The ruling political class in Washington D.C. is always making matters worse through what appear to be appropriate solutions for serious problems facing the country. Then when they don't work out as advertised many years after they've been implemented, they tell us that they've got the solutions for the newer, more serious problems that to the unsuspecting and unknowing public seem as if they came out of nowhere, and who are clueless as to how they began in the first place.

Two good examples of the long reach of history and major problems originating with Washington are one, how a permanent underclass that exists today was created during the 60s by Lyndon Johnson's Great Society programs and the other, the Great Recession that began in 2008 when the country's financial system melted down and in turn created the worst financial collapse since the Great Depression that began in 1929. 

It was Daniel Patrick Moynihan, one of the last great Democrats before the party became unmoored from any roots it had in traditional constitutional principles, sounded the alarm as Assistant Secretary of Labor in the Johnson administration that the new welfare state was creating an abundance of unintended consequences that were destructive to blacks, the primary demographic whom it was supposed to help. He came out with his "controversial" Moynihan Report in 1965 officially titled “The Negro Family: The Case for National Action,” that described those destructive consequences and how they started, the most significant one being the breakdown of the black family because of the perverse incentives created by welfare that was actually making poverty worse and creating a permanent underclass.  

The origins of the financial crisis of 2007/2008 can be traced back to Jimmy Carter's administration (another well-intentioned but misguided Democrat president) with the passage of the Community Reinvestment Act (CRA) of 1977. Like Johnson's welfare programs, the CRA was supposed to benefit primarily low-income blacks, it turned out to be the big bang event that led to wickedly destructive financial consequences for everyone many decades later. The original purpose of the CRA was to loosen lending standards by banks so that more blacks could participate in the American Dream by being able to buy a house and to overcome what at the time was called "redlining," an allegedly discriminatory practice by banks making it difficult for blacks to buy a home in non-urban neighborhoods.

Fast-forward to 1999, the last year Bill Clinton was in office as president, when on a bipartisan basis you had the wall between commercial and investment banking torn down with the repeal of the Glass-Steagall Act of 1933. This allowed all the high-powered investment banks to bundle and securitize all of the mortgage loans from across the country into asset-back securities called Collateralized Debt Obligations (CDO). With the low interest rates down to almost zero following 9/11 by the Bush Administration, the housing market took off like a rocket for the next six years helped along with a great deal more loosening and degradation of mortgage loan standards by banks as required by Congress that began in 1977 with the passage of the Community Reinvestment Act.

Unfortunately, a trillion-dollar market for specialized investments turned out to be a house of cards built on sand constructed out of the housing boom’s easy-to-get home mortgages. Many were extremely risky loans (called subprime mortgages) and were doomed to foreclosure. And all the new CDOs with exotic names such as synthetic CDO, Mortgage-backed Securities and Credit Default Swaps crashed within weeks, bringing down the world economy with them.

The moral of these two stories is that government should stay out of the social engineering business, as history has proven time and time again that it has a terrible track record and usually makes matters worse either in the short term or the long term or both. The rhetoric rarely matches up with the intended reality of social policy objectives and instead policy prescriptions most often end up being weaponized to bludgeon the Republicans for being cruel and heartless for not always going along with the Democrats.              

Government assistance has morphed from safety net to entitlement where there is no accountability for the failures of the ruling political class that perpetually creates problems, as well as government incentives to "right social wrongs" that do the same by distorting the marketplace in ways that are not good for anyone.

So as the sun always comes up in the morning, the ruling political class will always present itself as the savior to all those unknowingly and adversely affected by problems it created in the first place. The road to hell is indeed paved with good intentions, but in America, that's okay with many, since the perpetrators will always be rewarded with re-election again and again in an endless and hellish vicious cycle.