Santelli, and the housing troubles

Larry Kudlow interviews Rick Santelli:

Newsbusters has a transcript.

James Pethokoukis looks at why the White House attacked Santelli,

This may have been Santelli’s most important economic point: “You know, they’re pretty much of the notion that you can’t buy your way into prosperity, and if the multiplier that all of these Washington economists are selling us is over… that we never have to worry about the economy again. The government should spend a trillion dollars an hour because we’ll get 1.5 trillion back.” Of course, all this government spending doesn’t create prosperity. It merely transfers/steals prosperity from the future and brings it to the present to cushion the current downturn. Remember, here is what the Congressional Budget Office had to say about the stimulus spendathon:
In contrast to its positive near-term macroeconomic effects, the Senate legislation would reduce output slightly in the long run, CBO estimates, as would other similar proposals. The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth in the form of government bonds rather than in a form that can be used to finance private investment, the increased government debt would tend to “crowd out” private investment—thus reducing the stock of private capital and the long-term potential output of the economy. … Including the effects of both crowding out of private investment (which would reduce output in the long run) and possibly productive government investment (which could increase output), CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net.

This is a ruinous “one leg of a multi-legged stool” as the CNN reporter called it.

Again, no matter what’s done now, if the Community Reinvestment Act stays in the books, we’re still in for more of the same.


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