Sunday, May 02, 2010

The President's Graduation Speech

The Huffington Post carried the text and video of the President's speech to graduates at the University of Michigan.  I thought it was a pretty good speech.  There were several parts where I disagreed with his premise.  Two quotes from the speech are below in red - my comments follow in black.

What troubles me is when I hear people say that all of government is inherently bad. For when our government is spoken of as some menacing, threatening foreign entity, it ignores the fact that in our democracy, government is us.  If the President lived by those thoughts he might have tried a bit harder to figure out points of agreement on the health care bill.  

"Government is what ensures that mines adhere to safety standards and that oil spills are cleaned up by the companies that cause them."  Obama said the country has witnessed the danger of too little government, "like when a lack of accountability on Wall Street nearly leads to the collapse of our entire economy."   I am not sure whether his premise is correct.  Government may or may not be the best arbiter of safety standards in mines.  Based on the tragedy in West Virginia - there are probably better mechanisms.  The mine in question had been reviewed by government regulators several times before the explosion.  I am also pretty sure that a "lack of accountability" on the side of Wall Street was not the cause of the economic decline.  As I have argued before a good part of the crisis came from things like the Community Reinvestment Act, the change in tax treatment of capital gains on housing and the over-leveraging of Fannie Mae and Freddie Mac.  Indeed, we need to look at whether our system of financial markets regulation can meet the needs of the US markets in a global world - but it would be wise to also re-look at how we do a lot of government's current interventions in the financial markets.

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