There were some things to like about President Obama's even-handed inaugural speech. He paid homage to the founders. He tipped his hat to the importance of markets in the American scheme. He passed up the chance to build oratorical monuments to the momentousness of the moment.
But then, as I was feeling a sense of relief, President Obama let loose this stunning invitation to head-banging:
"The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end."
If effectiveness is the standard, the 30-year social engineering project to destroy market mechanisms that determined who could get a mortgage, and who couldn't, was effective beyond the dreams of its authors. In recent years, people without incomes and people with bad credit histories got mortgages.
Even politicians, especially those who maintained and promoted the system, got mortgages, at unusually favorable interest rates.
Yes, the system was corrupt, but it was, without doubt, effective in its social engineering purpose, which was to destroy the role of markets in the mortgage industry.
It worked, for a while, but does anybody still believe that it was a good idea? The unintended consequences, bundled mortgages sold as securities all over the world, turned out to be time bombs that blew up when the layoffs and defaults began.
The proper test of a government policy is not whether it works. Instead, Congress and the White House should ask:
Does the government have any business interfering in a particular market?
What's the down side to government interference?
Assuming the worst of the unintended consequences happens, what does the government do then?
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