Opinion: Oh, for the days when Hillary was a Wal-Mart board member
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
Who among the Democratic candidates is wearing the rose-colored glasses? Is it the battle-tested ‘I’m ready on Day One’ Hillary Clinton, or the junior Illinois Sen. Barack ‘Obambi’ Obama? The Chicago Tribune’s Steve Chapman picks apart Clinton’s proposed ‘freeze’ on home foreclosures and finds an answer. I’ll excerpt his column here before going into my own rant on Clinton’s economic populism:
In her campaign, [Clinton] presents herself as an experienced hand with a penchant for practical solutions, suggesting that her opponent, U.S. Sen. Barack Obama, dispenses nothing but vaporous oratory detached from the real world. When it comes to the mortgage meltdown, though, her policy rests on the assumption that upon arriving in the Oval Office, she’ll open the closet and find a magic wand. Obama, by contrast, acknowledges the bitter truth that when government regulators clamber into a carriage, it can easily turn into a pumpkin. Their approaches to the problem are not an aberration but a symptom of a larger difference. Obama is not a staunch free marketeer, but he grasps the value of markets and shows some deference to economic laws. Clinton, however, tends to treat both as piddly obstacles to her grand ambitions.
Regarding the effects of the foreclosure freeze, Chapman continues:
After all, it’s easy to pass a law prohibiting lenders from foreclosing. But the first result of that would be a lot more borrowers deciding that paying the mortgage is no longer the highest priority. Those who have practiced strenuous frugality in order to meet their monthly obligations would get nothing, and those who behaved recklessly would prosper. The second result would be to choke off the flow of credit. When a bank makes a loan, it needs some assurance of being repaid. When it isn’t, foreclosure offers a way to minimize its loss. If Clinton blocks that option for a time, banks will be markedly less eager to offer loans -- particularly for anyone with a less than perfect credit history.
The rest of Chapman’s column is a pretty good primer on what would happen under any long-term interest-rate freeze or other major interruption of the current housing market correction. At Slate, Daniel Gross offers a slightly more technical explanation of post-bubble price corrections and interest-rate freezes.
After looking at Clinton’s ‘Economic Blueprint for the 21st Century,’ it’s tough not to agree with Chapman’s candidate-of-experience skepticism — and not just on foreclosures. Much of Clinton’s blueprint, released today, is a just-in-time attempt for tomorrow’s Wisconsin primary to cozy up to the more progressive wing of the Democratic Party in Obama’s camp. Given that, it’s easy to dismiss this as a typically cycnical campaign exercise. But you shouldn’t — read why after the jump.
Why should you take Clinton seriously? Because she wants you to. Unlike the soaring rhetoric of Obama’s speeches, she says, her proposals are the stuff of realism and hard experience. In this way, she’s similar to Republican candidate John McCain — just as he makes his honesty and honor campaign issues, Clinton plugs her own pragmatic approach to governing. So her departure from pragmatism should be treated as if she were breaking a campaign promise, similar to McCain’s recent conversion on torture.
And boy, does Clinton ever break with economic pragmatism in her blueprint. She opens immediately with a three-point plan to ‘end the foreclosure crisis’ — both the 90-day moratorium and interest-rate freeze discussed above, and setting aside $30 billion in public money for assistant to distressed borrowers. We’ve already read why that’s bad.
Other parts of Clinton’s plans lean heavily toward economic populism — retooling existing free-trade agreements, temporarily halting new ones, more sick days for American workers, ending this and that corporate tax loophole and so on. If I remember correctly, this kind of platform didn’t work so well for John Edwards, to whom the free market has been very kind (though I see a bright spot in Clinton’s support for sustainable energy research).
On their own, Clinton’s individual points don’t stink to badly of naive economic populism. But taken as a whole, they point to her regard of economic laws as what Chapman calls ‘piddly obstacles to her grand ambitions.’ If you can deduce any Clinton economic philosophy at all, it’s one of deep distrust of the market and a disposition toward very heavy government intervention that could prolong already bad economic slumps.
Even worse is positing that intervention as a solution to the mortgage crisis. To those of us who have been priced out of our respective real estate markets, that sounds like a plan to reduce the stock of affordable housing.