KJ - anything that could be labeled an "entitlement program" is, IMO, not a public good. Prior to Social Security and Medicare (for example), we still had senior citizens. On average, they were very poor because they didn't plan ahead. So what happened to them? Many of them were in very desperate circumstances, but there were a lot of them that were taken care of by family. Now that the government takes care of them, how often do you think family gets involved? I'm just speculating here, but I would guess very infrequently. As for those with no family, this seems like a good idea for a charity. I wouldn't be surprised to find that charities used to exist to address such a need.
turgy - How do you think we created the housing bubble in the first place? Honestly, this is a topic for its own thread, but I'll just touch on some of the highlights. It has only been relatively recently that people could buy a home with little or no down-payment. That is the removal of risk to a purchaser because worse case scenario, they take a hit to their credit rating. Banks would have never been willing to take such a risk, but they know they are able to bundle and sell. Why is all of that possible? Much of it has to do with the government pushing for rules that allow people to buy homes that realistically can't afford them. Fannie Mae and Freddie Mac are government sponsored enterprises who were told by the government to purchase a lot of these bad loans, removing the risk for the banks. On top of all of this, interest rates are being maintained artificially low by the federal reserve, which also limits risk to the buyer. When you increase the number of people who are buying houses, the supply doesn't automatically increase to accomodate, so the price increases. Even though it is an artificial increase, it suddenly means that these people who purchased houses become very weathly not through any labor, but simply because they bought a house. This creates an additional perception of safety. Rating agencies, which are government regulated, are compensated inappropriately, giving them an incentive to rate the securities higher than they should be. Meanwhile, the government did make commitments and guarentees to foreign investors, none of which was appropriate, but they effectively told the foreign investors that there was no risk.
So, was there risk or wasn't there? Clearly, if something seems to good to be true, you should be sceptical, so no one in their right mind should assume that something with such a good return is risk free. But when everything went belly-up and the banks started failing because of it, the government stepped in an issued a bail out, demonstrating that the government certainly intended to stand behind the fact that the risk had been removed from the system.
There are plenty of economist that don't agree that there would have been a total financial collapse had a couple of banks been allowed to fail. There certainly would have been a financial crisis, but what we are going through now is one anyway and there are a lot of people predicting that we are setting ourselves up for an even worse financial crisis than we would have had had we just let things play out.
As for wanting less government, turgy, I have to disagree with you again. There is a difference between wanting a federal handout and being willing to take one when it is presented. If the federal government is giving the handouts, you are going to be paying for it whether you get your share or not, so you take your share. That doesn't mean you wouldn't prefer that no handouts were given in the first place.
