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As Stacey Campfield (R - TN 18) notes in his recent post, ‘Easy Money’, under the Bredesen administration, state expenditures in Tennessee have grown from $19 billion in 2002 to 2007’s $28 billion dollar budget buster!. That’s a 32% increase in just 6 years!
Given Phil Bredesen (D) has traveled the state raising fears of $500 million shortfalls, adjustments to which run as high as an additional $500 million, it might be prudent to look at some numbers, especially since folks like NIT’s Christian Grantham are suggesting an Income Tax yet again.
Tax increases are generally justified by citing corresponding necessary increases in expenses. What justification exists for Tennessee’s skyrocketing budget? I understand things cost more over time. But 32% more? Has the cost of living in Tennessee increased 32% in 6 years? The Social Security Administration allowed Cost of Living Allowance increases averaging just 3.6% annually since 2002. Applied to to Tennessee’s budget that would have produced growth from $19 billion to just $22,200,588,000 for the same 6 years. Since Tennessee successfully raised the $28 billion for 2007’s expenses, had it also adopted SSA’s standards, the state would have spent more each year and still had a $5.8 billion surplus last year.
That’s $1,933 per person in the state’s labor force or almost $1,000 for every man, woman and child in Tennessee! Which makes Christian Grantham’s proposal convoluted and unnecessary. If the Governor would simply stop spending money like a drunken sailor, Tennesseans would automatically get tax cuts. Bredesen could double the SSA’s COLA rate in spending and we’d still have a surplus. If the state just lived within budget constraints Government imposes on many of its citizens, there would be no shortfall and we could reduce taxes across the board with real tax cuts. Failing that, at a minimum we could better afford the one thing Grantham proposes I do agree with, weaning Tennessee from its own Welfare reliance.
Christian Grantham proposes reducing our sales tax and adding an income tax because, in his words,
When state budgets are tied to consumer driven tax revenues, hard times can hit government services when they are needed the most … It would also provide the steady revenues the state needs for long-term financial stability rather than ebbing and flowing with consumer spending.”
Not only does this ignore the Economic horror associated with having both an Income and a Sales tax, but it fails to realize problems inherent in consumer driven tax revenues apply to income driven tax revenues, too. He should consider what is happening right now in Michigan. This on the heels of Michigan Governor Jennifer Granholm (D) ramming a massive $1.6 billion tax increase down the throats of Michigan taxpayers last year. People don’t spend less in down times only because fears are fueling their decisions. Just as often people spend less because they are making less. Foolishly adding an income tax to generate revenue removes what little day-to-day control citizens have over their tax payments and means Government cares more about getting money for its purposes while refusing to consider the welfare of its citizens. If taxpayers don’t have extra money to spend on consumer items, they surely don’t have extra money to finance out of control Government expansion. It’s time to see Government sacrifice before asking citizens to do the same.
Grantham’s income tax idea may well be great for what he calls the “long term financial stability” of Tennessee. I’m more concerned with the long term financial stability of Tennesseans.
Tuesday night, Barack Obama spoke to a waiting country and a wondering world. Found in his words are a myriad reasons to reject what he stands for. The election is over and Obama is President. Some say the healing must now begin and we must unite behind Barack. Obama himself appealed “…to those Americans whose support I have yet to earn — I may not have won your vote, but I hear your voices, I need your help, and I will be your President too.”
I say, Obama will be the President; but he will never be my President. Obama wants what he is unwilling to give. To get the job, Obama divided us. Now on the job, he yearns for unity’s strength. But leopards don’t change their spots. As he ran, so will he govern. I will not be a party to that.
When Obama “wonders if the dream of our founders is alive”, I remember what those Founders wrote. They were “dedicated to the proposition that all men are created equal.” Obama believes some men are more equal than others. When advocating for nonexisent rights or for granting more rights to some than to me, he will be the President, but not my President.
