The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Legitimacy

Posted on | June 6, 2011 | 10 Comments

by Smitty

I would argue that the effect of the imperial Federal government over the last century has been to de-legitimize itself:

The CBO calls this approach “fair-value” accounting because it treats the federal government’s actions just like the actions of any other market participant, taking into account the market risk of guaranteeing a mortgage.

Typically, federal accounting does not do this because it is argued that because the government can print its own money, its risk is zero.

The CBO says that even though the government can print money – technically by issuing Treasury bonds – this merely transfers the risk to the taxpayer, who will eventually have to pay off the bonds issued by the government.

The government has to operate off of a reality-based economy. Sure, it can wink at reality, and has. But look at the habit that has been formed:

“As of March 31, 2011, the GSEs reported a fair-value deficit of approximately $187 billion,” the CBO report stated. “Adding to that the $130 billion in net payments already received from the Treasury implies a fair-value cost to the government of about $317 billion in obligations incurred through March 2011.”

Whoever wins in 2012 had better drive for more integrity than has been seen from previous administrations. Also, the people have to demand that integrity.
Fannie and Freddie should be among the first two casualties in a bloodless, anti-recreational-bureaucracy pogrom. Their existence flies in the face of the 10th Amendment; let the states sort out the housing for their citizens as required.
While not the sufficient, load shedding this particular bit of federal over-reach is necessary to restoring federal legitimacy. Also, coherent accounting.

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