Must See: Mark Sanford carves up the stimulus

Source: http://hotair.com/archives/2009/02/03/must-see-mark-sanford-carves-up-the-stimulus/

Ontario Snowstorm

Source: http://www.stupidemailjokes.com/Worth1000Words/OntarioSnowstorm.aspx

Check out these amazing snowstorm images. Orillia Ontario got major league dumped on....

Economists against Obama's stimulus By Betsy Newmark

Source: http://betsyspage.blogspot.com/2009/02/economists-against-obamas-stimulus.html

February 11, 2009

Although President Obama claimed that economists don't oppose his stimulus package, he's ignoring a whole swath of economists who are quite critical or skeptical that this package will contribute more growth to our economy. Brian Riedl lists quite a few who oppose his approach.

The Obama administration has claimed that virtually all economists support their approach to "stimulus" spending. This is patently untrue. Nobel Laureates Ed Prescott, James Buchanan, and Vernon Smith recently joined 200 other economists signing a letter opposing the legislation. Other notable economists critical of the stimulus package include Nobel Laureate Gary Becker, as well as Robert Barro, Greg Mankiw, Arthur Laffer, and Larry Lindsey. Martin Feldstein, who had been the only notable conservative economist loudly supporting the stimulus, has since changed his mind.

More liberal economists such as Alice Rivlin and Alan Blinder have also strongly criticized certain aspects of the spending bill. (See original for all the links.)

Yesterday, Nobel Prize winner Gary Becker and MacArthur Fellow Kevin Murphy took a fair-minded look at the stimulative effect from this package and, while they don't think the effect will be zero, they don't see it having a strongly positive effect on our economy.

In fact, much of the proposed spending would be in sectors and on programs where the government would mainly have to draw resources away from other uses. This type of spending includes adding broadband to rural areas, spending more on health coverage, encouraging scientific innovations, developing renewable energy, as well as many other things.

As President Barack Obama recently said, "This plan is more than a prescription for short-term spending -- it's a strategy for America's long-term growth and opportunity in areas such as renewable energy, health care and education." Such spending may encourage long-term growth, but it will have little short-term effect on GDP.

So our conclusion is that the net stimulus to short-term GDP will not be zero, and will be positive, but the stimulus is likely to be modest in magnitude. Some economists have assumed that every $1 billion spent by the government through the stimulus package would raise short-term GDP by $1.5 billion. Or, in economics jargon, that the multiplier is 1.5.

That seems too optimistic given the nature of the spending programs being proposed. We believe a multiplier well below one seems much more likely.

They are skeptical, as are many, that this spending will be temporary. And they remind us that there will be consequences from all this spending that will have a long-term deleterious effect because, as we should know by now, there is no free lunch.

The increased federal debt caused by this stimulus package has to be paid for eventually by higher taxes on households and businesses. Higher income and business taxes generally discourage effort and investments, and result in a larger social burden than the actual level of the tax revenue needed to finance the greater debt. The burden from higher taxes down the road has to be deducted both from any short-term stimulus provided by the spending program, and from its long-run effects on the economy.

We believe that it is incumbent on both supporters and opponents of the bill to thoughtfully evaluate each of these four factors. We recognize that how individuals will come out in their own evaluation of these factors will determine their attitude toward the stimulus package, and that there is considerable ground for reasonable differences of opinion.

Our own view is that the short-term stimulus from the legislation before Congress will be smaller per dollar spent than is expected by many others because the package tries to combine short-term stimulus with long-term benefits to the economy. Unfortunately, short-term and long-term gains are in considerable conflict with each other. Moreover, it is very hard to spend wisely large sums in short periods of time. Nor can one ever forget that spending is not free, and ultimately it has to be financed by higher taxes.

So Obama's claims that no economist disagrees with his approach is just as dishonest as his attempt to portray the Republicans as advocating a do-nothing approach to the economic crunch. Ask yourselves if you want to have the Congress pass the biggest spending bill in our nation's history in this rushed through manner and based on such prevarications.

