If the Federal Government does not do it, who Will?

Article I, Section 8 of the Constitution makes it clear that the federal government has very few powers delegated to it. Meanwhile, the Tenth Amendment in the Bill of Rights delegates powers not explicitly granted to the federal government to the states and the citizens. James Madison eloquently noted that "ambitious encroachments of the federal government, on the authority of the State governments, would not excite the opposition of a single State, or of a few States only. They would be signals of general alarm... But what degree of madness could ever drive the federal government to such an extremity." (Federalist No. 46, January 29, 1788). Madison would be shocked to see the state of affairs our nation is in today.

The brilliance of those who founded this Republic was obvious. They gave the national government very limited powers and gave the power to do virtually anything they desired to the states. They did this knowing that, if an individual state exercised too much control — taxes too high, regulations too oppressive — people would be free to leave to find a place with more liberties. This freedom to "vote with their feet" would keep the state governments in check and give the American people the ability to find the type of government that met their needs.

In addition, giving states such enormous powers would lead to a competitive environment in developing the best approaches to solve policy problems. Instead of the national government making the foolish mistake of trying to solve a major national problem and creating an environment where it is too costly for the states to develop innovation, the founders intended for each state to solve problems through competition and the best innovations would eventually rise to the surface. Virtually all states use the same standard procedures in a plethora of areas. They were developed by witnessing the work of other states, not through the coercion of the federal government.

The founders of this country understood that the federal government was no place to address policies like health care because the issues surrounding it would be too complicated and the costs too high. They delegated that to the states and, over time, the innovators would eventually rise to the top. To date, the states have had no success in solving the health care situation, so it is laughable that the federal government would try to replicate failed policies in Massachusetts on a national level. Remember, the federal system our republic is built on intended for issues like this to be addressed exclusively by the states and not the federal government. Without exception, states like California, Oregon, Massachusetts, and Hawaii have attempted major healch care programs and they have all been complete failures. Hawaii's socialized health care program almost put the entire state into bankruptcy and had to be discontinued in seven months.

The states are the best place for solving policy problems. They have limited amount of dollars because they do not have the power to print currency (meanwhile, the federal government had that power but few others and few reasons to print its "funny money"). This would make a certain level of frugality essential in solving policy problems. Furthermore, having problems solved on a state level allows the mistakes in the problem of doing such isolated, rather than becoming a national disaster. Again, those who created our Republic were brilliant and we need their wisdom now more than ever.

Typical Reaction to Financial "Crisis"

It wasn't a question of "if", but "when." I knew that the problems with the sub-prime would result in typical government reaction in the extreme. There is no doubt that there was some poor decision making in the home financing market place and the companies that are guilty of such are taking a pounding today. The market place is naturally punishing these companies. Some are going bankrupt, others are being acquired by other mortgage companies, others still are voluntarily making significant reforms.

This, of course, isn't enough for the government. The government is demanding more regulations, some of which will make it difficult (if not impossible) for many people to ever be able to get a dream home. They are demanding another agency to provide more oversight, leading to more bureaucracy and cost, but not necessarily to better systems. It is typical government over reaction that leads to punishing, but not effective government. The kind of "reforms" that hurt the victims more than help. The type of programs that only hinder economic growth and prosperity.

I wish the government took more of a medical profession view of problems. Often, when a person is sick, the last thing a doctor wants to do is intervene because the cure is some times worse than the illness. Instead, the advise is "let it run its course." Letting the current situation run its course would allow government to take action after things have settled and then it would have some idea what steps need to be taken. Doing it now, is typical reaction, the kind known for causing damage.

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Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.