On the Bloomberg website today, they seem to have put this editorial in the “News” section by mistake. It begins with a misleading assertion in the headline:
Boehner Builds Economic Case on Assertions at Odds With Markets, Studies
House Speaker John Boehner, giving Wall Street leaders his prescriptions for growing the U.S. economy and reducing the nation’s debt, built his case on several assertions that are contradicted by market indicators and government reports.
Sounds bad. Sounds like Boehner is just making stuff up, with disregard for undisputed facts.
Boehner’s statement in his Wall Street speech that government spending “is crowding out private investment and threatening the availability of capital” runs counter to the behavior of credit markets.
“Look at interest rates. Look at capital spending,” said Nariman Behravesh, chief economist of IHS Inc., a research firm based in Englewood, Colorado. “It’s very hard to come to a conclusion that there’s any kind of crowding out.”
Still, some economists, including former Federal Reserve Board Chairman Alan Greenspan and Stanford University Professor John B. Taylor, a Treasury undersecretary in Republican President George W. Bush’s administration, have argued that the deficits have been crowding out private investment.
Greenspan said the deficit is one reason that corporate investment as a share of profits is lower than historical patterns, in an interview on CNBC’s Squawk Box on Dec. 3, 2010.
“Approximately one-third of the decline in capital investment as a share of cash flow is directly attributable to” the “crowding out by U.S. Treasury borrowing,” Greenspan said in the interview.
Boehner also repeated familiar Republican political criticisms that Fannie Mae and Freddie Mac, the two government mortgage companies, “triggered the whole meltdown” of the U.S. financial system.
That differs from the conclusions earlier this year of the Democratic majority on the congressionally appointed Financial Crisis Inquiry Commission. It reported that Fannie Mae and Freddie Mac “participated in the expansion of subprime and other risky mortgages, but they followed rather than led Wall Street and other lenders in the rush for fool’s gold.”
Three of the panel’s four Republicans, while faulting Fannie and Freddie, didn’t place the blame squarely on the two mortgage giants.
“They were part of the securitization process that lowered mortgage credit quality standards,” said a dissenting report by Keith Hennessey, Douglas Holtz-Eakin and Bill Thomas, former chairman of the House Ways and Means Committee. In a Wall Street Journal essay, the three said laying primary blame on government intervention is “misleading” and cited 10 reasons, taken together, for the crisis.
Only Peter Wallison, the other Republican commissioner, offered support for Boehner’s view that Fannie and Freddie caused the mortgage bubble and subsequent collapse. Wallison’s dissent put most of the blame on government housing policies that encouraged Fannie and Freddie to buy more subprime mortgages to promote home ownership among low-income people.
So “Boehner Builds Economic Case on Assertions at Odds With Markets, Studies” should really read something like, “Boehner Builds Economic Case on Assertions at Odds With Some Economists, and Many Democrats”.
They can call their Op-Ed anything they want, they shouldn’t call it a news story.