The "Take it or Leave it" Democrats By Betsy Newmark

Source: http://betsyspage.blogspot.com/2009/02/look-to-conference-committee-report.html

February 11, 2009

The three Republicans, Olympia Snowe, Susan Collins, and Arlen Specter have all claimed that they won't vote for the final bill if the conference report does much to change the Senate version of the bill. Well, they should get ready to bend that statement because, as the American Spectator reports, the White House is working with the House Democrats to restore the rather minor spending cuts that they are so proud of having carved out to come up with their compromise bill. I predict that much of the spending will be re-imposed and the three Republicans will suddenly find that that spending isn't so bad after all.

It sounds like the approach that the conference is looking towards is to restore some of the spending cuts from the Senate bill and scale back the tax credits and the patch for the AMT that the Senate compromisers had put in.

Meanwhile, the Pelosi Democrats are ticked off at the Republican Three's demands that they don't change the Senate bill.

When MSNBC asked Collins how she would react to the restoration of the House spending plan, she replied, “The Democrats will lose my vote.”

Similar remarks by Specter prompted House Majority Leader Steny H. Hoyer (D-Md.), not known for his bellicosity, to fire back at his weekly pen-and-pad session with reporters: “I’m shocked that any senator of any party would say this is the bill we passed, take it or leave it.”

But privately, House Democratic staffers see several areas of potential accommodation, including alterations to the mixture of tax cuts and spending that could result in scaling back a $15,000 homebuyer tax credit, a favorite of the Senate GOP, and $11 billion in deduction of taxes on auto purchases, strongly opposed by Senate Finance Chairman Max Baucus (D-Mont.).

Pelosi’s ultimate leverage in conference talks, those close to her say, is the fact that Obama himself has indicated he’s willing to go to the mat to partially restore some of the Senate cuts. And they expect a week of intense lobbying by the president personally on behalf of the Obama-Pelosi agenda.

“I can’t imagine that three Republicans would deny what the president wants at the end of the day,” said a top House Democratic aide, speaking on condition of anonymity.

So they don't like being told "take it or leave it" by those Compromise Republicans, but they sure want to tell the Republicans in both houses to "take it or leave it." I guess it all depends on who is doing the taking and who is doing the leaving.

The Democrats seem to be happy to come through with a package and then dare the Republicans to filibuster it.

There was another revealing moment from Tuesday’s Democratic powwow, courtesy of another member in attendance.

“There was an outcry within the caucus that was, like, we’d actually like to see them [Senate Republicans] go ahead and filibuster. Let ’em follow through on their threats. ... I don’t think the speaker disagreed.”

That's a dare I'd like to see the Senate Republicans take, but I have no confidence in the Compromise Three and their fine-sounding vows to oppose a conference bill much different from the Senate bill.

Leading America down wrong path By Arlene Carroll

Source: http://www.phillyburbs.com/news/news_details/article/365/2009/february/10/leading-america-down-wrong-path.html

February 10, 2009

Burlington County Times

It makes one wonder how our politicians justify their statements and actions. To get elected, they tell America what they think it wants to hear. Now they are backing off everything and telling us that what they said is not going to work. They are really out of touch with the average American, as they vote down party lines whether it is good or bad for America.

We now have a treasury secretary who didn't pay his income taxes until he was offered the job. He has now paid them, but guess what - no penalties. Now we have Tom Daschle withdrawn from a cabinet job [because he] also did not pay some income taxes until it was made public. No penalties either. Could the average American get away with this? Is this a double standard? Their fellow Democrats say these are honest mistakes - what a joke. On May 7, 1998, Daschle said anyone who cheats on his income tax should be prosecuted fully. Should we believe these are the best and only men for these jobs?

We are being told only doom and gloom and tough choices have to be made. Yet, we can spend $160 million or more on an inauguration and many other parties. Many politicians lecture us about putting a freeze on our salaries. Congress didn't freeze its sala-ries, they took a pay raise (no news editorials about this). Is this another double standard? Congress is not afraid of losing its salaries, pensions or medical coverage since members contribute nothing towards them. The American taxpayer gives it to them. Are they better than any other American? When they retire they get the same salary, plus their spouses collect too. The answer to this is, they should pay the same as everyone else. Is this another double standard? They talk about the perks of the CEO's, what about them? They sure take care of themselves.

Where can an American apply as [someone seeking asylum]? A single pensioner, after 40-50 years of contributions, gets a monthly allowance of $1,012. A single [asylum seeker] gets a monthly allowance of $1,890, plus an additional social assistance of $580, for a total of $2,470 a month. Who thought of this idea? Now they want to spend billions more on programs that won't stimulate the economy. Do these people know what they are doing to our country? They are out of touch with the average American and leading America down the wrong path.

