â€œWeâ€™re going to work with federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4 percent,â€ Obama said in his speech last week to announce the $450 billion jobs package. The plan would put â€œmore than $2,000 a year in a familyâ€™s pocket and give a lift to an economy still burdened by the drop in housing prices.â€ Mark Zandi, the chief economist at Moodyâ€™s (and a self described liberal), immediately announced that the new jobs program would add two percent to GDP and 1.9 million jobs to the economy next year. Kevin Ungar of Mother Jones piled on with: â€œCurrently, the federal government can borrow at an astonishingly low 2 percent interest rate. If we can make investments that will produce a predictable return of at least 3 percent in increased revenue, why would we not want to take advantage of these low rates to make those investments?â€
With that kind of logic, maybe we should just give all our money to the Federal Government. They seem to have the capacity to simultaneously meet the challenges attached to pesky house payments, large-scale job creation, and the magic of predictable rates of return on investments. In the minds of people like Obama, Zandi and Ungar, the answers are always simple.
Of all the immense challenges coming out of liberal politics these days, the most pernicious are the half-truths. Whether they are knowingly providing these obvious half-truths is a question for another day. The real problem is that when the first half of the story is the part that sounds good, the omission of the more troublesome last half amounts to a lie. It is pure and simple deception.
Letâ€™s look at the comments coming out of the three individuals above. Inserted here is the last partâ€¦the part that was left out:
1) Obama â€“ Home Refinancing at 4%: â€œSomeone is currently earning 6% on the mortgage contract (like the Wisconsin Teachers Pension Fund or your retired neighbor next door), and for the government to force the refinancing of that loan is to take money out of the hands of someone who contractually deserves it, and put it in the hands of someone who does not.â€
It is truly unfortunate that so many people are in trouble with their mortgages. And it is just as unfortunate that someone who owns an asset that entitles them to a six percent return is forced by the government into an â€œadjustmentâ€ down to four percent.Â The money is just being moved between pockets. Or, was the Federal Government (you and me) going to pick up the tab for this one too?
2) Zandi â€“ GDP Growth and Job Creation: â€œIn 2013, the nationâ€™s GDP will go right back down by two percent. And this is because we will have then quit borrowing that large pile of money to artificially jack-up GDP during an election year. Because the jobs that we â€œcreatedâ€ have little effect on ongoing productivity, and have little real investment value, they will all go away in 2013 too. We will be left with another couple thousand dollars in debt for every man, woman and child in America, with next to nothing to show for it.â€
Temporary tax credits and a few improved roads and bridges do nothing more for the economy than handing out bundles of government-borrowed hundred dollar bills at the local grocery store. In truth, the bundles of money would be a more efficient and better option from a long-run economic standpoint.
3) Ungar â€“ Predictable Returns on Government Investments: â€œGovernments are really not in the investment business. Only a tiny fraction of the current $3.5 trillion dollar Federal Government budget would represent anything that might be defined as an investment. And the track record for the investment of capital by governments is stunningly bad. Letâ€™s point at the $535 million blown up in the bankruptcy of green energy provider Solyndra as the best current example.â€
I have no idea who Mr. Ungar is. He sounds like someone who just graduated with a degree in Economics from Harvard. The only thing that can be said for his argument is that the math works. If you can earn more return on your investments than your costs of funds, you are creating a positive return. With this logic, maybe we should make the Federal Government into a hedge fund.
The point in this is not to direct attention at the failed thinking. The point is rather to point at the failed willingness to communicate anything resembling the complete story. These people are again trying to sell the old â€œsomething-for-nothingâ€ fallacy. Ah, the bliss of a life without real-world trade-offs. It is no wonder that confidence in the system is so low. When politicians, economists, and journalists paint such incomplete, and consequently, biased and misleading pictures of reality, it is no wonder that our confidence in them has shrunk to nearly nothing.
It is one thing to point out that we disagree on matters of political importance. That has and always will be the case. It is a completely different thing when we fail to agree on the issue of basic honesty and routine transparency. The complexity of the world we now inhabit demands our best attempts at the whole truth. But, then again, that core whole-truth imperative has never really been different over recorded time.
The hoary Yiddish axiom that â€œa half-truth is a whole lie,â€ is once again proven accurate, timeless, and universally applicable.