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  An American Manifesto
Wednesday April 16, 2014 
by Christopher Chantrill Follow chrischantrill on Twitter

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You Ain't Seen Nothing Yet Liberal Condescension Isn't the Problem

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Budget Fun with Fannie and Freddie

by Christopher Chantrill
February 05, 2010 at 6:31 pm

|

REMEMBER when your liberal friends used to writhe on the floor in a foaming rage? They were outraged because the Iraq War never got into the federal budget, but got slipped in through the back door with “supplemental appropriations.”

Now there’s a new game in town. Advanced conservatives are going to class to learn how to throw themselves on the floor about the losses at the government’s mortgage giants, Fannie and Freddie: $400 billion and counting. Now that these GSEs are flat broke, why doesn’t the president add the $5 trillion in Fannie/Freddie mortgage-backed debt in the National Debt, they ask?

This Monday, February 1, the president published the federal budget for the fiscal year 2011 starting October 1. In that budget the feds will account for the bailout of Fannie and Freddie. But the cost will not appear in the headlline number of $3.8 trillion in spending. Instead, Obama’s guys will snuck it into the outlays for the recently concluded FY 2009.

The only place you will be able to see what really happened will be usgovernmentspending.com, which is not a government website.

Our noble rulers have developed not one but two plausible narratives to account for Fannie’s and Freddie’s losses at the real-estate casino. There’s the Congressional Budget Office (CBO) version. And there’s President Obama’s Office of Management and Budget (OMB) version.

The cunning rascals aren’t going to chuck an indigestible $400 billion loss into the budget. And they aren’t going to stack the GSEs’ debt into the National Debt. Oh no. They are too smart for that.

The CBO, in its August 2009 baseline, began to treat Fannie and Freddie’s operations for the first time “as if they were being conducted by a federal agency” rather than a private corporation. They have estimated that Fannie and Freddie added $291 billion to Federal Outlays in FY 2009. And CBO has estimated $99 billion in spending on Fannie and Freddie for FY 2010 through 2019. That comes in just a little shy of $400 billion.

Not surprisingly, the president’s OMB has found a less costly way of accounting for the Fannie/Freddie debacle.

At OMB they have computed the cost of the Fannie/Freddie bailout merely from the actual cost of buying preferred stock from the mortgage giants. In FY 2009, writes the CBO director, the “Treasury provided a total of $95.6 billion in cash outlays to the two entities” for the purchase of preferred stock and warrants to buy common stock. So that is what OMB put into its “final report of spending for 2009.”

For the future, OMB estimates a further $65 billion in outlays to support Fannie and Freddie in 2010-2019.

Frankly, I’m shocked.

Leaving aside the minor difference of $229 billion in accounting between CBO and OMB, I’m surprised that the cost to the federal government of righting Fannie and Freddie is so low.

In fact, if I were a politician on the way up, a young version of Sen. Chris Dodd (D-retiring) or Rep. Barney Frank (D-unashamed), I would say, as Barney Frank said back in 2003, that it was time for the government to roll the dice.

I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .

Why not? If the only cost to the federal government of offering affordable housing to millions of impressionable voters is a mere accounting item of two to three percent of GDP once in a generation, what’s not to like?

But wait, you say! What about the cost of all the Fannie/Freddie debt that the Federal Reserve System has bought up in the last year? What about the cost of all the banks that the FDIC has taken over? You are right; the costs will be substantial. But they aren’t budget costs. They aren’t appropriations. They are insidious costs that will diffuse through the economy as inflation and as increased banking fees. How do you explain that in a campaign commercial?

But I am not discouraged. I have faith in the new generation of independent conservative politicians. Someone, a Palin or a Brown, perhaps, will figure out how to frame the Fannie Freddie issue and turn it into a “death panel” for our Democratic friends. Pat Buchanan said it best back in August:

Of Sarah Palin it may be said: The lady knows how to frame an issue.

Of Sen. Scott Brown (R-MA) the same may also be said. Maybe that’s the big difference between a populist like Palin or Brown and a populist like President Obama. One kind knows how to frame an issue. The other kind knows how to strike an attitude.

Christopher Chantrill blogs at www.roadtothemiddleclass.com.

Buy his Road to the Middle Class.

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Action

The incentive that impels a man to act is always some uneasiness... But to make a man act [he must have] the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness.
Ludwig von Mises, Human Action


Chappies

“But I saw a man yesterday who knows a fellow who had it from a chappie that said that Urquhart had been dipping himself a bit recklessly off the deep end.”  —Freddy Arbuthnot
Dorothy L. Sayers, Strong Poison


China and Christianity

At first, we thought [the power of the West] was because you had more powerful guns than we had. Then we thought it was because you had the best political system. Next we focused on your economic system. But in the past twenty years, we have realized that the heart of your culture is your religion: Christianity.
David Aikman, Jesus in Beijing


Churches

[In the] higher Christian churches... they saunter through the liturgy like Mohawks along a string of scaffolding who have long since forgotten their danger. If God were to blast such a service to bits, the congregation would be, I believe, genuinely shocked. But in the low churches you expect it every minute.
Annie Dillard, Holy the Firm


Civil Society

“Civil Society”—a complex welter of intermediate institutions, including businesses, voluntary associations, educational institutions, clubs, unions, media, charities, and churches—builds, in turn, on the family, the primary instrument by which people are socialized into their culture and given the skills that allow them to live in broader society and through which the values and knowledge of that society are transmitted across the generations.
Francis Fukuyama, Trust


Class War

In England there were always two sharply opposed middle classes, the academic middle class and the commercial middle class. In the nineteenth century, the academic middle class won the battle for power and status... Then came the triumph of Margaret Thatcher... The academics lost their power and prestige and... have been gloomy ever since.
Freeman Dyson, “The Scientist as Rebel”


Conservatism

Conservatism is the philosophy of society. Its ethic is fraternity and its characteristic is authority — the non-coercive social persuasion which operates in a family or a community. It says ‘we should...’.
Danny Kruger, On Fraternity


Conservatism's Holy Grail

What distinguishes true Conservatism from the rest, and from the Blair project, is the belief in more personal freedom and more market freedom, along with less state intervention... The true Third Way is the Holy Grail of Tory politics today - compassion and community without compulsion.
Minette Marrin, The Daily Telegraph


Conversion

“When we received Christ,” Phil added, “all of a sudden we now had a rule book to go by, and when we had problems the preacher was right there to give us the answers.”
James M. Ault, Jr., Spirit and Flesh


Democratic Capitalism

I mean three systems in one: a predominantly market economy; a polity respectful of the rights of the individual to life, liberty, and the pursuit of happiness; and a system of cultural institutions moved by ideals of liberty and justice for all. In short, three dynamic and converging systems functioning as one: a democratic polity, an economy based on markets and incentives, and a moral-cultural system which is plural and, in the largest sense, liberal.
Michael Novak, The Spirit of Democratic Capitalism


Drang nach Osten

There was nothing new about the Frankish drive to the east... [let] us recall that the continuance of their rule depended upon regular, successful, predatory warfare.
Richard Fletcher, The Barbarian Conversion


Education

“We have met with families in which for weeks together, not an article of sustenance but potatoes had been used; yet for every child the hard-earned sum was provided to send them to school.”
E. G. West, Education and the State


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©2012 Christopher Chantrill