When Obama says he wants to “… renew this nation’s promise … to restore prosperity … to reclaim the American Dream …”; when he speaks of “remaking this nation” I must ask, when was the promise broken and by whom; who stole our prosperity; who moved the American Dream out of reach of everyday Americans and who pulled down our nation that it needs to be remade? For a century, it has been the ideological allies of Barack Obama who have done so. When raising our taxes, curtailing our liberty, weakening the defense of our country and bankrupting our businesses and Economy - Obama will be the President, but not my President.
When Obama says his Presidency was launched in “the living rooms of Concord” and financed “by working men and women who dug into what little savings they had to give … to this cause” I marvel at his deception. When he enters the Oval Office it will complete a journey begun in the living room of William Ayers’ and which traveled a path financed by thousands of people Obama will not identify, many of whom are not even Americans. He will enter the office of the President, but not my President.
When Obama says “… the challenges that tomorrow will bring are the greatest of our lifetime …” and references our military and families worried about tomorrow, I recoil in horror from the cavalier exploitation of those about whom he is ignorant. My son is in the military he will command and I have four more children at home to care for. When he sends my son into harm’s way but threatens not to support him while there; when he takes money for which I labor and which I need to support my family to give to families he decides need it more he will be the President, but not my President.
When Obama calls for “a new spirit of patriotism”, I struggle to find something wrong with the old one. When Obama gives away our sovereignty and national interests to our enemies and those who would weaken us he will be the President, but not my President.
When Obama calls for us to “look after not only ourselves, but each other” and to believe “that we cannot have a thriving Wall Street while Main Street suffers” I marvel at his hypocrisy. Under the old spirit of “service and responsibility” he would replace, Americans were the most generous and industrious people on earth. When Obama decides who it is I must sacrifice for and brings suffering to Main Street via higher taxes for the Wall Street Bailout he will be the President, but not my President.
Obama’s words are empty. His promise is hollow. His dreams are nightmares. To be my President, he must deny everything he confesses to believe in. He must repudiate his stated policies. He must realize the paradise he seeks is found in the principles and promises of others. As the President, he may invoke the imagery of Lincoln, King and Kennedy but his appeal to their memory defiles their legacy.
He says he will be my President. But he will not because he cannot. To expect me to believe otherwise insults me. And that, too, is something my President would not do.
New technology overcomes old challenges. It also raises new ones. Nuclear plants generate the most electricity but have cleanup questions. The Internet has overcome and created challenges, too. Howard Dean used the internet to raise money at unheard of levels. Ken Timmerman reports Barack Obama’s campaign raised $427 million dollars, much of it coming via the internet.
Almost half of the $427 million came from donations of less than $200. Campaigns don’t have to identify donors until their aggregate giving exceeds $200. When giving was by check or cash, it was harder to cheat; cash deposits had to be accounted for and checks left paper trails. Credit card internet giving is the new way around the law.
Timmerman writes about an Obama donor, “Good Will”, who gave $17,375 in over 1,000 donations under $200, far exceeding the limit for individuals. The FEC has ordered the campaign to return the excess money, and they’ve started to. They’ve got thousands to go! Warner Todd Huston writes of testing the foreign donation firewalls of both Obama and McCain. Only one campaign had any checks on the process in place.
Complicating matters, current monitoring and regulating mechanisms are outpaced by technology. The FEC didn’t find “Good Will”. Activists did. Giving is at T1 speeds. Enforcement is stuck on dialup.
“While FEC practice is to do a post-election review of all presidential campaigns, given their sluggish metabolism, results can take three or four years,” said Ken Boehm, the chairman of the conservative National Legal and Policy Center.
If Presidential campaigns have these issues, what of lesser publicized and scrutinized down-ticket races?
While a great example of new tech making new opportunities, it raises new problems, too. Per Drew Rawlins, Executive Director of the Tennessee Registry of Election Finance, in Tennessee a PAC cannot give a Senate candidate over $15,000; half in the primary and half in the general. ActBlue is clearly over that limit.
