Obama calling the kettle black

Posted by Marc Hodak on May 28, 2008 under Politics | Read the First Comment

In an article entitled Obama, Clinton campaigning in different races, Obama is quoted as follows:

“(The high rate of foreclosures) is a serious problem all across Las Vegas, all across Nevada, all across the nation,” the Illinois senator said. “A lot of this wouldn’t have happened if we would have done a better job regulating banks.”

Later, talking to supporters here at the College of Southern Nevada, Obama returned to the theme, noting that McCain said early in the campaign that “economics is not something I’ve understood as well as I should have.”

Obama is accusing McCain of being weak on economics? Maybe the article should have been titled “Economics, Obama campaign on different planets.” Obama is clearly failing to distinguish economics and politics.

Economics is about relationships between X and Y. For instance, it might be economically true that greater regulation of banks would have led to fewer foreclosures. On the other hand, it’s at least as possible that the degree of bank regulation had no net impact on foreclosures, or that the regulation that existed may have enhanced the likelihood of foreclosures. I can 100 percent guarantee that Obama doesn’t know which is true. He is only asserting something that sounds good to his audience. That’s politics, an area in which Obama is clearly strong. McCain at least admits he is ignorant about economics, which may or may not be good politics.

Politics is about government intervention in private decisions. Such intervention has economic consequences, but it is not itself “economics.” For instance, let’s assume that Obama is right that better bank regulation might have forestalled the mortgage crisis; two questions remain about the wisdom of such regulation. First, all government interventions–like treatments for an ill patient–have central effects and side effects. The side effects of government intervention are generally known as unintended consequences. Assuming they are known, however, it’s a reasonable question to ask if the side effects will be worse than the central effects in this instance. Second, all government action is subject to non-economic considerations. So, what makes Obama so certain that better regulation in this instance will even create the intended central effects? Maybe that’s what he means by the audacity of hope.