For decades Washington has been manipulating prices to encourage homeownership and “steer” the economy. To “incentivize” you to buy a house, it made mortgage payments tax deductible, largely exempted homes from capital gains taxes, and created Fannie Mae and Freddie Mac. After the stock market tumbled in 2001 and 2002, Washington established a policy of artificially low interest rates that created the illusion of cheap credit; leery of the stock market, and looking for someplace else to put all this easy money, Americans began buying homes in droves.

But eventually the drug-induced high of artificial credit wore off, and out-of-whack housing prices plummeted, sparking the financial crisis. What was Washington’s response? It ramped up its price manipulation policy, injecting us with a new round of “easy money” amphetamine:  Bush doled out “stimulus” checks, the Treasury began funneling billions into banks, and the Fed started frantically slashing interest rates. And, we are told, this is only the beginning. A new dose of bailouts, interest rate cuts, and “stimulus” giveaways is just around the corner.

Maybe it’s time for a new approach. How about we start thinking of ways to address this crisis by getting the government out of the business of price manipulation–and let prices, from home values to interest rates, be determined by people’s free choices and the law of supply and demand?

This will require some unconventional thinking–and here’s a suggestion to get us started: free up the housing market by freeing up immigration. That’s bound to be controversial, but indulge us for a moment.

Right now the housing market is in disarray. Too many homes built for our current population has sent prices spiraling downward, and millions of homeowners, stuck with mortgages they can’t afford and houses they can’t unload, are facing foreclosure. Meanwhile, there are millions of peaceful people around the globe eager to bring their wealth, talent, and ambition to this country, but can’t because Washington forcibly prevents them from immigrating.

This government-enforced cap on the number of potential home-buyers is just another instance of price manipulation. Imagine if the number of annual immigrants increased from around 650,000 a year to, say, five million. Virtually overnight we would see money pour into the American real estate market, as millions of new businessmen and workers bought and rented homes. Not only would this eliminate the oversupply of houses, we would enjoy the broader economic benefits of welcoming legions of highly skilled and motivated individuals into the American economy.

You might be thinking, “Won’t this lead to lower wages or unemployment at a time when we can least afford it?” The history of this country attests to the fact that, in the long run, immigration fosters economic growth. Even in the short run, however, the effect on wages and employment is an open question–it depends on how much capital and entrepreneurial acumen the new immigrants bring and create.

There are many other simple measures we could take to roll back the government’s manipulation of prices. For instance, we could eliminate restrictions on bank ownership, which coercively limit how much capital banks can raise.

Besides such quick, immediate steps to end government price distortions, we need a long-term strategy to eliminate all government policies that manipulate prices. We need to eliminate the countless regulatory shackles on financial institutions, which distort market forces and encourage reckless actions. We need to put an end to the government’s crusade to encourage homeownership through Fannie and Freddie, the Community Reinvestment Act, tax code manipulation, and many other avenues. Above all, we need to end the government’s ability to set interest rates and create inflationary booms–and their inevitable busts–by phasing out the Federal Reserve and allowing the United States to return to a gold standard.

These would be radical reforms, to be sure–but that’s because the government has been radically expanding its price manipulation policies for the better part of a century. We’re seeing where that path leads. It’s time to start moving in a new direction.

Yaron Brook is the president of the Ayn Rand Center for Individual Rights. Don Watkins is a writer at the Ayn Rand Center. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of “Atlas Shrugged” and “The Fountainhead.”

Speaking of the financial crisis, French president Nicolas Sarkozy recently said, “Laissez-faire is finished. The all-powerful market that always knows best is finished.”

Sarkozy was echoing the views of many, including president-elect Obama, who assume that the financial crisis was caused by free markets–by “unbridled greed” unleashed by decades of deregulation and a “hands off” approach to the economy. And given this premise, the solution, they say, is obvious. To solve this crisis and prevent another one, we need a heavy dose of Uncle Sam’s elixir: government intervention. Whether it’s more bailouts, stricter regulation, a new round of nationalizations, or some other scheme, the only question since day one has been how, not whether, government is going to intervene.

And the issue is wider than the financial crisis. Millions of Americans don’t have health insurance? Well, says Obama, that’s because we’ve left the health-care system to the free market. The solution: a complete government takeover of medicine. A few companies engaged in accounting fraud? It must be because we didn’t impose enough regulations on businessmen. The solution: rein in corporations with Sarbanes-Oxley.

But while capitalism may be a convenient scapegoat, it did not cause any of these problems. Indeed, whatever one wishes to call the unruly mixture of freedom and government controls that made up our economic and political system during the last three decades, one cannot call it capitalism.

Take a step back. In the lead up to the “Reagan Revolution,” the explosive growth of government during the ’60s and ’70s had left the American economy in disarray. A crushing tax burden, runaway inflation, brutal unemployment, and economic stagnation had Americans looking for an alternative. That’s what Reagan offered, denouncing big government and promising a new “morning in America.”