But are they violating a law? The answer may come down to applying offline laws to online issues. As with applying 1st Amendment’s rights to traditional media and New Media, how do we apply campaign Finance law crafted for yesterday’s offline campaigns to today’s online efforts?
While agreeing ActBlue was a PAC, Rawlins said ActBlue wasn’t Hawkins’ donor; the 74 people giving to ActBlue to give to Hawkins were. ActBlue served as an “intermediary” under Tennessee law. Rawlins compared them to other “intermediaries” like PayPal or traditional bundlers and doesn’t believe ActBlue violated the law. Had ActBlue given Hawkins that much in undesignated funds, they’d have broken the law. Contributions designated to Hawkins are OK.
I’m not sure. I don’t suggest ActBlue willfully broke a law. I’m suggesting old laws may be insufficient to address ActBlue’s actions. I’m suggesting we address this now and suspend this sort of campaign donation until we decide.
I’m unsure about classifying ActBlue as an intermediary. Drew Rawlins observed anyone could be an intermediary because the money didn’t come from them, but the individual donors. Given that, I asked if churches and corporations could be intermediaries. Rawlins said “No;” churches and corporations were legally forbidden to make campaign donations. But PACs have legal restrictions, too. If churches or corporations can’t go beyond their legal restrictions, why can PACs?
I’m uncomfortable with ActBlue’s processes. Bundlers don’t hold donations, they pass them on right away. Checks are payable to specific entities. Cash isn’t deposited by a bundler who then cuts a check to the campaign. Even online money transfers via PayPal are immediate. The money goes from my account to the recipient’s. But donations made via ActBlue are often held by ActBlue before being disbursed. Where is that money in the meantime? If it stops in an ActBlue account, how is the final payment not from ActBlue? What would happen if an offline bundler were to operate like this?
It comes down to murky law. Campaigns are operating under the premise “It’s easier to get forgiveness than permission!” While perhaps valid for dealing with a child’s mistakes, it makes for dangerous election finance law. With what’s at stake, it seems just a matter of time before someone sues to resolve this. So why not look at it now and speak to it definitively and without the pressure of lawsuits?
I’m going to keep looking into this. I want to speak to Drew Rawlins again and a few more folks as well. In the meantime, what do you think? Is this real or no big deal? What arguments, for or against, am I missing? To help keep the election process clean, let’s deal with this now. It’ll bring us into the 21st century and keep us up to date, at least until the next idea comes along …
Welcome to visitors from Free Republic! Please feel free to poke around a bit after reading The Twentieth Century Motor Company. And please come back to read more!
Back in February, I wrote of my appreciation for and debt to Ayn Rand’s novel ‘Atlas Shrugged’. Its message was seminal in the development of my political philosophy and practice. To try and condense over 750 pages into a blog post is impossible. But I can do for you what was done for me.
My first contact with Rand was via an excerpt from ‘Atlas Shrugged’ telling the tale of a fictional company, The Twentieth Century Motor Company. I wasn’t able to determine what I was reading was an excerpt from a larger work. I thought it was just a phenomenally well written morality play. Later, reading ‘Atlas Shrugged’ I was delighted to find the story I loved was part of Rand’s work.
I distinctly remember from my first encounter with the tale of Twentieth Century, almost twenty years ago, two impressions. The first was that reading the story was akin to reading the headlines of today’s paper despite ‘Atlas Shrugged’ having been written in the 1950s. I suspect it is even more relevant today than when it was written. The second impression was that every person in our country ought to be required to read just this story once per year. It doesn’t take a terribly long time, though it’s much longer than a blog post, and the benefits of remembering the truth of its premise are legion.
I’ve thought for some time about reproducing the story for you here in this fashion. As with so many good intentions - family, work, church and other urgent matters called more loudly for my time. However, following the historic vote in Congress to take $700 billion from you and I to give to others; to take from those of us with the ability to generate money and give it to those who loudly claim to have a greater need for it than we do, telling this story became the most urgent thing I had to do to be true to the motivation I have to serve those of you who choose to take your time to read what I write.
