As usual, the likely losers would be taxpayers. One risk is that home prices fall, causing some homeowners with second mortgages to default. An equity buffer helps reduce defaults, which is one reason foreclosure rates remain near record lows. A reduction in equity would make defaults and foreclosures more likely.
Former Democratic Rep. Brad Miller testified in a 2015 hearing on the 2008 financial crisis that “the subprime mortgage model was to lend to people who already owned their own homes—70% were refinances and had a lot of equity in their home—and the mortgages were designed to catch them in a cycle of borrowing and borrowing again.”
He blamed banks for being greedy, but they were merely responding to incentives created by the government and Fannie and Freddie. If Fan and Fred buy and guarantee second mortgages, this will also create new risks in the financial system.
The political supporters, who surely know the findings of the minimum-wage studies, might object vociferously: “Most past statistical studies on minimum-wage hikes have found meager percentage reductions in employment in covered worker groups (generally, lower than 3 percent of covered workers) and hours worked.” They would be right, for the literature they’ve reviewed. Yet they overlook how employers are not fools, unable to recognize and use other ways of legally responding to government mandates, with the intent of offsetting partially, if not totally, the labor-cost increases from money wage-rate hikes.
Employers know very well that the mandated money-wage increase is hardly the only way workers are compensated, and may not even be the most important form of compensation (on the margin) for some, or even a few, covered workers (especially those with children who need flexible schedules).
Employers also face competitive market pressures to control their labor costs and advance their profits in financial markets. Employers who don’t respond to minimum-wage mandates by cutting their labor costs (perhaps because they want to be “nice” to their workers) can be left behind with relatively higher production costs, and with higher prices and lower sales than those who do make the cuts. The extant competition can force all competitors to respond even when they would prefer not to do so.
J.D. Tuccille argues against banning people from recording the police.
President Biden has embraced modern progressivism and ditched his liberal economic-policy inheritance. Nowhere is this more striking than in competition policy—the past 40 years of which, Mr. Biden says, have been a failed experiment. His complaint is the consumer-welfare standard, the nearly half-century bipartisan consensus that competition policy should be judged by whether consumers benefit from a given arrangement.
Today’s Democrats aren’t the first to argue that the Federal Trade Commission, now led by Lina Khan, needs drastic change. New leadership after the 1968 and 1980 elections argued the same. In a recent analysis for the Competitive Enterprise Institute, we compared Ms. Khan’s tenure with her predecessors’ from those two eras. The contrast is revealing.
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The FTC has persisted in relentless norm-busting, beginning with Mr. Biden’s designating Ms. Khan as chair immediately after she was confirmed as a commissioner—without telling the Senate he intended to do so. It continued by limiting information available to minority commissioners, companies under investigation and Congress. Further, according to a designated agency ethics official, Ms. Khan became the first agency employee to ignore the advice that she recuse herself from participating in a specific party matter owing to “appearance or other federal ethics grounds.” Before joining the commission Ms. Khan had opined that Meta, one of the parties to a challenged merger, should be denied such acquisitions. She chose to participate anyway, and members of the commission sought to conceal her disregard for ethical guidance.
Norms are essential, particularly when people with strong but different opinions must work together. When they are undermined, so too are social and professional cohesion. Such is the case at Ms. Khan’s FTC. While the commission is certainly active, promulgating rules and filing lawsuits, the painstaking organization and planning necessary to make its efforts permanent are nowhere to be found. As legendary basketball coach John Wooden said, “Never mistake activity for achievement.”