Under Reagan, some taxes were reduced, inflation was subdued, a few regulations were relaxed–and the economy roared back to life. But while markets were able to function to a greater degree than in the immediate past, the regulatory and welfare state remained largely untouched, with government spending continuing to increase, as well as some taxes. Later administrations were even worse. Bush Jr., often laughably called a champion of free markets, presided over massive new governmental controls like Sarbanes-Oxley and massive new welfare programs like the prescription drug benefit.

None of this is consistent with capitalism. As the economic system that fully recognizes and protects individual rights, including the right to private property, capitalism means, in Ayn Rand’s words, “the abolition of any and all forms of government intervention in production and trade, the separation of State and Economics, in the same way and for the same reasons as the separation of Church and State.” Laissez-faire means laissez-faire: no welfare state entitlements, no Federal Reserve monetary manipulation, no regulatory bullying, no controls, no government interference in the economy. The government’s job under capitalism is single but crucial: to protect individual rights from violation by force or fraud.

America came closest to this system in the latter half of the nineteenth century. The result was an unprecedented explosion of wealth creation and consequent rise in the standard of living. Even now, when the fading remnants of capitalism are badly crippled by endless controls, we see that the freest countries–those which retain the most capitalist elements–have the highest standard of living.

Why then should capitalism take the blame today–when capitalism doesn’t even exist? Consider the current  crisis. The causes are complex, but the driving force is clearly government intervention: the Fed keeping interest rates below the rate of inflation, thus encouraging people to borrow and providing the impetus for a housing bubble; the Community Reinvestment Act, which forces banks to lend money to low-income and poor-credit households; the creation of Fannie Mae and Freddie Mac with government-guaranteed debt leading to artificially low mortgage rates and the illusion that the financial instruments created by bundling them are low risk; government-licensed rating agencies, which gave AAA ratings to mortgage-backed securities, creating a false sense of confidence; deposit insurance and the “too big to fail” doctrine, whose bailout promises have created huge distortions in incentives and risk-taking throughout the financial system; and so on. In the face of this long list, who can say with a straight face that the housing and financial markets were frontiers of “cowboy capitalism”?

This is just the latest example of a pattern that has been going on since the rise of capitalism: capitalism is blamed for the ills of government intervention–and then even more government intervention is proposed as the cure. The Great Depression? Despite massive evidence that the Federal Reserve’s and other government policies were responsible for the crash and the inability of the economy to recover, it was laissez-faire that was blamed. Consequently, in the aftermath, the government’s power over the economy was not curtailed but dramatically expanded. Or what about the energy crisis of the 1970s? Despite compelling evidence that it was brought on by monetary inflation exacerbated by the abandonment of the remnants of the gold standard, and made worse by prices controls, “greedy” oil companies were blamed. The prescribed “solution” was for the government to exert even more control.

It’s time to stop blaming capitalism for the sins of government intervention, and give true laissez-faire a chance. Now that would be a change we could we believe in.

Yaron Brook is the president of the Ayn Rand Center for Individual Rights. Don Watkins is a writer at the Ayn Rand Center. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of “Atlas Shrugged” and “The Fountainhead.”

QUESTION: Is the project to widen Palm Bay Road on schedule, and when will it be completed?

ANSWER: The project widening Palm Bay Road from four to six lanes for 4.5 miles between Minton Road and Robert J. Conlan Boulevard is on schedule for a fall 2010 completion date, said Stephanie Evans, public involvement coordinator for the Florida Department of Transportation.
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“The government should put an end to the non-objective ‘indecency’ laws that permit the FCC to dictate what Americans can say and hear on the airwaves,” said Don Watkins, a writer for the Ayn Rand Center for Individual Rights.

“The Supreme Court has defined ‘indecency’ as speech that ‘depicts or describes sexual or excretory activities and organs in terms patently offensive as measured by contemporary community standards.’ But which Americans count–and don’t count–as part of the community? Why are they king? And how are broadcasters to divine the community’s supposedly shared standards?

“As the history of the government’s anti-indecency regime has shown, these questions are unanswerable. The only way for broadcasters to play it safe is to engage in self-censorship, cutting any material regulators might declare indecent.

“And once the government becomes the enforcer of ‘community standards,’ no speech is safe. How long until the courts start rubber-stamping the Bible Belt’s efforts to suppress the theory of evolution on the grounds that it is offensive, corrupts young minds, and undermines community values?

“It’s time for the government to stop telling Americans what we can say and hear on the airwaves, and to protect our constitutionally guaranteed right to free speech.”

After 13 months as president and CEO of the Brevard Art Museum, Karl Hollander resigned Monday. He handed his letter of resignation to Sue Hopkins, chairwoman of the museum’s board of trustees.
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