I think of this story often. When Government tells me it will raise my taxes for yet another entitlement or socially planned experiment, I remember the story. When Government tells me I can’t smoke if I want, I must wear my seatbelt or helmet if I don’t want and that I am denied access to transfats if I want them, I think of the story. When Government tells me, as Joe Biden did in the VP debate three nights ago, it is “simple fairness” that Government take my money to give to someone else because Government has decided I have too much while the recipient of my money has too little, I think of the story.
Most importantly, I think of how the story ends. Socialism holds such great potential and promise on paper. As soon as you put it into practice, however, the philosophy’s promise is unmasked and shown to be the lie it has always been. Nations the world over have tried it and it has always failed. Only one system of government and economic theory has come close to delivering on the promise Socialism makes: the Republic and Free Market Capitalism found in the USA. How odd, then, that while former Socialist countries abandon the evident failure of their ways for the demonstrated success of ours, many here in America are determined to exchange what has proven successful for that which has proven worthless.
One can only ask oneself, as the narrator in the story below does, “…how it could be possible that the educated, the cultured, the famous men of the world could make a mistake of this size and preach, as righteousness, this sort of abomination - when five minutes of thought should have told them what would happen if somebody tried to practice what they preached.”
This story will be posted permanently at BCM on a page of its own. But for now, I commend to you Rand’s story and my guide.
The Twentieth Century Motor Company
“Well, there was something that happened at that plant where I worked for twenty years. It was when the old man died and his heirs took over. There were three of them, two sons and a daughter, and they brought a new plan to run the factory. They let us vote on it, too, and everybody - almost everybody - voted for it. We didn’t know. We thought it was good. No, that’s not true, either. We thought that we were supposed to think it was good. The plan was that everybody in the factory would work according to his ability, but would be paid according to his need.
“We voted for that plan at a big meeting, with all of us present, six thousand of us, everybody that worked in the factory. The Starnes heirs made long speeches about it, and it wasn’t too clear, but nobody asked any questions. None of us knew just how the plan would work, but every one of us thought that the next fellow knew it. And if anybody had doubts, he felt guilty and kept his mouth shut - because they made it sound like anyone who’d oppose the plan was a child-killer at heart and less than a human being. They told us that this plan would achieve a noble ideal. Well, how were we to know otherwise? Hadn’t we heard it all our lives - from our parents and our schoolteachers and our ministers, and in every newspaper we ever read and every movie and every public speech? Hadn’t we always been told that this was righteous and just? Well, maybe there’s some excuse for what we did at that meeting. Still, we voted for the plan - and what we got, we had it coming to us. You know, ma’am, we are marked men, in a way, those of us who lived through the four years of that plan in the Twentieth Century factory. What is it that hell is supposed to be? Evil - plain, naked, smirking evil, isn’t it? Well, that’s what we saw and helped to make - and I think we’re damned, every one of us, and maybe we’ll never be forgiven …
“Do you know how it worked, that plan, and what it did to people? Try pouring water into a tank where there’s a pipe at the bottom draining it out faster than you pour it, and each bucket you bring breaks that pipe an inch wider, and the harder you work the more is demanded of you, and you stand slinging buckets forty hours a week, then forthy-eight, then fifty-six - for your neighbor’s supper - for his wife’s operation - for his child’s measles - for his mother’s wheel chair - for his uncle’s shirt - for his nephew’s schooling - for the baby next door - for the baby to be born - for anyone anywhere around you - it’s theirs to receive, from diapers to dentures - and yours to work, from sunup to sundown, month after month, year after year, with nothing to show for it but your sweat, with nothing in sight for you but their pleasure, for the whole of your life, without rest, without hope, without end … From each according to his ability, to each according to his need …
