The Wall Street Journal’s Evening Wrap, writing about the subprime mortgage lending meltdown, reported that “Sen. [John] McCain has sworn off using government money for bailouts [and] doesn’t approve lowering the down-payment requirements for Federal Housing Authority-backed loans as a way to help low-income homeowners.” McCain’s plan for dealing with the situation was criticized as amounting “to little more than watching this crisis happen.”
This is always the criticism that free market supporters face in times of “crisis.” Whenever anything goes wrong, there is always a hue and cry about market failure and the very obvious need for the government to step in to rescue the people and regulate the problem out of existence. Those who suggest the government do nothing-or even reduce regulation-are not seen as being helpful.
Yet a closer look at such issues generally reveals that some combination of government regulations and human nature is to be blamed. Case in point-the debate over Texas electricity deregulation in 2007. Prices were high so deregulation was too blame-it didn’t matter that Texas prices were already high before deregulation. Or that the Texas Legislature mandated the use of natural gas in at least 50 percent of all new generation of electricity-right about the time that gas prices started to rise. Or that environmental activists and regulations have made it next to impossible to build new lower-cost nuclear and coal-fired generation.
Electricity prices are on their way up-they always rise during the summer due to increased demand. How high they go will largely depend on natural gas prices. If this becomes a “crisis” this summer, those concerned about electricity prices ought to remember that government mandates and environmental regulations are the cause-rather than the solution-to this problem.
– Bill Peacock