It is ironic that only a few years after the Soviet Union collapsed, the United States, supposedly the world's principal bastion of free-market capitalism, would embark on a bout of central planning that - in terms of losses and malinvestment - would dwarf any central planning effort in the former Soviet Union. This central planning effort started innocently enough - as they often do - with a 'strategy' to increase the home ownership rate to 67.5% by the year 2000. While there is plenty of blame to go around to explain the spectacular failure the housing bubble eventually became and the enormous damage it caused, the precipitating cause of a massive bubble in housing was, undoubtedly, Bill Clinton's goal to boost the home ownership rate to 67.5%.
In the discussion below a review of some of the confident pronouncements surrounding the 67.5% home ownership goal will be reviewed. Immediately after, will be a review of some of the equally confident - and more current - pronouncements about what the 'Green New Deal' entails. This review will make it clear that the same enormous personal arrogance and economic ignorance that sparked the 67.5% ownership goal and subsequent housing bubble is the animating force behind the Green New Deal.
The Housing Bubble
President Bill Clinton - June 05,, 1995
"And I cannot say enough in terms of my appreciation to Secretary (Henry) Cisneros, who is a genuine visionary...Since the day I asked Secretary Cisneros to build this strategy, he has done about everything a human being could do. And I can say this without knowing that I'm overstating it, that if we succeed in doing this, if we succeed in making that number (67.5%) happen, it will be one of the most important things this administration has ever done, and we're going to do it without spending more tax money..." (1)
"The goal of this strategy , to boost home ownership to 67.5% by the year 2000, would take us to an all-time high, helping as many as 8-million families cross that threshold...I want to say this one more time, and I want to thank again all the people here from the private sector who have worked with Secretary Cisneros on this. Our home ownership strategy will not cost the taxpayers one extra cent." (2)
Jamie Gorelick, the 'Duchess of Disaster" and vice-Chair of Fannie Mae
"Under our community investment mandate, HUD will soon require us to dedicate 50% of our business to low and moderate income families... Some people have assumed we don't buy tough loans. Let me correct that misimpression right now. We want your CRA loans because they help us meet our housing goals. Last spring Fannie Mae pledged to provide $2-trillion in housing finance to 18-million underserved families before the decade is over." (3)
Andrew Cuomo, HUD Secretary - October 31, 2000
(note - the 67.5% goal had been achieved, but Cuomo wanted to goose the housing market even more)
"Even with a record home ownership rate of 67.7%, there is still much more to be done. These new regulations (requiring the GSEs to issue 50% of their mortgages to low and moderate income borrowers - author) will greatly enhance access to affordable housing for minorities, urban residents, new immigrants and others left behind, giving millions of families the opportunity to buy homes or to move into apartments with rents they can afford. We acknowledge and appreciate that Fannie Mae and Freddie Mac have accepted this challenge." (4)
The Green New Deal
The 67.5% home ownership goal of Bill Clinton's central plan for housing pales in comparison with Joe Biden's central plan for energy.
- 100% carbon-free electricity by 2035
- 100% fossil-free, energy, by 2050
For some perspective on these goals, see Table 1. Note that in 2019 wind and solar only produced 11.5% of US electricity. It is only when the contributions from hydro (7%) and nuclear (19.6%) are added that the total production of 'carbon free' electricity really becomes significant. Its a pretty safe bet we won't be building any new hydroelectric dams in the near future, and more nuclear plants are shutting down than starting up. (5) As a result, wind and solar alone will have to make up the gap created by shuttering 61.8% of US electricity generation capacity. It can't happen by 2035 - no way.
Even the daunting statistics discussed above, don't even capture what President Biden's central plan for energy requires. Fossil fuels dominate the energy used in transportation. In 2018, the US used 143-billion gallons of gasoline. Replacing this energy with electricity requires another 27% increase in US electricity generation. (6) In addition, in 2019 US airlines used 18.3-billion gallons of jet fuel, (7), and a further 47.2-billion gallons of diesel was used by trucks. (8) Inconvenient facts such as these never interfere with the visions of central planners.
President Joe Biden - January 27, 2021
(sounding just like Bill Clinton thanking Henry Cisneros)
"And let me just start by saying, I can't tell you how much I appreciate the three people standing next to me here for what they've agreed to do to help, particularly my best buddy, John Kerry...."
Executive Order on Tackling the Climate Crisis at Home and Abroad
"...we face a climate crisis that threatens our people and communities, public health and economy, and starkly, our ability to live on planet Earth. Despite the peril that is already evident, there is promise in the solutions - opportunities to create well-paying union jobs and to build a modern and sustainable infrastructure, deliver an equitable, clean-energy future, and put the United States on the path to achieve net-zero emissions, economy-wide, by no later than 2050." (9)
There is one saving grace in the Green New Deal. Recall President Clinton claimed his plan for housing "will not cost the taxpayer one extra cent." At least President Biden didn't make this claim of his central plan for energy.
National goals for home ownership - to three significant digits no less - or equally precise goals for how electricity is generated are no different than the five year plans of the Supreme Soviet. Few people look back on the Soviet Union - where party officials and apparatchiks decided how much fertilizer should be produced in Cherkassy and how much pig iron should be poured in Kharkov - as some sort of model of economic efficiency. For many, the personification of the enormous inefficiencies of the Soviet system - which are endemic to any system based on central planning and control - were the huge lines of people waiting outside of grocery stores; stores which were only filled with empty shelves.
Rather than demonstrating - once and for all - the futility in central planning, the Western elites who dominate government, the media and academic life conclude the problem with the Soviet Union wasn't central planning; instead, it was the central planners! These people think - with deadly seriousness - they are much smarter than the Soviet central planners and - in perfect Wizard of Oz fashion - will always be able to pull the correct rope and push the right button at exactly the perfect time. Sure, the Soviets couldn't pull it off, but they didn't have MIT PhD economists or Yale law school grads at the helm.
As the handful of quotes above demonstrates, the exact same arrogance and ignorance that sparked the housing bubble is behind the Green New Deal. When the housing bubble burst, homes didn't magically disappear. The home may have been worth less than the mortgage against it, but the home still existed as a physical asset. In contrast, the Green New Deal is likely to completely undermine the electrical generating infrastructure in the United States. Once lost, electrical generating capacity may prove difficult to replace quickly. If the Green New Deal ever gets off the ground in earnest, Americans in the future might look back fondly on the chaos that followed the housing bubble.
Sugar Land, TX
April 11, 2021
PS - As always, if you like what you read, please register with the site. It just takes an e-mail address and I don't share this e-mail address with anyone. The more people who register with the site, the better case I can make to a publisher to press on with publishing my book. Registering with the site will give you access to the entire Confederacy of Dunces list as well as the financial crisis timeline.
Help spread the word to anyone you know who might be interested in the site or my Twitter account. I can be found on Twitter @The92ers
1. University of California at Santa Barbara, The American Presidency Project, William J. Clinton, "Remarks on the National Homeownership Strategy," June 5, 1995
3. Remarks delivered by Jamie Gorelick to the American Bankers Association, National Community and Economic Development Conference, Chicago, IL October 30, 2000
4. HUD Announces New Regulations to Provide $2.4-trillion in Mortgages for Affordable Housing for 28.1-million Families https://archives.hud.gov/news/2000/pr00-317.html
9. See paragraph 201