“We’re all one big family, they told us, we’re all in this together. But you don’t all stand working an acetylene torch ten hours a day - together, and you don’t all get a bellyache - together. What’s whose ability and which of whose needs comes first? When it’s all one pot, you can’t let any man decide what his own needs are, can you? If you did, he might claim that he needs a yacht - and if his feelings are all you have to go by, he might prove it, too. Why not? If it’s not right for me to own a car until I’ve worked myself into a hospital ward, earning a car for every loafer and every naked savage on earth - why can’t he demand a yacht from me, too, if I still have the ability not to have collapsed? No? He can’t? Then why can he demand that I go without cream for my coffee until he’s replastered his living room? … Oh well … Well, anyway, it was decided that nobody had the right to judge his own need or ability. We voted on it. Yes, ma’am, we voted on it in a public meeting twice a year. How else could it be done? Do you care to think what would happen at such a meeting? It took us just one meeting to discover that we had become beggars - rotten, whining, sniveling beggars, all of us, because no man could claim his pay as his rightful earning, he had no rights and no earnings, his work didn’t belong to him, it belonged to ‘the family’, and they owed him nothing in return, and the only claim he had on them was his ‘need’ - so he had to beg in public for relief from his needs, like any lousy moocher, listing all his troubles and miseries, down to his patched drawers and his wife’s head colds, hoping that ‘the family’ would throw him the alms. He had to claim miseries, because it’s miseries, not work, that had become the coin of the realm - so it turned into a contest between six thousand panhandlers, each claiming that his need was worse than his brother’s. How else could it be done? Do you care to guess what happened, what sort of men kept quiet, feeling shame, and what sort got away with the jackpot?
“But that wasn’t all. There was something else that we discovered at the same meeting. The factory’s production had fallen by forty percent, in that first half year, so it was decided that somebody hadn’t delivered ‘according to his ability.’ Who? How would you tell it? ‘The family’ voted on that, too. We voted which men were the best, and these men were sentenced to work overtime each night for the next six months. Overtime without pay - because you weren’t paid by time and you weren’t paid by work, only by need.
“Do I have to tell you what happened after that - and into what sort of creatures we all started turning, we who had once been humans? We began to hide whatever ability we had, to slow down and watch like hawks that we never worked any faster or better than the next fellow. What else could we do, when we knew that if we did our best for ‘the family,’ it’s not thanks or rewards that we’d get, but punishment? We knew that for every stinker who’d ruin a batch of motors and cost the company money - either through his sloppiness, because he didn’t have to care, or through plain incompetence - it’s we who’d have to pay with our nights and our Sundays. So we did our best to be no good.
“There was one young boy who started out, full of fire for the noble ideal, a bright kid without any schooling, but with a wonderful head on his shoulders. The first year, he figured out a work process that saved us thousands of man-hours. He gave it to ‘the family,’ didn’t ask anything for it, either, couldn’t ask, but that was all right with him. It was for the ideal, he said. But when he found himself voted as one of our ablest and sentenced to night work, because we hadn’t gotten enough from him, he shut his mouth and his brain. You can bet he didn’t come up with any ideas, the second year.
“What was it they’d always told us about the vicious competition of the profit system, where men had to compete for who’d do a better job than his fellows? Vicious, wasn’t it? Well, they should have seen what it was like when we all had to compete with one another for who’d do the worst job possible. There’s no surer way to destroy a man than to force him into a spot where he has to aim at not doing his best, where he has to struggle to do a bad job, day after day. That will finish him quicker than drink or idleness or pulling stick-ups for a living. But there was nothing else for us to do except to fake unfitness. The one accusation we feared was to be suspected of ability. Ability was like a mortgage on you that you could never pay off. And what was there to work for? You knew that your basic pittance would be given to you anyway, whether you worked or not - your ‘housing and feeding allowance,’ it was called - and above that pittance, you had no chance to get anything, no matter how hard you tried. You couldn’t count on buying a new suit of clothes next year - they might give you a ‘clothing allowance’ or they might not, according to whether nobody broke a leg, needed an operation or gave birth to more babies. And if there wasn’t enough money for new suits for everybody, then you couldn’t get yours, either.
