Talk of national financial system

U-Wire and U-Wire

Last Friday The Wall Street Journal reported: ‘President Obama is attempting not merely to expand the role of the federal government but to put it in such a dominant position that its power can never be rolled back.’ This is in reference to his proposed budget for 2009 and 2010, which has soared to nearly 28 percent of GDP to more than $4 trillion dollars. The only time in our country’s history that spending was higher was during World War II. OK, the economy is bad, but not World War III spending bad. Instead of fighting against Nazis and fascism it seems we’re fighting for nationalization and big government. I don’t really know where to begin on this one. Most Americans don’t realize the implications of a nationalized financial system, which is where we’re rapidly headed (despite what Obama and Ben Bernanke will tell you, it’s looking more and more like Citibank and Bank of America will be nationalized). The fact is, the government could have all kinds of fun owning the largest banks; the Democrats could extend their ‘affordable housing policies’ and make mortgages available to everyone (how we got in this mess in the first place). Besides the housing markets, the government could easily get involved in education. Obama says he wants to make education ‘accessible and affordable to everyone who wishes to go.’ A noble act, but should everyone get to go to college for free? How many of you reading this are paying for your own schooling? How many have your parents paying for school? I bet on average those of you paying your own way have a significantly higher GPA than those whose parents pay. This relationship has been proven. It was researched extensively during the 1970s and found that people who paid their own way had staked interest in their success and thus had higher GPAs. If Obama wants to give everyone a chance for a free education, we’ll have extremely crowded campuses and a much lower caliber of students. Basically, not everyone can go to college, there still has to be people bagging groceries and pumping gas. Otherwise our society couldn’t function. So with a nationalized financial system, the government could continue to offer credit to lower-income individuals, finance ‘free’ education for the masses and what else? I would imagine Washington would mandate its banks to give significantly lower interest rates to companies that use ‘green energy’ or ‘buy American,’ both of which aren’t absolutely the best option. I’ll illustrate with two examples: Ball State University’s newly proposed geothermal energy plant will cost $66 million and will save $2 million a year, 66 divided by’ two equals 33 years to pay itself off. You don’t need to be a finance major to figure that’s a pretty low return on investment. That low return isn’t even taking into account the opportunity cost of that money (what else it could be spent on), and the interest that could be earned on such investments. Obama’s administration is bound to finance and encourage countless projects like this all across the world, the end result being that we can pat ourselves on the back for being so environmentally friendly and try to ignore our significantly lighter wallets. Example 2: Buy American! The idea of ‘Buy American’ really bothers me. To really understand comparative advantage you should take an economics course, but I’ll try to explain it. People should focus on what they are best at and produce it and buy everything else from those who have specialized in it. This will lead to trade and thus efficient production and more output. The point: the ‘Buy American’ clause in many of Obama’s plans will in the long run hurt Americans by subsidizing inefficient industries and ignoring the efficient producers, all at the cost of the masses mostly in the form of higher prices and reduced output. Even if the banks are not nationalized, the government will still have a greatly increased amount of influence in the economy for the years to come. I’m a believer in the free market and as small a government as possible. Obama’s proposed budget confirms that, at least for the foreseeable future, big government will rule. What does this mean for you and me? Well, we’ll all probably get great deals on the first homes we buy, have the possibility of having student loans forgiven, be able to enjoy marginally cleaner air and the inevitable: higher taxes for all – 50 percent income tax sounds about right. And we students complain now about the 10 or 20 percent we pay now (around 35 percent for all you professionals). Just wait and see: America will get the change it voted for.