Arlene Carroll
Vincentown

Rolling back welfare reform By Betsy Newmark

Source: http://betsyspage.blogspot.com/2009/02/rolling-back-welfare-reform.html

February 09, 2009

Mickey Kaus, who is a real tiger on the issue of welfare reform, raises the alarm that part of the $827 billion spending package would start rolling back the work requirements that were the heart of the 1996 welfare reform.

Shouldn't Republicans be making more of a fuss about the provision in the stimulus bill--both House and Senate versions, apparently--that spends $2-3 billion to the states for "temporary welfare payments"? I initially thought Charles Hurt of the N.Y. Post was being alarmist when he suggested the provision would "drastically undo two decades of welfare reforms." The essence of the 1996 reform was ending the individual legal entitlement to AFDC (cash aid to single mothers, basically) and replacing it with state-run programs that, in theory, require recipients to enter the work force. The stimulus bill doesn't rip up that basic deal, as I understand it. But it is part of a larger liberal campaign** to use the recession to weaken work requirements and let millions of non-working single mothers back on the welfare rolls. Specifically, it would apparently reward states that expand their welfare caseloads--even if the increase is only the product of loosened work requirements rather than a worsening local economy.

Nothing wrong with helping states avoid anti-stimulating cuts in a recession. Nothing wrong with targeting money to the poorest, who are most likely to spend it quickly. But why use the aid specifically to encourage expansion of welfare? This isn't "welfare" as only conservative Republicans would define it--i.e. any means-tested assistance. This is welfare as everyone would define it--cash assistance to able-bodied single mothers (or fathers) who may or may not be working, as in the old, despised AFDC program. Better to use the money (and more) to create public jobs*** for these would-be recipients if private sector jobs have dried up, even if that upsets municipal employee unions (which don't want welfare recipients doing jobs their members might do). Don't revive the old AFDC principle that if you have a child, you can count on the government to take care of you with cash aid even if you don't work.

At the very least the extra aid to the states shouldn't be triggered by caseload expansion. (You could, for example, give states aid in proportion to their local unemployment rate.)

You would think this would be a potential killer issue for the GOPs--"See, the Democrats already want to undo welfare reform"--and Obama, being sensitive to the charge, might quickly back down. It's easiest to whack the camel when only its nose is in the tent, no? (See the original for all his links.)

Are the Democrats really trying to take one of the most successful reforms of the past decade and weaken it so that they can get rid of the work requirements? One liberal hopes so.

Peter Edelman, a Georgetown Universitylaw professor who left a senior Clinton administration position in protest of the 1996 law, said the Obama administration and Congress should adopt emergency legislation to suspend work requirements and time limits on cash assistance. "The whole construct [of TANF] is to go out and find jobs," he said. "So it's a Catch-22. It's kind of an impossibility."

For now, lawmakers are considering whether to add to a welfare contingency fund, likely to run out for the first time this year, in an economic stimulus bill.

For some states, the predicament is immediate. The 1996 law replaced a limitless federal stream of welfare money to states, giving instead a fixed amount -- $16.5 billion a year nationally -- and significant spending freedom. In the years when people were leaving the rolls, less of that money went for cash assistance, and virtually all states shifted much of their grants to other help for poor people: child care, transportation, training programs, child welfare.

Now that welfare rolls are surging again, "the flaw is the states did not save enough money," said Ron Haskins, a Brookings Institution senior scholar who worked as a welfare adviser in the Bush White Houseand in Congress. "They have used the TANF block grant for everything under the sun. . . . That leaves them in the lurch."

Once again there is no penalty for past mistakes, just more federal money.

Washington Times EXCLUSIVE: Partisan dirt-digger joins WH office: Resume lacks legal training By Jon Ward

Source: http://www.washingtontimes.com/news/2009/feb/09/exclusive-partisan-dirt-digger-joins-wh-counsels-o/

Monday, February 9, 2009

Amid the furor over controversies regarding Cabinet-nominee tax problems and the seismic battle over a nearly trillion-dollar economic rescue bill, President Obama made a little-noticed appointment that is now generating intrigue.

