The collapse of the U.S. housing market over the past few years would be bad enough if it affected only home builders themselves. But in our complex economy, a downturn in an industry as big as housing construction has serious ripple effects.
The big floor-covering industry just down Interstate 75 in Northwest Georgia has suffered terribly as home building has dropped and demand for carpet and other floor coverings has fallen. In fact, flooring makers have endured “the largest decline in the history of the flooring industry,” Jeff Lorberbaum, chairman and CEO of Calhoun, Ga.-based Mohawk Industries, said recently.
From their peak just five years ago, carpet sales have dropped about 40 percent, he added.
He chided the federal government for encouraging lending policies that unwisely gave mortgages to people who were likely to struggle with making payments.
“Government policies were put in place to help people own homes, and we thought it was a good policy,” Lorberbaum said during a Chamber of Commerce event in Gordon County, Ga. “We had people with almost no income who were able to buy houses. It was ridiculous.” Then, “Lo and behold, you have to pay the piper sooner or later,” he said.
Falling sales of carpet have forced layoffs and plant closings. The unemployment rate in the metro Dalton area in July was a staggering 12.5 percent.
Lorberbaum urged politicians to “get out of the way” of job creation. That suggestion is more than sensible, given the fact that government policies helped to create the economic crisis.
Whether lawmakers will heed that advice is an open question, though. All too often, they are prone to doubling down on bad policies, rather than reversing them. President Barack Obama, for instance, wants more “stimulus” spending after the failure of the first stimulus – and he unfortunately has a good bit of support for that among Democrats in Congress.
Government can foster conditions – such as limited regulations and low taxes – that support economic growth. But government is not ultimately what stimulates the economy. That’s the free market’s job. Government distortion of the free market – whether in housing or any other industry – is the source of so many of our economic problems.