Once in a while it takes a foreign perspective – a view from abroad (or at least across the border) – to explain how things happened. Pierre Poilievre is a Canadian politician who spoke to his colleagues about what happened in the US and how to avoid doing the same thing there.
First he nails the problem:
In Rome and Athens, cradles of civilization are replaced with cradle-to-grave socialism. Across Europe and the United States, millions go without work. Those who do work face a lifetime of crippling taxation to pay for the entitlements of their countrymen and the debts of their governments.
Then he summarizes what happened here:
Many believe that the 2008 financial collapse and recession were the result of irresponsible behaviour by business and banks.
Those “many” are wrong:
In fact, this behaviour was merely the symptom. The illness was massive government intervention to turn the mortgage business into a social program.
He says that politicians’ intentions were honorable. I disagree. They were intentional, in order to fulfill their agenda of making Americans dependent upon government. But he got the rest of it right:
The roots of this go back three decades. Presidents from Carter to Bush Jr. wanted to expand home ownership, a worthy mission no doubt. To do this, they mandated government-sponsored enterprises like Freddie Mac and Fannie Mae to cover the risks of loans to people who would otherwise not qualify for them. We call these subprime mortgages.
Once they are dependent – that is, locked into making decisions that forced them to be eternally dependent on the government – they can’t get out. It’s like a lobster trap:
Once Americans are in debt, the U.S. government encourages them to stay there by allowing them to write off their mortgage interest. The bigger the mortgage debt, the lower the taxes.
It’s the mindset of getting something for nothing. Trading a little freedom away for a little security. It never works. It’s a lesson that people have to learn the hard way, it seems:
In sum, the government encouraged millions of Americans to spend money they did not have on homes they could not afford, using loans they could never repay and then gave them a tax incentive never to repay it.
Volumes have been written about the cause of the Great Recession. I’ve read some of them. I’ve never heard it explained better. By a Canadian politician no less.