“There was one man who’d worked hard all his life, because he’d always wanted to send his son through college. Well, the boy graduated from high school in the second year of the plan - but ‘the family’ wouldn’t give the father any ‘allowance’ for the college. They said his son couldn’t go to college, until we had enough to send everybody’s sons to college - and that we first had to send everybody’s children through high school, and we didn’t even have enough for that. The father died the following year, in a knife fight with somebody in a saloon, a fight over nothing in particular - such fights were beginning to happen among us all the time.
“Then there was an old guy, a widower with no family, who had one hobby: phonograph records. I guess that was all he ever got out of life. In the old days, he used to skip lunch just to buy himself some new recording of classical music. Well, they didn’t give him any ‘allowance’ for records - ‘personal luxury’ they called it. But at the same meeting, Millie Bush, somebody’s daughter, a mean, ugly little eight year old, was voted a pair of gold braces for her buck teeth - this was ‘medical need’ because the staff psychologist had said that the poor girl would get an inferiority complex if her teeth weren’t straightened out. The old guy who loved music, turned to drink, instead. He got so you never saw him fully conscious any more. But it seems like there was one thing he couldn’t forget. One night, he came staggering down the street, saw Millie Bush, swung his fist and knocked all her teeth out. Every one of them.
“Drink, of course, was what we all turned to, some more, some less. Don’t ask how we got the money for it. When all the decent pleasures are forbidden, there’s always ways to get the rotten ones. You don’t break into grocery stores after dark and you don’t pick your fellow’s pockets to buy classical symphonies or fishing tackle, but if it’s to get stinking drunk and forget - you do. Fishing tackle? Hunting guns? Snapshot cameras? Hobbies? There wasn’t any ‘amusement allowance’ for anybody. ‘Amusement’ was the first thing they dropped. Aren’t you supposed to be ashamed to object when anybody asks you to give up anything, if it’s something that gave you pleasure? Even our ‘tobacco allowance’ was cut to where we got two packs of cigarettes a month - and this, they told us, was because the money had to go into the babies’ milk fund. Babies was the only item of production that didn’t fall, but rose and kept on rising - because people had nothing else to do, I guess, and because they didn’t have to care, the baby wasn’t their burden, it was ‘the family’s.’ In fact, the best chance you had of getting a raise and breathing easier for a while was a ‘baby allowance.’ Either that or a major disease.
“It didn’t take us long to see how it all worked out. Any man who tried to play straight, had to refuse himself everything. He lost his taste for any pleasure, he hated to smoke a nickel’s worth of tobacco or chew a stick of gum, worrying whether somebody had more need for that nickel. He felt ashamed of every mouthful of food he swallowed, wondering whose weary nights of overtime had paid for it, knowing that his food was not his by right, miserably wishing to be cheated rather than to cheat, to be a sucker, but not a blood-sucker. He wouldn’t marry, he wouldn’t help his folks back home, he wouldn’t put an extra burden on ‘the family.’ Besides, if he still had some sort of sense of responsibility, he couldn’t marry or bring children into the world, when he could plan nothing, promise nothing, count on nothing. But the shiftless and irresponsible had a field day of it. The bred babies, they got girls into trouble, they dragged in every worthless relative they had from all over the country, every unmarried pregnant sister, for an extra ‘disability allowance,’ they got more sicknesses than any doctor could disprove, they ruined their clothing, their furniture, their homes - what the hell, ‘the family’ was paying for it! They found more ways of getting in ‘need’ than the rest of us could ever imagine - they developed a special skill for it, which was the only ability they showed.
