There was a very good reason why Sen. Marco Rubio took a swig of water during his reply to President Barack Obama’s State of the Union address Tuesday night: Even the Republican Senator from Florida could not swallow the political bane he was peddling to the American public.
Rubio, as expected in his official response for the GOP, labeled Obama in a way that fits neatly into the Republican myth about the President – he is a taxing, big spending, liberal, Democrat, Socialist – but has little to do with the political reality. Then Rubio offered no realistic alternatives to what the President suggested. Instead, he offered the same tired and faulty Republican bromides.
“Presidents in both parties – from John F. Kennedy to Ronald Reagan – have known that our free enterprise economy is the source of our middle class prosperity,” Rubio said. “But President Obama? He believes it’s the cause of our problems. That the economic downturn happened because our government didn’t tax enough, spend enough and control enough. And, therefore, as you heard tonight, his solution to virtually every problem we face is for Washington to tax more, borrow more and spend more.
"This idea – that our problems were caused by a government that was too small – it’s just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies,” the senator said.
On Wednesday, Paul Krugman, the Nobel-prize winning economist and New York Times columnist, assailed that argument.
“OK, leave on one side the caricature of Obama, with the usual mirror-image fallacy (we want smaller government, therefore liberals just want bigger government, never mind what it does); there we go with the ‘Barney Frank did it’ story,” Krugman wrote. “Deregulation, the explosive growth of virtually unregulated shadow banking, lax lending standards by loan originators who sold their loans off as soon as they were made, had nothing to do with it — it was all the Community Reinvestment Act, Fannie, and Freddie.”
In his Wednesday post to Wonkblog in The Washington Post, Mike Konczal noted that the housing crisis was driven by subprime loans in the private market, not mortgages from Fannie Mae and Freddie Mac, or the Community Reinvestment Act.
“The fly-by-night lending boom, slicing and dicing mortgage bonds, derivatives and CDOs, and all the other shadiness of the mortgage market in the 2000s were Wall Street creations, and they drove all those risky mortgages,” Konczal wrote.
To support his contention, Konczal cited data that showed “more than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions… Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.”
He went on to quote David Min, a University of California, Irvine law professor, who said the argument that the government directly created either the housing bubble or subprime loans has a serious problem with the timing:
“From 2002-2005, [GSEs] saw a fairly precipitous drop in market share, going from about 50 percent to just under 30 percent of all mortgage originations. Conversely, private label securitization [PLS] shot up from about 10 percent to about 40 percent over the same period. This is, to state the obvious, a very radical shift in mortgage originations that overlapped neatly with the origination of the most toxic home loans.”
Of course Rubio’s arguments fly in the face of other realities. Republicans are quick to say that the government creates regulations and laws that destroy America. They also argue that government, especially on the federal level, is incapable of getting things done.
No Child Left Behind was passed to improve education, yet our schools continue to flounder. The Environmental Protection Agency and several presidents have pushed to reduce carbon emissions from industry and cars, yet those emissions remain high. The government is trampling the people’s right to bear arms, yet gun sales continue to climb. The Obama administration is pushing socialist ideas, yet the markets continue to climb and many companies are enjoying large profits.
But somehow a federal government that cannot get anything else done was able to force private bankers to give housing loans to undeserving families at great risk to the banks. How could such an incompetent government get private banks, which seek to maximize profits, to put those profits at risk?
The point is the government was not able to accomplish that.
“Did Fannie and Freddie buy high-risk mortgage-backed securities?” Min asked. “Yes. But they did not buy enough of them to be blamed for the mortgage crisis. Highly respected analysts who have looked at these data...including the nonpartisan Government Accountability Office, the Harvard Joint Center for Housing Studies, the Financial Crisis Inquiry Commission majority, the Federal Housing Finance Agency, and virtually all academics, including the University of North Carolina, Glaeser et al at Harvard, and the St. Louis Federal Reserve, have all rejected the Wallison/Pinto argument that federal affordable housing policies were responsible for the proliferation of actual high-risk mortgages over the past decade.”