Shauna Daly, a 29-year-old Democratic operative, was named last month to the new job of White House counsel research director. Though she is inside one of the most powerful legal offices in the land, Miss Daly holds no law degree and doesn't list any legal training on her resume.

Her sole experience has been as an opposition researcher for Democratic political campaigns: She helped dig up dirt on rivals, or on her own nominee to prepare for attacks.

The addition to White House counsel Greg Craig's staff has alarmed some Republicans, who consider it a politicization of the office, and has irritated others who say that Democratic lawmakers who railed against Republican opposition researchers in legal positions in the past are now silent.

"Daly does not have the qualifications to be holding a significant position in the White House counsel's office," said Mark Levin, a conservative lawyer and radio-show host who worked in the Reagan White House and as chief of staff for Attorney General Edwin Meese.

"Her only qualification is that she knows how to dig up dirt on other people," he said.

A number of conservative and liberal lawyers and operatives confirmed that it is unusual for someone with Miss Daly's background to be working in the White House counsel's office, though some Clinton-era lawyers said that administration had non-lawyers working in the office.

The White House insists Miss Daly's work will be limited to legal research, like that of a paralegal, and won't stray into political muckraking.

"Shauna will be performing legal research in support of a team of lawyers doing traditional legal work at the White House," said White House spokesman Ben LaBolt.

But even some Democrats said there is reason to be cautious about the presence of a political-opposition researcher inside a White House legal office that is supposed to be free of partisan influence.

"It is important for her to understand this is a new role, and if she ever feels there are politics creeping into her job, she should set up strong barriers to stop that," said Faiz Shakir, research director at the Center for American Progress, a liberal think tank run by former Clinton administration Chief of Staff John Podesta.

Opposition researchers often use skills honed on a campaign to reveal damaging information about political opponents to reporters. But the move to the counsel's office requires Miss Daly to change her modus operandi dramatically.

"That information stays in-house, and all the information is for the president's counsel," Mr. Shakir said. "Part of it is not talking to the press. That's an important part. It's also making sure your prior relationships understand you now have a new function and cannot operate with them in a way you have prior."

On the Obama campaign, Miss Daly specialized in preparing for political attacks against Mr. Obama.

Thus, one scenario in which her skills would be useful to the White House would involve setting up a "murder board operation," in which political nominees are subjected to simulated political attacks in order to prepare for the real thing.

If that is part of her job description, the timing of Miss Daly's hiring would appear to be a response to problems the Obama administration has experienced with several of its nominees, most recently the withdrawal of Tom Daschle for secretary of health and human services because of a tax problem.

Although the White House confirmed that the counsel's office has taken over the vetting process, it said Miss Daly has not been involved in any vetting of political appointees and will not do any work on future vetting. A separate team of people inside the counsel's office will handle that task, the White House said.

Miss Daly has been doing opposition research for Democratic politicians since just after graduation in 2001 from Smith College. She began in 2002 as a researcher for Sen. Tim Johnson's re-election campaign in South Dakota, and in 2004 she was research director for Betty Castor's unsuccessful run at a Florida seat in the U.S. Senate.

In 2005, she served as research director for the unsuccessful New York mayoral bid of Gifford Miller, then the council speaker. From October 2005 to January 2007, before joining the Obama campaign, she was the deputy research director at the Democratic National Committee.

Mark Corrallo, a communications director at the Justice Department early in the Bush administration, said he was upset not about politicization but what he called a double standard in media coverage.

"If this had been a Republican, then we'd be hearing the howls: 'How can you put a guy who worked in opposition research at the White House counsel's office?' "

Mr. Corrallo raised the example of the political firestorm Democrats raised in 2007 when President Bush tried to name a Republican political-opposition researcher, Timothy Griffin, to a senior Justice Department job, the U.S. attorney for Arkansas' Eastern District.

Democrats attacked Mr. Griffin because he was a former Republican National Committee operative who also worked for senior Bush adviser Karl Rove at the White House, before the U.S. attorney in eastern Arkansas was fired to make way for Mr. Griffin.

The maneuvering drew national attention because it became part of the scandal over the removal by top Justice officials of seven other U.S. attorneys across the country for questionable reasons.

But Mr. Corrallo, who has a long background in Republican politics, including work as a spokesman for Mr. Rove during the CIA leak scandal, pointed out that unlike Miss Daly, Mr. Griffin has a law degree and extensive legal experience as a judge advocate general in the U.S. military.

