luke 20:25 and Matthew 22:21, "render unto Caesar what is Caesar's and unto God what is God's." Mr. McCain said he and his fellow prisoners shouldn't ask God to free them, but to help them become the best people they could be while serving as POWs. It was Caesar who put them in prison and Caesar who would get them out. Their task was to act with honor.

McCain was also tortured by the Vietnamese practice of tying his head between his ankles with his arms behind him, and then leaving him for hours. The torture so badly busted up his shoulders that he still can't raise his arms over his head.

One night, a Vietnamese guard loosened his bonds, returning at the end of his watch to tighten them again so no one would notice. Shortly after, on Christmas Day, the same guard stood beside Mr. McCain in the prison yard and drew a cross in the sand before erasing it. Mr. McCain later said that when he returned to Vietnam for the first time after the war, the only person he really wanted to meet was that guard.

Day recounts how McCain refused to accept special treatment or be released early, even when very ill.

"He wasn't corruptible then," Mr. Day says, "and he's not corruptible today."

Day tells about McCain's family:.

For example, in 1991 Cindy McCain was visiting Mother Teresa's orphanage in Bangladesh when a dying infant was thrust into her hands. The orphanage could not provide the medical care needed to save her life, so Mrs. McCain brought the child home to America with her. She was met at the airport by her husband, who asked what all this was about.

Mrs. McCain replied that the child desperately needed surgery and years of rehabilitation. "I hope she can stay with us," she told her husband. Mr. McCain agreed. Today that child is their teenage daughter Bridget.

There was also a second infant Cindy McCain brought back. She ended up being adopted by a young McCain aide and his wife.

"We were called at midnight by Cindy," Wes Gullett remembers, and "five days later we met our new daughter Nicki at the L.A. airport wearing the only clothing Cindy could find on the trip back, a 7-Up T-shirt she bought in the Bangkok airport." Today, Nicki is a high school sophomore. Mr. Gullett told me, "I never saw a hospital bill" for her care.

Karl Rove worries about McCain's reluctance to talk about such things himself:

...Mr. McCain rarely refers to them on the campaign trail. There is something admirable in his reticence, but he needs to overcome it.

Private people like Mr. McCain are rare in politics for a reason. Candidates who are uncomfortable sharing their interior lives limit their appeal. But if Mr. McCain is to win the election this fall, he has to open up.

When it comes to choosing a president, the American people want to know more about a candidate than policy positions. They want to know about character, the values ingrained in his heart.

These qualities mattered in America's first president and will matter as Americans decide on their 44th president.

(Hat Tip to Norman Hooben)

U.S. Risks Losing Remaining Oil Companies

In this morning's news is evidence that Exxon-Mobile may be moving toward going out of business in a few years, at http://articles.moneycentral.msn.com/Investing/JubaksJournal/IsExxonMobilsFutureRunningDry.aspx. . Why? And what would that mean for the U.S.?

It is routine for the U.S. Congress to haul in the CEOs of big U.S. oil companies, slap them around before the cameras, threaten them with even more regulation if they do not "behave" and blame half the troubles of the world on them. That usually happens in the spring, when gas prices always, always go up because of seasonal changes as our few remaining refineries change over to summer production. But this spring, with the soaring worldwide price of oil, it happened as never before.

Never mind that the U.S. oil "giants" are now mere bit players in the world. In the 1970s, they controlled 70% of the world's oil supply. Now the enormous oil companies of other countries - all government-owned - control 80%.

Meantime, Congress will not let go of U.S. oil companies as whipping boys. Haliburton became their chief whipping boy all through the Bush administration, because of its misfortune in having had Dick Chaney as its CEO, until he gave up all those bucks to be Bush's Vice President. After some years of that, Halliburton finally had enough. They moved out of the U.S., to Dubai. Can anyone blame them? Being a favorite whipping boy gets old.

Now there are signs that Exxon-Mobile may be planning to go out of business over the next few years.

What is the problem? What isn't! Not only is Exxon continually harassed by Congress, it is running out of places to drill. Old fields are producing less. And almost every new possibility in the U.S., or off its shores, is off limits. Then too, the costs of drilling are soaring, because more and more of new discoveries are in "extreme" places, like in frozen Artic tundra, or through a mile of water and a mile of salt. It costs a lot more to drill there! The highly-specialized equipment for such drilling is in short supply worldwide, with the price being constantly bid up. Neither are they allowed to build any new refineries in the U.S

Great going, Congress! Not only are we paying dearly for oil. But Congress is ensuring we could pay even more, by persecuting, limiting and threatening the only oil companies we still have left. Exxon - now only 18th biggest in the world - is our biggest, most capable oil company. Congress is doing everything it can to make it even smaller. A couple of them even threatened openly to nationalize them, in open hearings. ("Nationalize" means to confiscate a company without paying for it - like Hugo Chavez did in Venezuela.)

Instead, what Congress should be doing is trying to build up the U.S. oil industry. What is left of it, that is. They should be cherishing and helping the few oil giants we have left. Subsidies might be wise. They should be learning from them, not lecturing them in ways that show their appalling ignorance of energy problems. They should be talking subsidies, the removal of restrictions, asking them what they need in order to access more of the world's oil reserves.

Our oil companies have done admirably under decades of persecution. They have stayed in business. Their profits may look large in dollars, but they are necessary for the huge investments required. They must spend huge amounts on ever-more-expensive exploration and development, long before returns come in - if indeed they ever do. We are on the road to losing more and more of U.S. oil companies if we do not wake up on time. U.S. energy now has a tiny fraction of the world's oil supply. It will get smaller fast if we do not turn around quickly on how we treat our oil companies. Without them, we would be at the mercies of the mid East oil countries and Russia.

There is a tiny chance that Congress might decide to give US comsumers a tiny concession, by letting oil companies drill in the US. Who do they want to do our drilling anyhow - US companies? Or someone like Hugo Chavez or the Saudis or the Chinese? The way we are going, that might be our only option.

How dumb can Congress get?