The sub-prime lending leaders among private banks in 2008 were Countrywide Financial, HSBC, JP Morgan Chase, and Wells Fargo, according to data from Inside Mortgage Finance. In 2011, the Center for Public Integrity reported that “mortgages financed by Wall Street from 2001 to 2008 was 41/2 times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.”
Yet Rubio and other Republican sycophants continue in the misguided meme that the housing crisis was the fault of Fannie, Freddie and the CRA. Never do they mention the removal of Glass-Steagall, the 1933 law that banned banks from gambling with depositor’s money.
Rubio also argued that more government will not “help you get ahead;” will not “create more opportunities;” will not “inspire new ideas.” Of course, history tells us that argument does not hold water. It was through government programs after World War II that many returning veterans were able to attend school and make themselves more valuable to employers.
While one may not be able to say definitively that the computer industry would not be at its current level without government, one cannot honestly claim that government research and contracts did not help to support the industry as it grew. Can one claim that the Internet would have been created without government support? Maybe, but one cannot honestly claim that the government did not play a major role in its development.
And the Republican Party cannot claim to support innovation in education, as Rubio did in his comments, after vowing to eliminate the Department of Education, seeking to cut PELL Grants, and denigrating the teaching of critical thinking skills.
Rubio was correct when he said that we need to “incentivize” local school districts to offer more advanced placement courses and more vocational and career training. He also was correct in saying that the cost of college must be contained if we wish to have an educated workforce and populace. Yet, Republicans cannot make those arguments without looking like hypocrites. They cannot claim to be for education when they are the party of cuts to the education budget, are dismissive of science, and unwilling to reign in the biggest abusers of education funding – for-profit colleges that offer students a GED and an associate’s degree or certification, but only give them a large federal loan bill that cannot be forgiven.
“I believe in federal financial aid,” Rubio proclaimed. “I couldn’t have gone to college without it. But it’s not just about spending more money on these programs; it’s also about strengthening and modernizing them.”
Indeed, much of that may be true. The problem is that it is hard to swallow when it comes from Republicans.
Rubio, as expected in his official response for the GOP, labeled Obama in a way that fits neatly into the Republican myth about the President – he is a taxing, big spending, liberal, Democrat, Socialist – but has little to do with the political reality. Then Rubio offered no realistic alternatives to what the President suggested. Instead, he offered the same tired and faulty Republican bromides.
“Presidents in both parties – from John F. Kennedy to Ronald Reagan – have known that our free enterprise economy is the source of our middle class prosperity,” Rubio said. “But President Obama? He believes it’s the cause of our problems. That the economic downturn happened because our government didn’t tax enough, spend enough and control enough. And, therefore, as you heard tonight, his solution to virtually every problem we face is for Washington to tax more, borrow more and spend more.
"This idea – that our problems were caused by a government that was too small – it’s just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies,” the senator said.
On Wednesday, Paul Krugman, the Nobel-prize winning economist and New York Times columnist, assailed that argument.
“OK, leave on one side the caricature of Obama, with the usual mirror-image fallacy (we want smaller government, therefore liberals just want bigger government, never mind what it does); there we go with the ‘Barney Frank did it’ story,” Krugman wrote. “Deregulation, the explosive growth of virtually unregulated shadow banking, lax lending standards by loan originators who sold their loans off as soon as they were made, had nothing to do with it — it was all the Community Reinvestment Act, Fannie, and Freddie.”
In his Wednesday post to Wonkblog in The Washington Post, Mike Konczal noted that the housing crisis was driven by subprime loans in the private market, not mortgages from Fannie Mae and Freddie Mac, or the Community Reinvestment Act.
“The fly-by-night lending boom, slicing and dicing mortgage bonds, derivatives and CDOs, and all the other shadiness of the mortgage market in the 2000s were Wall Street creations, and they drove all those risky mortgages,” Konczal wrote.
To support his contention, Konczal cited data that showed “more than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions… Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.”
