Thursday, August 26, 2010

Liberalism is Failing – They huffed and puffed and blew my house down!

From The Foundry

image On Tuesday, the National Association of Realtors reported that July sales of existing homes fell by 27% from June of this year and by 25.5% compared to July 2009. This annual sales rate of 3.83 million homes was the lowest since NAR began keeping track of sales in 1999. Then yesterday, the Commerce Department reported that July sales of new homes fell 12.4% from June and by 32.4% compared to July 2009. This annual rate of 276,000 new units sold is the lowest since 1963, when government records were first kept. The source of the plunge is no secret: July’s numbers reflect the first month when existing home sales received no boost from the home buyer tax credit. [ In the graph, note the little line under 4.0 on the far right. That’s pretty scary. – JS ]

Americans have seen this movie before. Last fall after the Obama administration’s Cash for Clunkers program dried up, new automobile sales plummeted. General Motors’ sales plunged 36 percent in September 2009 compared with August. Ford plummeted 37 percent. Chrysler dove 33 percent. And Americans are still feeling the hangover from the original car spending binge. Thanks to the destruction of traded-in cars mandated by President Obama, used car prices have soared this year. This means that the most cash-strapped Americans who are already dealing with 9.5% unemployment now are finding it harder to find an affordable car, all thanks to government intervention in the marketplace.

The problem with both of these liberal programs is the same: there is no such thing as a free lunch. In both cases the additional government spending did not create any new demand; it only shifted the time at which American consumers were going to make a purchase they had decided to make anyway. Instead of ensuring an environment where market participants could ascertain the true prices of the goods they want to purchase, these government interventions added uncertainty into the economy by making it harder for existing businesses and entrepreneurs to plan their next move. These government interventions, paid for with borrowed dollars, did not create new wealth. They just diverted capital and resources from the other places where markets would have invested it spontaneously absent government action.

Read the rest here…

Related cartoons

image image image