Krugman On Mortgage Plans: Obama "Cautious," Clinton "Bold And Progressive"

New York Times columnist Paul Krugman writes on the presidential candidates' mortgage crisis proposals:

Barack Obama's speech on the economy on Thursday followed the cautious pattern of his earlier statements on economic issues.

I was pleased that Mr. Obama came out strongly for broader financial regulation, which might help avert future crises. But his proposals for aid to the victims of the current crisis, though significant, are less sweeping than Mrs. Clinton's: he wants to nudge private lenders into restructuring mortgages rather than having the government simply step in and get the job done.

Mr. Obama also continues to make permanent tax cuts -- middle-class tax cuts, to be sure -- a centerpiece of his economic plan. It's not clear how he would pay both for these tax cuts and for initiatives like health care reform, so his tax-cut promises raise questions about how determined he really is to pursue a strongly progressive agenda.

All in all, the candidates' positions on the mortgage crisis tell the same tale as their positions on health care: a tale that is seriously at odds with the way they're often portrayed. ...

Mrs. Clinton, we're assured by sources right and left, tortures puppies and eats babies. But her policy proposals continue to be surprisingly bold and progressive.

Finally, Mr. Obama is widely portrayed, not least by himself, as a transformational figure who will usher in a new era. But his actual policy proposals, though liberal, tend to be cautious and relatively orthodox.

Read the full column.

Comments

[Lindy222]

Silly me. I thought when I started to read this: "Wow! Maybe Krugman has stopped writing straight Hillary swill and has written something objective!"

Then I read this: "Mrs. Clinton, we're assured by sources right and left, tortures puppies and eats babies. But her policy proposals continue to be surprisingly bold and progressiv­e.."

*sigh*

Same old same old, I guess. I didn't bother finishing the column.

[MiddleRoad1]

:) I stopped reading his columns after his "Nixonian" comment.

[cosmic]

Krugman: a typical repressed liberal intellectual - he's to progressive writers as Colmes is to democratic pundits - the kind of guy that gives all of us a poor profile

[billrott]

I disagree with Mr. Krugman. Perhaps it is because I have a masters in business and understand the impact of Mrs. Clinton's plan. Within the Clinton plan, she calls for a freeze on interest rates for subprime. Freezing the interest rates will immediately create an arbitrage opportunity that will benefit rich investors at the expense of the government and ultimately tax payers. The sad truth is people that opted into these mortgages now have to deal with what they bought into. The market will correct itself and things will go on. The issue now is to prevent these types of issues going forward through regulation.

[Sylmason]

Don't fester yourself sweetie. She'll only get in the WH again is when she takes a tour. There is still hope for her to have a lucrative creer in the film industry, because that war story was a big two-four.

[robXdion]

W. Bush has a MBA too. We're not impressed. You can't always wait for the market to magically correct itself. World competition is different. This is not the 80s anymore.

[billrott]

That is not what I said. Please I did not have my daddy buy me an C level education. Bush is an incompetent and always has been.

The idea of freezing interest rates is idiotic. It will create an artificially insulated interest rate which others could use to borrow against. Simply put, if Hillary says lets freeze the interest rates at 5% and I can find an investment that returns at least 8%, I could borrow from the frozen interest rate at 5% and buy the investment that returns 8% and make an automatic 3% without investing any of my capital. This is called arbitrage.

As for the 80's comment, you are wrong. If it was the 80's, this crisis would have never happened. Deregulation opened the market up to quickly and the regulators never anticipated the investment communities response. As such, the unregulated subprime crisis occurred.

[billrott]

The market for housing will correct itself. The price of houses is above the natural level due to the efforts of the market in pushing the subprime/CDO's. Whether or not you freeze interest rates, etc., the market will correct. You can not change that fact. People are just not going to pay $10 for something that is worth $5.

At this point in time, we should support the Dodd bill that calls for a streamlining of regulations from thirty disconnected agencies into one. We need to support calls that people have to invest more principle in homes prior to getting a mortgage. This action would prevent speculation and people buying beyond their means.

As for people that lied about their incomes, bought something beyond their means, and speculated in the subprime arena, they should now get the fruits of their labor. Otherwise, these people will continue such reckless actions and those that were fiscally responsible will be punished for doing the right thing.

[billrott]

The governments only responsibility here is to prevent the shakeout in the subprime from occurring again and impacting liquidity across the board that would prevent others from getting needed loans.

Lastly, world competition is still the same. in order for us to compete, we need to move up stream to cutting edge innovative things such as biotech, green industries, etc. We can not compete in the area of textiles, and commodities. It is just not possible to compete in these areas and maintain the level of living we are accustom to.

[crazyv]

As somebody who has spent 30 years in the financial markets I can't think of a dumber idea than freezing rates for 5 years. It is not "bold and progressive" it is the worst kind of pandering. It is guaranteed to make credit harder to get and ensure that the current problem will just drag on. This is a simple problem - house prices are too high based on income levels. Through various gimmicks people were enticed to borrow on the assumption that prices could only go higher- aka a Ponzi scheme and like all such schemes it blows up when there are no more suckers around to keep the game going. The best thing one can do is let house prices fall to a level where people can afford to own them based on standard mortgages(ARM or fixed) at current rates. The sooner we get to that level the better off everybody will be. The role for government is to ensure that the innocent don't harmed during that relocation process- I think the idea of buying foreclosed and converting them to affordable housing is good idea, providing assistance to cities and towns who rely on real estate taxes to pay for police, fire etc to help them down scale in a controlled fashion is appropriate.

An economist of Krugman's standing knows better than to suggest that price controls are the answer- the fact that he did is just evidence that he is nothing more than a Clinton hack.

[MiddleRoad1]

Back to shilling. Nice, PK. What did she do? Tell you that she made a mistake proposing Alan Greenspan, and she really wants you?

[AnninCA]

Move-on.org is supporting the pansy of a candidate.

:)

Hillary is the real deal.

[wendelgee2]

"pansy"
grow up.

[crazyv]

you are absolutely right- who am I going to believe- Her or my lying eyes? It is my fault that I am unable to see her running out of the plane ducking under sniper fire and not being greeted by the young girl. I have seen the errors of my way and now realize that If Hillary says it must be so then it must be so. She would never lie to us- damn you Obama cultists for challenging the great leaders words. I have just two words for you - Crow bar

[AnninCA]

Yes, his plan is about like his health care plan.

Hillary is the true progressive.

[SLone08]

Yes Hillary "I like cluster bombs" Clinton is a progressive just because Krugman says so.

[greejambri]

Yes, Krugman has lost ALL credibility since he decided to shill for Clinton, the LEAST progressive of ALL the Democratic candidates. Bringing back Alan Greenspan is "progressive?" PUHLEEEEEEEEEEEZ!

[wagadog]

Hillary is a true liar.

[Alessan]

All of these things are proposals to change things as they are now, if the republicans
are in the majority, it doesn't matter who's President. You better get out there and support your Democratic congressman and Senators who hopefully will replace all the empty Republican seats. WAKE UP, GIVE UP ON OBAMA, NOW.

[greejambri]

There has NEVER been a "progressive" bone in Hillary's body. Not since she was the president of the Young Republicans in college and supported Goldwater for president, not since she gave Bush authorization to invade and occupy Iraq, not since she decided to devote her time as a senator to sponsor a flag-burning amendment and rail against video games, not since.....­....... If there is one term that aptly describes Hillary Clinton's political philosophy it is 'OPPORTUNI­ST." Stick you finger in the air and see which way the prevailing winds are blowing. She is NO leader, never has been, and never will be. Annin, you are as deluded a Clinton supporter as they come.