Krugman on Bush and McCain's Housing Crisis Response: "It’s Like Katrina" to Say "Let People Suffer"

Posted by Amanda Terkel, Think Progress at 4:39 AM on March 31, 2008.

Last week, Sen. McCain spoke to the Orange County Hispanic Small Business Roundtable in California on solving the nation's economic woes. During that speech, he stated that he does not believe the federal government should assist struggling homeowners:

I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.

McCain instead advocated a laissez faire approach, saying that he would “convene a meeting of the nation's accounting professionals” and “top mortgage lenders” and try to persuade them to voluntarily help Americans.

Today on ABC This Week, former Labor secretary Robert Reich and New York Times columnist Paul Krugman compared McCain’s approach to Herbert Hoover. “John McCain makes Herbert Hoover look like an activist,” said Reich. Krugman then added that ignoring the housing crisis is just as bad as the administration’s response after Hurricane Katrina:

It would be a little different if the administration said housing prices are going up. If they hadn’t said there’s no bubble. It’s a national disaster in effect. It’s like Katrina. To say, oh, let people suffer, saying let those people who made the mistake of staying in New Orleans suffer.

On March 16, Sen. Charles Schumer (D-NY) also said, “The President's hands-off attitude is reminiscent of Herbert Hoover in 1929 and 1930.”

Transcript:

REICH: This is not something that’s just a run-of-the-mill economic or finance crisis. I think therefore, it is very important, and appropriate for the government to do something. I mean, John McCain makes Herbert Hoover look like an activist.

WILL: He was.

KRUGMAN: Yeah, when I listened to McCain give that speech, I immediately thought of Herbert Hoover’s treasury secretary. Liquidate farmers, you can’t do this. This is a financial crisis. You’ve got to do something, and that does include helping homeowners who were sucked in a little different if Alan Greenspan said you should all take out adjustable rate mortgages.

It would be a little different if the administration said housing prices are going up. If they hadn’t said there’s no bubble. It’s a national disaster in effect. It’s like Katrina. To say, oh, let people suffer, saying let those people who made the mistake of staying in New Orleans suffer.

Amanda Terkel is Deputy Research Director at the Center for American Progress and serves as Deputy Editor for The Progress Report and ThinkProgress.org at the Center for American Progress.