Unexpected Consequences, the Hallmark of Liberalism

Liberalism's strength is that is sounds so good. It's weakness is that it's application is usually disastrous. It proposes solutions to problems without examining what other effects will manifest when the solution is implemented. These effects are usually predictable but are often misnomered "Unexpected Consequences" by Liberals. Liberal damage is most severely felt in economic matters. Because they like to pretend certain economic forces do not exist, they forge ahead and act surprised when the inevitable ill outcomes materialize. But as the Nobel-Prize winning Economist, Friedrich August von Hayek pointed out, "Economic forces are just that, forces; ignore them at your own peril."

This week we were treated to a new volley of simplistic solutions with some very nasty "unexpected consequences" looming in them. First, we had Barney Frank insisting that banks lower the payments for home borrowers who were having a difficult time making payments. The implication is that the principle be reduced, transferring money/assets from the bank to the borrower. The obvious result is that millions of home owners stay in their homes and avoid bankruptcy. But what other effects will follow? Just as water under the force of gravity seeks lower ground, economic activity seeks profit. By rewarding borrowers that did not pay their mortgage timely, you encourage this activity. You set the expectation that the government will rescue you if you get into trouble. This increases the number of borrowers going into arrears. At the same time you punish banks for making the loans. This causes a decrease in the amount the banks are willing to loan. We already have this problem and Frank proposes something to make the problem worse? What is more insidious is that when the problem does worsen, he will propose another "solution" more invasive and more idiotic to keep the abyss going.

Next, congressional leaders went after insurance companies. Harry Reed claimed that insurance companies have seen profits grow four fold over the last seven years. The fact is that they have seen their profits drop precipitously over the last two. But liberals just hate it when we confuse the issue with facts. Just as there is a reason a ball drops to the ground when thrown out a second-story window, there is a reason why insurance profits are the way they are. The simplistic answer is that they are greedy. But few businesses are altruistic. Greed and fear are essential to a free market. Businesses vie for your money (greed) and hope they make you happy (fear). This balance keeps prices in check while maximizing your satisfaction. You vote with your money who wins. Losers disappear in this economic Darwinism (Hey, don't liberals adore Darwin).

Government has only greed because it possesses what no business has, power. Government can be useful when it uses power in endeavors that require it. For example, military power can be used to strike fear in our enemies while sparing us the fear of invasion. When government power is aimed at economic activity, you get a disaster like Chrysler. Bailing out Chrysler in the '70s removed the fear of making bad decisions. Once I owned a Dodge that had its transmission blow at 60,000 miles. The dealer simply rolled his eyes and said that was happening to all them, then handed me a $700 bill. I decided not to buy any more Chrysler products. But the government reached into my pocket and undid that decision with a second bailout. Chrysler, immune from fear, can proceed without ever changing. Meanwhile, we instill fear in the insurance companies with the zeal Bush used against Al Qaeda. Do you have any doubt the Federal government can wipe out the insurance industry just as effectively?

And once the insurance industry is gone, replaced with an entity with massive power and greed and virtually lacking in fear (i.e., the government), how will that will be better? How will it be punished for mistakes? Currently, the government is tasked with curbing one of very few vices in capitalism, fraud. Bernie Madoff was supposed to be stopped by Federal regulators. The head regulator in New York at the time was Tim Geithner. And how was he punished for this massive failure? He was made Treasury Secretary. What kind of punishment is that? (Can somebody remind me why Obama thought he was the only one smart enough to do that job?)

Finally we have the proposal to cap executive salaries on Wall Street. This asinine idea presupposes that government officials can correctly guess what the salaries are supposed to be. Again, economic forces, like physical forces kick in. And just as throwing a couple liberals out a second story window may make you feel good for a while, capping executive pay will also leave you with a big mess in the end, no matter how many times Congress votes to repeal the Law of Gravity. This stuff has been tried before!

In Venezuela economic forces caused milk to rise in price above what most people could pay. Chavez vowed to fix the price at a lower level. People cheered at this idea (people often cheer at liberal ideas when the nasty consequences are hidden or glossed over). Now you cannot find milk anywhere in Caracas or in most of Venezuela. Do you think people would have cheered if he had promised to make milk disappear from the country? Will people cheer when their 401(k) plunges from lack of talented corporate leadership. Will people cheer when their insurance coverage is terminated, their doctor is force out of practice, and the number of years it takes to get a doctor increases as the pool of practicing doctors shrinks?

In the '70s Nixon responded to inflation by freezing wages and prices. The price of beef was set below the market price. Beef produces could not make a profit (there's that awful word again) and rushed their herds to slaughter. For a while the market was awash in beef. Then nothing. With no beef on the market people began searching for substitutions. Toast with peanut butter became known as a Nixon Burger. (Fortunately we were spared the Clinton Burger but I still hate to imagine what an Obama Burger would be made of.)

So Barney, Harry and Nancy, next time you talk to me about economic matters, let's all pretend I am an intelligent human being (i. e., a conservative) and give me the facts. And don't pretend you can squeeze one part of a balloon without affecting the rest of the balloon. Better yet, keep your hands off my balloon and go get your own!