He went on to quote David Min, a University of California, Irvine law professor, who said the argument that the government directly created either the housing bubble or subprime loans has a serious problem with the timing:
“From 2002-2005, [GSEs] saw a fairly precipitous drop in market share, going from about 50 percent to just under 30 percent of all mortgage originations. Conversely, private label securitization [PLS] shot up from about 10 percent to about 40 percent over the same period. This is, to state the obvious, a very radical shift in mortgage originations that overlapped neatly with the origination of the most toxic home loans.”
Of course Rubio’s arguments fly in the face of other realities. Republicans are quick to say that the government creates regulations and laws that destroy America. They also argue that government, especially on the federal level, is incapable of getting things done.
No Child Left Behind was passed to improve education, yet our schools continue to flounder. The Environmental Protection Agency and several presidents have pushed to reduce carbon emissions from industry and cars, yet those emissions remain high. The government is trampling the people’s right to bear arms, yet gun sales continue to climb. The Obama administration is pushing socialist ideas, yet the markets continue to climb and many companies are enjoying large profits.
But somehow a federal government that cannot get anything else done was able to force private bankers to give housing loans to undeserving families at great risk to the banks. How could such an incompetent government get private banks, which seek to maximize profits, to put those profits at risk?
The point is the government was not able to accomplish that.
“Did Fannie and Freddie buy high-risk mortgage-backed securities?” Min asked. “Yes. But they did not buy enough of them to be blamed for the mortgage crisis. Highly respected analysts who have looked at these data...including the nonpartisan Government Accountability Office, the Harvard Joint Center for Housing Studies, the Financial Crisis Inquiry Commission majority, the Federal Housing Finance Agency, and virtually all academics, including the University of North Carolina, Glaeser et al at Harvard, and the St. Louis Federal Reserve, have all rejected the Wallison/Pinto argument that federal affordable housing policies were responsible for the proliferation of actual high-risk mortgages over the past decade.”
The sub-prime lending leaders among private banks in 2008 were Countrywide Financial, HSBC, JP Morgan Chase, and Wells Fargo, according to data from Inside Mortgage Finance. In 2011, the Center for Public Integrity reported that “mortgages financed by Wall Street from 2001 to 2008 was 41/2 times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.”
Yet Rubio and other Republican sycophants continue in the misguided meme that the housing crisis was the fault of Fannie, Freddie and the CRA. Never do they mention the removal of Glass-Steagall, the 1933 law that banned banks from gambling with depositor’s money.
Rubio also argued that more government will not “help you get ahead;” will not “create more opportunities;” will not “inspire new ideas.” Of course, history tells us that argument does not hold water. It was through government programs after World War II that many returning veterans were able to attend school and make themselves more valuable to employers.
While one may not be able to say definitively that the computer industry would not be at its current level without government, one cannot honestly claim that government research and contracts did not help to support the industry as it grew. Can one claim that the Internet would have been created without government support? Maybe, but one cannot honestly claim that the government did not play a major role in its development.
And the Republican Party cannot claim to support innovation in education, as Rubio did in his comments, after vowing to eliminate the Department of Education, seeking to cut PELL Grants, and denigrating the teaching of critical thinking skills.
Rubio was correct when he said that we need to “incentivize” local school districts to offer more advanced placement courses and more vocational and career training. He also was correct in saying that the cost of college must be contained if we wish to have an educated workforce and populace. Yet, Republicans cannot make those arguments without looking like hypocrites. They cannot claim to be for education when they are the party of cuts to the education budget, are dismissive of science, and unwilling to reign in the biggest abusers of education funding – for-profit colleges that offer students a GED and an associate’s degree or certification, but only give them a large federal loan bill that cannot be forgiven.
“I believe in federal financial aid,” Rubio proclaimed. “I couldn’t have gone to college without it. But it’s not just about spending more money on these programs; it’s also about strengthening and modernizing them.”
Indeed, much of that may be true. The problem is that it is hard to swallow when it comes from Republicans.
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