"Tim had served on a congressional committee as a lawyer. He also prosecuted cases for 10 years in the Army. He's a real lawyer," Mr. Corrallo said. "But because he had worked at the RNC and the White House political office, he was a hack.

"Now come back to this woman, who is not a lawyer, in a newly created position in the White House counsel's office. It's amazing what they're doing. Her background is pure politics, and they put her in the White House counsel's office," he said.

Several Democratic senators who criticized Mr. Griffin - Patrick J. Leahy of Vermont, Charles E. Schumer of New York, Richard J. Durbin of Illinois and Sheldon Whitehouse of Rhode Island - did not respond to requests for comment.

The White House did not make Miss Daly available for comment.

But Democratic lawyers with experience in the White House defended the move.

Lanny Davis, who served as special counsel to President Clinton from 1996 to 1998, said the presence of a non-lawyer in the counsel's office is "certainly justifiable."

Mr. Davis said he did not have specific knowledge about Miss Daly or of the new position, but that he remembered having non-lawyers doing legal research at the White House counsel's office in the Clinton White House.

"There were certainly interns doing legal research year round. I think we had a full-time or part-time paralegal," said Mr. Davis, who writes a weekly news analysis for The Washington Times called Purple Nation.

Abner J. Mikva, White House counsel from 1994 to 1995, said the same thing.

"We had several non-lawyers attached to the office. One of them was doing research. Others were doing security matters, in addition to the vetting that the White House counsel's office is sort of responsible for," Mr. Mikva said.

Have They No Shame? A Power Grab at the Census: The White House is taking control of the census — and the GOP is sounding the alarm by Jennifer Rubin

Source: http://pajamasmedia.com/blog/have-they-no-shame-a-power-grab-at-the-census/

February 9, 2009

As required by the Constitution, every ten years the federal government undertakes a massive effort to count and gather information about Americans. The information impacts hundreds, if not thousands, of decisions about federal funding and policy. But most importantly, it will be the basis for the redistricting which determines Congressional representation.

The White House has proposed that the director of the Census, a Commerce Department employee, report to the White House. The White House contends this is no big deal. Nevertheless, the move followed [1] a wave of protest from liberal civil rights groups concerned that they might not succeed in maximizing the count of minority voters if the census remained under the auspices of  Republican Judd Gregg, the Commerce secretary nominee.

Republican leaders in Congress are waking up to the implications of the White House’s decision and beginning to sound the alarm. Two Republican congressmen have sent [2] a letter to the White House protesting the move. The congressmen cited Title 13 of the U.S. Code, requiring that the Census Bureau be administered “within, and under the jurisdiction of, the Department of Commerce.” They contend that “the Executive Branch is limited to providing support for the Bureau in the form of information and resources.”

On Sunday Republicans fanned out on TV to try to raise public awareness of the issue. Minority Leader John Boehner on [3] Fox News Sunday explained:

It just tells me that the census, the counting of the population of the United States is going to be politicized.  This is very simple, Chris, the Constitution says that every ten years there will be a count of all persons who live in the United States.  That means that we need to have an actual count.  And why this has to be moved from the Commerce Department over to the chief of staff’s office, I would think he’d have better things to do, than to coordinate the census, but apparently they have ideas about what they might want to do to politicize the counting of our population next year.

[4] Sen. John Cornyn echoed a similar sentiment during his exchange with Chris Wallace:

WALLACE: Senator Cornyn, we now learn that the Obama administration is going to have the director of the Census Bureau report not only to the commerce secretary but also to the White House. What’s wrong with that?

CORNYN: Well, ordinarily, this has been something that the commerce secretary has done, and I think it ought to be done on a competent, as much as possible, nonpartisan basis. And to shift it to the White House to me just politicizes the census, which is not something we should be doing.

WALLACE: And what’s the danger, briefly, of politicizing the census?

CORNYN: Well, because, of course, that determines who gets what congressional districts. States like Texas were going to get probably at least three new congressional districts based on the reapportionment — and then, of course, in drawing those lines, redistricting within states. It’s all based on those census figures. So if you cook the figures up front, I think it distorts that process going forward and undermines the concept of one person, one vote.

