Obama on Leno
By David Henderson
I just finished watching my DVR of President Obama on NBC’s “The Tonight Show with Jay Leno.” There were some interesting highlights. Of course, Obama was charming: he does that very well. If I judged him only by looks, tone, and humor, as I think most people will do, I would give him an A+. Particularly charming was the way he made fun of the fact that the Secret Service insisted that he take a motorcade rather than walk less than half a mile.
But there was actually economic content in the interview also, and not just what appeared to be Obama’s prepared lines, but also his response to a bit of a curve ball that Leno threw him. Incidentally, isn’t it interesting that comedians are asking some of the tougher questions being asked of politicians and pundits? Jon Stewart, for example, of the Daily Show, asked Alan Greenspan, “If we believe in free markets, why do we have a Fed?” (here at the 2:25 point)
Leno put his finger on what is so wrong about the special 90 percent tax that the House of Representatives voted to impose after the fact on a particular group of people and gave Obama a chance to justify it. Leno gave him a 2-3 minute break to think about his answer. When they came back after the ads, Obama didn’t justify it and said that he would like instead to raise the top marginal income tax rate to where it was through most of the 1990s, that is, 39.6 percent. Here’s where I fault Leno, though. Given that he asked a tough question and Obama stated his preference for a higher tax rate on all high-income people, Leno should have asked Obama if he would veto this law. Incidentally, the 90 percent tax is also imposed after the fact, which makes it an ex post facto law and, therefore, unconstitutional. Not that that typically matters in Washington.
Obama also hinted that he would impose federal usury laws. Here’s that segment:
Here’s the dirty little secret, though. Most of the stuff that got us into trouble was perfectly legal. And that is a sign of how much we’ve got to change our laws — right? We were talking earlier about credit cards, and it’s legal to charge somebody 30 percent on their credit card, and charge fees and so forth that people don’t always know what they’re getting into. So the answer is to deal with those laws in a way that gives the average consumer a break.
When you buy a toaster, if it explodes in your face there’s a law that says your toasters need to be safe. But when you get a credit card, or you get a mortgage, there’s no law on the books that says if that explodes in your face financially, somehow you’re going to be protected.
The above segment is interesting in so many ways. First, as noted, in the first paragraph, Obama seems to be advocating federal usury laws. It was usury laws in California in the early 1970s that prevented me from getting a credit card with a limit of even $250. Second, Obama seems to be saying that high interest rates are the problem. Most people have thought that the bubble was due to low interest rates. Third, Obama seems not to understand, or maybe care about, moral hazard, as his toaster analogy shows. If your getting overextended on your credit cards means that you’re not protected, you’re less likely to get overextended on your credit cards. Consistent with that lack of understanding of moral hazard, in laying out, fairly well, actually, how AIG got in a heap of trouble, Obama never said a word about the fact one reason AIG could take such risks is that politicians like Obama and McCain would bail them out if things went bad.