To make matters even better, Roger Cohen's recent column, "America, Awaken," not only is chock full of Really Bad Ideas, but then links an article by none other than Bill Clinton on how to restore the economy. A two for one deal! Is this a great country, or what?!?
Alas, neither person has a clue on how to deal with the present crisis, although at least Clinton does advocate cutting corporate tax rates. Nonetheless, one good point does not negate the other stuff, as a centerpiece of Clinton's proposed "recovery" plan is the issuance of "loan guarantees" to the banks. I'm not kidding.
First, let us look at what Cohen wants: (1) An "energy policy" that continues to throw even more dollars after "green" energy initiatives that not only are boondoggles but also are gobbling up resources and giving nothing in return but expensive and inferior fuels and electricity; (2) An "industrial policy" that he believes will force American companies to do more politically-correct "investing."
Like so many at the Grey Lady, Cohen is like the people in the crowd in the Frederic Bastiat story of the "Broken Window Fallacy," in which the onlookers claim a boy who broke a baker's window is a public benefactor because the glazier will have employment fixing the window. In other words, Cohen, like the Bastiat characters, views only what can be seen and has no idea as to what is not seen. He writes:
One of Clinton’s energy ideas related to the cash incentive Obama had offered for start-up green companies. America moved in the past few years, the former president noted, from having less than 2 percent of the world market in manufacturing high-powered batteries for hybrid or all-electric cars to 20 percent, with 30 new battery plants built or under construction. Then — wait for it — Republicans in Congress wouldn’t extend the plan because they viewed it as a “spending program” rather than a tax cut.What Cohen does not say is that NONE of these companies can make it on its own in even a relatively free market. Instead, taxpayers are forced to cover the perennial losses that these firms will make. And Cohen truly believes that this is the way to a recovery.
This is madness, the ne plus ultra of American politicians betraying the American people. As Clinton noted, “We could get lots of manufacturing jobs in the same way” — that is, combining green energy and industrial policy.
The "madness" is not in pulling the plug on these subsidized ventures; the real madness is thinking that government can subsidize us into economic recovery.
Then there is Bill Clinton. I would urge readers to look over all the points, but I want to deal with the loan guarantee issue. Clinton writes:
Before the last presidential election, I tried for a year to get both Congress and the administration to deal with the fact that the banks weren’t lending because they were still jittery about the economy, and worried about the regulators coming down on them for bad loans still on the books. It’s not much better now. Banks still have more than $2 trillion in cash uncommitted to loans.Here is the problem: Clinton is demanding that banks lend for projects that are NOT going to help lead a recovery, but simply will reward people who are politically-connected. In other words, taxpayers will be on the hook (once again)for money lent to political entrepreneurs. I'm sure that Ben Bernanke will stand behind everything with his checkbook from the Fed.
So I suggested that the federal government set aside—not spend—$15 billion of the TARP money and create a loan-guarantee program that would work exactly the way the Small Business Administration does. Basically, the bank lends money to a business after the federal government guarantees 75 percent of it. Let’s say that the SBA fund has about a 20-to-1 loan-to-capital ratio, and it’s never come anywhere near bankruptcy. If we capitalized this more conservatively at 10-to-1, we could guarantee $150 billion in loans and create more than a million jobs. We should start with buildings we know will stay in use: most state and local government buildings, schools, university structures, hospitals, theaters, and concert halls. We could include private commercial buildings with no debt. Even if many are strapped for cash, allowing the costs of the retrofits to be paid only from utility savings means the building owners won’t be out any cash. It’s a “just say yes” system.
Yes, subsidies, tax-financed and tax-guaranteed loans. That will fix everything.