*The great wealth of the U.S. Economy has been built on the backs of entrepreneurs who do what they do best: create wealth.
The Subprime Lending Mess:
The federal government's actions contribute to what economists call moral hazard — that is, people taking risks because they know that if things turn out badly, someone else will bear a large portion of the cost. For the market economy to function well, it needs to be a profit system and a profit-and-loss system, with the losses being the penalty for bad decisions.
*Another way the feds contributed to the subprime mess was with a little-noted change in regulations by the comptroller of the currency in December 2005 that acted as the trigger. Financial planner Less Antman has pointed out that the comptroller started requiring banks to require minimum payments on credit card balances, causing increases of at least 50% for most cards and as much as 100% on others. Many people who hold subprime mortgages are people for whom a higher monthly payment on a credit card would be a problem. Imagine that you're such a person and that before the change you always made sure you made your mortgage payments. With the new regulation, you instead make your credit card payment but miss your mortgage payment, a widely observed transformation in the traditional American delinquency pattern.
*Yet another federal contributor to the subprime crisis is the Community Reinvestment Act. This act, first passed in 1977 and beefed up in 1995, requires banks to lend to high-risk areas that they otherwise would avoid. Those banks that fail to comply pay fines and have more difficulty getting approval for mergers and branch expansions. How ironic, then, that the same federal government, and many of its boosters, now attack Countrywide for following the very policies the government wanted earlier.
*Community activist groups and civil rights law firms had made their living by accusing banks of racism when the banks hesitated to approve loan requests from minority citizens with poor credit scores. Fair Housing laws, championed by American Heros like Martin Luther King, Jr., had long-ago outlawed the practice of ‘redlining’, which is refusing to sell or rent to blacks in certain neighborhoods. But a new generation of activists modified the concept of redlining, applying it not just to race-based home sale covenants, but to any refusal to lend to a minority member, even for sensible financial reasons.
*As every parent knows, the danger of cutting a special break for one child is that all the other children will demand the same thing.
Jobs:
Almost everyone wishes for a renaissance of American manufacturing but they need to know what it is they are looking to achieve. The loss of almost 4 million U.S. manufacturing jobs since 1998 seems easy to explain by cheap imports or the flight of plants to Mexico, China and other poorer countries. Job losses also stem from greater efficiency (fewer workers producing more goods) and slumping domestic demand (for communications equipment and computers after the dot-com bust and for housing materials and vehicles now). Despite those 4 million lost factory jobs. In the same period, U.S. manufacturing output rose 22%