“God help us, ma’am! Do you see what we saw? We saw that we’d been given a law to live by, a moral law, they called it, which punished those who observed it - for observing it. The more you tried to live up to it, the more you suffered; the more you cheated it, the bigger reward you got. Your honesty was like a tool left at the mercy of the next man’s dishonesty. The honest ones paid, the dishonest collected. The honest lost, the dishonest won. How long could men stay good under this sort of a law of goodness? We were a pretty decent bunch of fellows when we started. There weren’t many chiselers among us. We knew our jobs and we were proud of it and we worked for the best factory in the country, where old man Starnes hired nothing but the pick of the country’s labor. Within one year under the new plan, there wasn’t an honest man left among us. That was the evil, the sort of hell-horror evil that preachers used to scare you with, but you never thought to see alive. Not that the plan encouraged a few bastards, but that it turned decent people into bastards, and there was nothing else that it could do - and it was called a moral ideal!
“What was it we were supposed to work for? For the love of our brothers? What brothers? For the bums, the loafers, the moochers we saw all around us? And whether they were cheating or plain incompetent, whether they were unwilling or unable - what difference did that make to us? If we were tied for life to the level of their unfitness, faked or real, how long could we care to go on? We had no way of knowing their ability, we had no way of controlling their needs - all we knew was that we were beasts of burden struggling blindly in some sort of place that was half-hospital, half-stockyards - a place geared to nothing but disability, disaster, disease - beasts put there for the relief of whatever whoever chose to say was whichever’s need.
“Love of our brothers? That’s when we learned to hate our brothers for the first time in our lives. We began to hate them for every meal they swallowed, for every small pleasure they enjoyed, for one man’s new shirt, for another’s wife’s hat, for an outing with their family, for a paint job on their house - it was taken from us, it was paid for by our privations, our denials, our hunger. We began to spy on one another, each hoping to catch the others lying about their needs, so as to cut their ‘allowance’ at the next meeting. We began to have stool pigeons who informed on people, who reported that somebody had bootlegged a turkey to his family on some Sunday - which he’d paid for by gambling, most likely. We began to meddle into one another’s lives. We provoked family quarrels, to get somebody’s relatives thrown out. Any time we saw a man starting to go steady with a girl, we made life miserable for him. We broke up many engagements. We didn’t want anyone to marry, we didn’t want any more dependents to feed.
“In the old days, we used to celebrate if somebody had a baby, we used to chip in and help him out with the hospital bills, if he happened to be hard-pressed for the moment. Now, if a baby was born, we didn’t speak to the parents for weeks. Babies, to us, had become what locusts were to farmers. In the old days, we used to help a man out if he had a bad illness in the family. Now - well, I’ll tell you about just one case. It was the mother of a man who had been with us for fifteen years. She was a kindly old lady, cheerful and wise, she knew us all by our first names and we all liked her - we used to like her. One day, she slipped on the cellar stairs and fell and broke her hip. We knew what that meant at her age. The staff doctor said that she’d have to be sent to a hospital in town, for expensive treatments that would take a long time. The old lady died the night before she was to leave for town. They never established the cause of death. No, I don’t know whether she was murdered. Nobody said that. Nobody would talk about it at all. All I know is that I - and that’s what I can’t forget! - I, too, had caught myself wishing that she would die. This - may God forgive us! - was the brotherhood, the security, the abundance that the plan was supposed to achieve for us!
“Was there any reason why this sort of horror would ever be preached by anybody? Was there anybody who got any profit from it? There was. The Starnes heirs. I hope you’re not going to remind me that they’d sacrificed a fortune and turned the factory over to us as a gift. We were fooled by that one, too. Yes, they gave up the factory. But profit, ma’am, depends on what it is that you’re after. And what the Starnes heirs were after, no money on earth could buy. Money is too clean and innocent for that.
“Eric Starnes, the youngest - he was a jellyfish that didn’t have the guts to be after anything in particular. He got himself voted as the Director of our Public Relations Department, which didn’t do anything, except that he had a staff for the not doing of anything, so he didn’t have to bother sticking around the office. The pay he got - well, I shouldn’t call it ‘pay,’ none of us was ‘paid’ - the alms voted to him was fairly modest, about ten times what I got, but that wasn’t riches, Eric didn’t care for money - he wouldn’t have known what to do with it. He spent his time hanging around among us, showing how chummy he was and democratic. He wanted to be loved, it seems. The way he went about it was to keep reminding us that he had given us the factory. We couldn’t stand him.
