OK, back up: this morning the papers and the web are full of nuance-sniffing, as people try to find omens in the SOTU and the GOP response. I don’t think I can add anything useful to all that. But there was one important point in Marco Rubio’s remarks that I don’t think has been highlighted. It’s true, as Andy Rosenthal says, that Rubio mainly reminded us that Republicans don’t like government or taxes; surprise! But he also reminded us that Republicans don’t like reality.
Here’s the passage:
This idea – that our problems were caused by a government that was too small – it’s just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies.
OK, leave on one side the caricature of Obama, with the usual mirror-image fallacy (we want smaller government, therefore liberals just want bigger government, never mind what it does); there we go with the “Barney Frank did it” story. Deregulation, the explosive growth of virtually unregulated shadow banking, lax lending standards by loan originators who sold their loans off as soon as they were made, had nothing to do with it — it was all the Community Reinvestment Act, Fannie, and Freddie.
Look, this is one of the most thoroughly researched topics out there, and every piece of the government-did-it thesis has been refuted; see Mike Konczal for a summary. No, the CRA wasn’t responsible for the epidemic of bad lending; no, Fannie and Freddie didn’t cause the housing bubble; no, the “high-risk” loans of the GSEs weren’t remotely as risky as subprime.