Williams helps us understand the Constitution

Always a good read, Walter Williams’ column this week is right on message for our audience. This week he reminds readers that Congress – primarily the people’s house – runs the government including generating tax revenue and determining spending allocations.

As the media and many politicians completely ignore the founding documents, over time they become less relevant. This is a dangerous path.

Williams does a good job describing the powers of Congress in Stubborn Ignorance. Here’s a line from the first paragraph.

Presidents cannot be held responsible for budget deficits or surpluses. A president cannot spend a dime that Congress does not first appropriate. Given these plain facts, are politicians, pundits and media people — who persist in talking about a president cutting or raising taxes, or creating a budget deficit — ignorant, stupid or deceptive?

My friend is right on the money. The ignorant, stupid and deceptive leaders and media types are making these types of statements over and over again to ensure voters stay ignorant and stupid.

Williams also touches on the current financial situation and delivers some facts – always ignored facts.

Many politicians and pundits claim that the credit crunch and high mortgage foreclosure rate is an example of market failure and want government to step in to bail out creditors and borrowers at the expense of taxpayers who prudently managed their affairs. These financial problems are not market failures but government failure. The Community Reinvestment Act of 1977 is a federal law that intimidated lenders into offering credit throughout their entire market and discouraged them from restricting their credit services to low-risk markets, a practice sometimes called redlining. The Federal Reserve Bank, keeping interest rates artificially low, gave buyers and builders incentive to buy and build, thereby producing the housing bubble. Lenders were willing to make creative interest-only loans, often high-risk “no doc” and “liar loans,” in order to allow people to buy more housing than they could afford. Of course, with the expectation that housing prices will continue to rise, it was no problem for lenders and borrowers but housing prices began to fall, leaving some people with negative home equity and banks in trouble.

Of course, Congress and the Executive branch have created additional reforms since 1977 that were designed to increase home ownership rates by minorities and low-income households. Republicans – including G.W. Bush – were involved in promoting these programs that were designed to force lenders to approve loans that would have otherwise been denied.

Government is at fault here. Using regulations, they twisted and manipulated the market providing guaranties that everyone would be backed by the full faith and credit of the United States.

Yes, lenders are at fault because they actively promoted the no money down philosophy. And yes, the borrowers are at fault because they were caught up in the frenzy and don’t have a clue to manage their household budget. They live beyond their means.

But heck, when there is zero risk, why not put all your eggs into the basket?