Mainstream news reporters also are beginning to discuss the implications of this move. Rick Klein wrote on [5] The Note:

GOP lawmakers are pointing out that the new structure will effectively leave White House Chief of Staff Rahm Emanuel — a former chairman of the Democratic Congressional Campaign Committee — in a decision-making position regarding how Census business is conducted.

“The Census is supposed to be not only outside of politics, but transparent,” said Rep. Darrell Issa, R-Calif., the ranking Republican on the House Oversight and Government Reform Committee. “This implies that President Obama intends on getting a count to his liking. It borders on overt political corruption.”

While the program to count and compile data on Americans might not seems political, the reapportionment of House seats based on the decennial census has huge political ramifications. In addition,  the census data will be used to determine funding formulas for a wide range of government programs.

It is ironic that the Obama team selected Republican Judd Gregg to head the Commerce Department as an intended symbol of the Obama administration’s commitment to New Politics. This was supposedly evidence of a less cravenly political style of governing than what many contended was par for the course in the Bush years. Now, it appears the Obama team intends to strip Gregg of real authority over this key responsibility, giving lie to the notion that the Obama administration believes in post-partisanship.

Had this stunt been attempted during the Bush years one certainly would have heard a hue and cry from good government groups, the media, and academics. We no doubt would have heard a chorus of opposition: “The professional public servants are being shunted aside!” And from those so aghast about attempts to suppress or manipulate voting, we would have expected the shrieks: “This is an attempt to politicize the census and stack the deck for reapportionment!” It is not hard to imagine the reaction if the Bush White House had suggested that a supposedly unbiased statistical undertaking should be directed by, say, Karl Rove.

It is unclear what, if any, recourse Republicans might have. If public pressure can be generated, the White House might retreat. (The White House already seems to be [6] scrambling, trying to belatedly clarify that the Census Director will merely be working “closely” with the White House.) But it is far from certain that the public will see through the White House spin and rise up over something as arcane as control over the census.

Alternatively, Senate Republicans might seek to hold up Gregg’s confirmation until assurances are provided that the census will be not be controlled by political operatives in the White House. Combining disgruntled Republicans with liberal Democrats (who might be loathe to put a conservative Republican in the Obama cabinet) might raise the potential for a filibuster.  Nevertheless, Republicans haven’t been successful in mounting serious challenges to nominees so far.

Concerned congressmen might seek to mount a legal challenge. However, the knotty issue of who possess legal “standing” to sue and other legal defenses may dissuade courts from weighing in. (Sources on Capitol Hill report that Republican counsel are mulling over the legal issue.)

It therefore remains to be seen whether the White House can be forced to give up the idea of seizing control of the census and instead to guarantee that it will remain free from political interference. If not, and this issue continues to fester, it will likely shed further doubt on Obama’s claim to be the harbinger of a new era in Washington. In the end, the White House is unlikely to retreat unless overcome by the fear that President Obama’s image — which has taken a beating in the first few weeks of his presidency — might be unduly imperiled.  So, for now, Republicans are left to ask, “Have they no shame?”

URLs in this post:
[1] a wave of protest: http://www.msnbc.msn.com/id/29046718/
[2] a letter: http://www.newsmax.com/headlines/census_emanuel_republican/2009/02/08/179458.html
[3] Fox News Sunday : http://gopleader.gov/News/DocumentSingle.aspx?DocumentID=110456
[4] Sen. John Cornyn: http://www.foxnews.com/story/0,2933,489741,00.html
[5] The Note: http://blogs.abcnews.com/thenote/2009/02/is-obama-politi.html
[6] scrambling: http://www.cqpolitics.com/wmspage.cfm?docid=news-000003025792

Jennifer Rubin is PJM's Washington, DC, editor. She also blogs at Commentary’s Contentions.

What Happened To Business Prudence?

Source: http://www.ibdeditorials.com/IBDArticles.aspx?id=318815966519210

By ROBERT L. BRADLEY JR. | Posted Friday, February 06, 2009 4:20 PM PT

More than 200 years ago, Adam Smith determined that economic self-interest advanced the wider commercial good as if led by an invisible hand. Such a self-seeker, he added, "frequently promotes (the interest) of society more effectually than when he really intends to promote it."

