Combs Spouts Off

Today's Wall Street Journal featured a fine opinion column defending freedom of choice and challenging paternalistic efforts to address three current issues. The author addressed three things in the news lately: subprime mortgages, health insurance, and payday loans. In each case, he argued, efforts to protect people from themselves with more regulation are wrong-headed and counter-productive.

Regarding the "mortgage crisis," the author argued that liberal credit, subprime loans, and adjustable-rate mortgages made home-ownership possible for countless people who otherwise couldn't have achieved it. And for most of them, this was and still is a very good thing: 

… According to the national delinquency survey released yesterday, the vast majority of subprime, adjustable-rate mortgages are in good condition,their holders neither delinquent nor in default.

There's no question, however, that delinquency and default rates are far too high. But some of this is due to bad investment decisions by real-estate speculators. These losses are not unlike the risks taken every day in the stock market.

The real question for policy makers is how to protect those worthy borrowers who are struggling, without throwing out a system that works fine for the majority of its users (all of whom have freely chosen to use it). If the tub is more baby than bathwater, we should think twice about dumping everything out.

Regarding health care, the author argued that paternalism has denied people access to affordable options and restricted them to "gold-plated health plans" that they don't want and can't afford:

Buying health insurance on the Internet and across state lines, where less expensive plans may be available, is prohibited by many state insurance commissions. Despite being able to buy car or home insurance with a mouse click, some state governments require their approved plans for purchase or none at all. It's as if states dictated that you had to buy a Mercedes or no car at all.

Regarding payday loans, the author noted that these services, although expensive, allow people of modest means to cope with emergency needs at a far lower cost than the alternatives of bouncing checks or missing payments. The effort to restrict, regulate, or outlaw these services could cause great harm to their supposed victims:

Anguished at the fact that payday lending isn't perfect, some people would outlaw the service entirely, or cap fees at such low levels that no lender will provide the service. Anyone who's familiar with the law of unintended consequences should be able to guess what happens next.

Researchers from the Federal Reserve Bank of New York went one step further and laid the data out: Payday lending bans simply push low-income borrowers into less pleasant options, including increased rates of bankruptcy. Net result: After a lending ban, the consumer has the same amount of debt but fewer ways to manage it.

The "less pleasant options" also include loan sharks with mob connections who break legs when payments are late.

The author concluded with words that made me cheer:

Since leaving office I've written about public policy from a new perspective: outside looking in. I've come to realize that protecting freedom of choice in our everyday lives is essential to maintaining a healthy civil society.

Why do we think we are helping adult consumers by taking away their options? We don't take away cars because we don't like some people speeding. We allow state lotteries despite knowing some people are betting their grocery money. Everyone is exposed to economic risks of some kind. But we don't operate mindlessly in trying to smooth out every theoretical wrinkle in life.

The nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else.

If you're reading this on your computer, you're probably already seated. Good. If not, sit down. The author of this wonderful column? George McGovern. Yes, the George McGovern.

Now, listen up, all you doom-and-gloom libertarians and libertarian-conservatives. You whine about how we're losing more and more of our freedoms, about the inexorable growth of Leviathan. You think we're losing the battle for liberty. You speak with contempt about the "sheeple" among whom you live, who are all too eager to "trade their birthright for a mess of pottage." You're wrong. In terms of the intellectual climate, the culture, the prevailing values and beliefs, we've made tremendous progress in the last 40 years.

No, we're not yet on the verge of a libertarian nirvana or a shining city on the hill. But we're not descending into darkness, either. Things have changed, and they've mostly changed for the better.

Except for in a few primitive backwaters and on college campuses, the superiority of "free minds and free markets" is almost universally acknowledged (even if grudgingly, by some). 

And the most radical leftist in my lifetime to be a major-party presidential candidate, the man who in 1972 advocated essentially democratic socialism and a cradle-to-grave welfare state, is today arguing for economic liberty and freedom of choice in a column entitled "Freedom Means Responsibility."

I think that's just way, way cool. Thanks, George! And cheer up, my friends — we're winning the war of ideas, and the future is bright!

(This message brought to you by Denver's most Pollyanna-ish curmudgeon — or curmudgeonly Pollyanna. Something like that. A tip of the hat to Rick Sincere, who had some good comments of his own.) 

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