Doing More Harm Than Good

July 2, 2010 - 3:00 PM
Shortly after Barack Obama rammed his health care "reform" bill through Congress on a strictly partisan vote, the great Wall Street Journal columnist Holman Jenkins observed that the president had obtained a political victory.
Shortly after Barack Obama rammed his health care “reform” bill through Congress on a strictly partisan vote, the great Wall Street Journal columnist Holman Jenkins observed that the president had obtained a political victory.
 
“Now, can we have health care reform?” Jenkins wondered. He noted that free-market principles, which would force providers to compete on price, could drive down consumer costs. Instead, the country will get stuck with Obamacare’s changes, which will only increase costs.
 
Well, here we go again.
 
Lawmakers, spooked by the 2008 financial crisis, have passed a massive “reform” bill that’s supposed to protect Americans. Obama says he’ll be proud to sign the measure. It would “put in place the toughest consumer financial protections in our history, while creating an independent agency to enforce them,” he insists.
 
For example?
 
“Credit card companies will no longer be able to mislead you with pages and pages of fine print,” Obama said. “You will no longer be subject to all kinds of hidden fees and penalties, or the predatory practices of unscrupulous lenders.”
 
Sounds okay, as far as it goes. But wait – was the 2008 crisis caused by credit card companies bilking consumers? Not at all. It was triggered by a recession and the eventual collapse in prices when the national housing bubble burst.
 
With millions of “homeowners” defaulting because they couldn’t make their mortgage payments, banks were left with empty homes whose true value was a mystery. They eventually started to hoard assets so they wouldn’t be swept into bankruptcy as, say, mortgage broker Countrywide was.
 
In other words, the crisis had everything do to with credit, and nothing to do with credit cards. Oh, and by the way, it was federal government policy to encourage lending to people with less than stellar credit histories. Fannie Mae and Freddie Mac were explicitly supposed to back such loans, in order to encourage more home ownership.
 
Still, the administration doesn’t like to let a crisis go to waste, and seems eager to get a new regulator in place. That nominee will head the Consumer Financial Protection Bureau (created by the recently passed legislation), and is expected to be Harvard law professor Elizabeth Warren.
 
“The market for consumer credit is broken,” she says. “Credit card agreements, mortgages, bank overdraft agreements and other products are loaded with tricks and traps.” Again – that may be true. But it’s not really relevant to the problem our government is supposedly addressing.
 
USA Today profiled Warren and reports she “proposed the consumer financial regulator in 2007.” Wait – the year before the credit crunch? How about that. The best solution to our national problems, apparently, is the very same idea Warren proposed before those problems even erupted. How fortunate. Can’t wait to see what else she’s been planning all these years.
 
On the other hand, maybe we’d all be better off if she waited. The last thing Americans need these days is regulators offering us more “protection.” Sadly, though, that’s exactly what we’re likely to get.
 
Need an example? “Congress urged to give FDA power to regulate CT scans,” USA Today reports. Indeed, let’s have federal bureaucrats, not doctors, deciding when people need scans. Maybe the regulators can read the scans, too. That would really save money, since the wave of the future seems to be more regulators and fewer doctors.
 
Of course, under Obamacare we’re likely to have fewer scanners, and other advanced medical devices, anyway.
 
Consider our northern neighbor. Canada’s socialized medical system boasted a total of 419 CT scanners and 222 MRI machines in 2007. That’s compared to more than 10,100 CT scanners and almost 8,000 MRI machines in the United States in 2006. As the federal government takes over health care, look for it to find savings the Canadian way – by limiting access to some devices and providers. 
 
As long as there is regulation, there will be companies trying to use the regulation to their financial advantage. A group known as “Clean Coal,” for example, has run newspaper ads about the Kerry-Lieberman cap-and-trade bill encouraging Congress to “Fix It or Nix It.”
 
Free market proponents understand that the latter option is the only sensible approach. But the coal group adds, “Take note that we say ‘fix it’ first.” If the bill could be tailored to favor its interests, the group would support it, even if it meant big tax increases on consumers and other, non-coal, industries. There’s a lot of such rent-seeking about these days.
 
Congressional meddling in the markets promises to do more harm than good. Americans should be begging lawmakers for more reform, and fewer regulations.