In a recent post on his blog, Paul Krugman disparages Dick Armey for saying the government ran the housing market into the ground (or something along those lines). Krugman writes:
There’s a persistent delusion, on the part of many pundits, to the effect that we’re actually having a rational political discussion in this country. But we aren’t. The proposition that the Community Reinvestment Act caused all the bad stuff, because government forced helpless bankers into lending to Those People, has been refuted up, down, and sideways. The vast bulk of subprime lending came from institutions not subject to the CRA. Commercial real estate lending, which was mainly lending to rich white developers, not you-know-who, is in much worse shape than subprime home lending. Etc., etc.
If you watch the video, you'll see Armey never mentioned the CRA. He simply made a sweeping blanket statement. Now anyone who has followed the decade long critique of government interference in the housing market knows the CRA is the last policy serious critics claim played a role in the debacle. It's pretty much accepted, in all camps, that the policy had a relatively negligible effect on the market.
But what Krugman misses (or most likely chooses to miss) is that the CRA is in and of itself one of the many results of a political mindset that dominated Washington in the 80's, 90's, and 00's that indirectly forced hundreds of thousands, if not millions, of parties to get involved in something they ordinarily never would have gotten involved in.
No doubt a similar thing will happen in healthcare if the same mindset wins out.
(Note: See chapter 2 of Johan Norberg's Financial Fiasco for a detailed analysis of government interference in the housing market)
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