But what happens when it's government that defines profit opportunities, and a country's culture deprecates commercial self-interest to the point that business leaders who "do good" are praised over those who "make good"? What happens when the invisible hand is replaced by the grip of regulation, subsidies and "social" responsibility? The current financial crisis provides the answer.

For decades, government has intervened in the mortgage market, in the name of the "public interest." There was the creation of Fannie Mae and Freddie Mac, the Home Mortgage Disclosure Act of 1975 and the Community Reinvestment Act of 1977, the Financial Institutions Reform Recovery and Enforcement Act of 1989 and the Federal Housing Enterprises Financial Safety and Soundness Act of 1992.

There was the demand in 2000 by HUD that Fannie Mae dedicate 50% of its business to low- and moderate-income families. And there was President George W. Bush pushing homeownership for all as the way to prosperity.

Through laws and administrative regulation, Stan Liebowitz and other free-market scholars have shown, governments have pushed private businesses to go far beyond prudent, self-interested profit-making.

In 2000, for example, the Fannie Mae Foundation identified the "Outstanding Accomplishment" of Countrywide Financial Corp. as making almost one-sixth of its mortgages to blacks, Hispanics and Native Americans.

The foundation then went on to praise the firm's "companywide fair lending task force, employee training in fair lending, recruitment of minority employees, employee compensation systems that do not penalize for making small loans and comprehensive 'We House America' campaign to expand homeownership opportunities."

Did anyone bother to ask whether such do-goodism might be at odds with old-fashioned prudence, or whether, in the final analysis, it might be bad for its intended be-neficiaries? Did new-model business leaders dare to think there could be unintended consequences from the post-'60s creed of corporate social responsibility?

The brass at Countrywide were too busy basking in their honors to really care. In 2000, for example, La Opinion, the country's leading Spanish-language newspaper, named Countrywide Home Loans "Corporation of the Year." Perhaps the company's leaders thought narrow prudence would stand in the way of such gifts as the $25,000 they gave to the League of United Latin American Citizens for "educational programs on homebuying."

And Countrywide was hardly alone in the assault on invisible-hand decision-making. A decade ago, a senior managing director at Bear Stearns said this about mortgages made pursuant to the Community Reinvestment Act:

"While credit scores can be an analytical tool with conforming loans, their effectiveness is limited with CRA loans. Unfortunately, CRA loans do not fit neatly into the standard credit score framework. We believe a broader array of credit analysis data is needed to get a clearer perspective of the situation."

Certainly, the people formerly employed by Bears Stearns now have a clearer perspective on the value of those mortgages.

All this might have been learned from the Enron debacle. In response to generous government subsidies, that company moved from its natural gas core into solar power, wind power and other government-dependent "green" energy plays. Enron tried to monetize its political bets by sounding the climate alarm and calling for government regulation of carbon dioxide emissions.

In its prime, Enron was arguably the most politically connected and politically correct company in America, and even created a subsidiary to invest in inner-city, minority-owned businesses. Sure, the company lost money in all of this, but it received a climate protection award from the EPA and a corporate conscience award from the Council on Economic Priorities, among other honors.

And yet, when the company collapsed, progressives screamed about corporate greed rather than about the perils of corporate welfare and "social" responsibility.

Milton Friedman foresaw it all in a prescient 1962 article arguing that business can effectively serve only one master — its owners — by winning profits in accord with investor expectations, while respecting legal and ethical norms.

Friedman warned against attempting to serve multiple masters: "If businessmen do have a social responsibility other than making maximum profits for stockholders," he asked, "how are they to know what it is?" More important still: What will result?"

Noted Adam Smith, in an observation that has turned out to be more true than he could have imagined: "I have never known much good done by those who affected to trade for the publick good,"

Government regulation and political correctness are at the root of recent organizational failures that, in turn, have resulted in massive taxpayer-financed bailouts. New government intervention is trying to address the problems created by prior intervention — and futilely, it appears.

The remedy is a reliance on invisible-hand profit-making where the good can really crowd out the bad. A new legal relationship between government and the economy is required — free-market capitalism in place of political capitalism.

With this should come a new understanding of the proper philosophy of entrepreneurial capitalism — tough-love prudence in place of the amorphous doctrine of "corporate social responsibility."

Bradley is CEO of the Institute for Energy Research and author of "Capitalism at Work: Business, Government, and Energy" (M & M Scrivener Press).