“Gerald Starnes was our Director of Production. We never learned just what the size of his rake-off - his alms - had been. It would have taken a staff of accountants to figure that out, and a staff of engineers to trace the way it was piped, directly or indirectly, into his office. None of it was supposed to be for him - it was all for company expenses. Gerald had three cars, four secretaries, five telephones, and he used to throw champagne and caviar parties that no tax-paying tycoon in the country could have afforded. He spent more money in one year than his father had earned in profits in the last two years of his life. We saw a hundred pound stack - a hundred pounds, we weighed them - of magazines in Gerald’s office, full of stories about our factory and our noble plan, with big pictures of Gerald Starnes, calling him a great social crusader. Gerald liked to come into the shops at night, dressed in his formal clothes, flashing diamond cuff links the size of a nickel and shaking cigar ashes all over. Any cheap show-off who’s got nothing to parade but his cash, is bad enough - except that he makes no bones about the cash being his, and you’re free to gape at him or not, as you wish, and mostly you don’t. But when a bastard like Gerald Starnes puts on an act and keeps spouting that he doesn’t care for material wealth, that he’s only serving ‘the family,’ that all the lushness is not for himself, but for our sake and for the common good, because it’s necessary to keep up the prestige of the company and of the noble plan in the eyes of the public - then that’s when you learn to hate the creature as you’ve never hated anything human.
“But his sister Ivy was worse. She really did not care for material wealth. The alms she got was no bigger than ours, and she went about in scuffed, flat-heeled shoes and shirtwaists - just to show how selfless she was. She was our Director of Distribution. She was the lady in charge of our needs. She was the one who held us by the throat. Of course, distribution was supposed to be decided by voting - by the voice of the people. But when the people are six thousand howling voices, trying to decide without yardstick, rhyme or reason, when there are no rules to the game and each can demand anything, but has a right to nothing, when everybody holds power over everybody’s life except his own - then it turns out, as it did, that the voice of the people is Ivy Starnes. By the end of the second year, we dropped the pretense of the ‘family meetings’ - in the name of ‘production efficiency and time economy,’ one meeting used to take ten days - and all the petitions of need were simply sent to Miss Starnes’ office. No, not sent. They had to be recited to her in person by every petitioner. Then she made up a distribution list, which she read to us for our vote of approval at a meeting that lasted three-quarters of an hour. We voted approval. There was a ten-minute period on the agenda for discussion and objections. We made no objections. We knew better by that time. Nobody can divide a factory’s income among thousands of people, without some sort of a gauge to measure people’s value. Her gauge was bootlicking. Selfless? In her father’s time, all of his money wouldn’t have given him a chance to speak to his lousiest wiper and get away with it, as she spoke to our best skilled workers and their wives. She had pale eyes that looked fishy, cold and dead. And if you ever want to see pure evil, you should have seen the way her eyes glinted when she watched some man who’d talked back to her once and who’d just heard his name on the list of those getting nothing above basic pittance. And when you saw it, you saw the real motive of any person who’s ever preached the slogan: ‘From each according to his ability, to each according to his need.’
“This was the whole secret of it. At first, I kept wondering how it could be possible that the educated, the cultured, the famous men of the world could make a mistake of this size and preach, as righteousness, this sort of abomination - when five minutes of thought should have told them what would happen if somebody tried to practice what they preached. Now I know they didn’t do it by any kind of mistake. Mistakes of this size are never made innocently. If men fall for some vicious piece of insanity, when they have no way to make it work and no possible reason to explain their choice - it’s because they have a reason that they do not wish to tell. And we weren’t so innocent, either, when we voted for that plan at the end of the first meeting. We didn’t do it just because we believed that the drippy, old guff they spewed was good. We had another reason, but the guff helped us to hide it from our neighbors and from ourselves. The guff gave us a chance to pass off as virtue something that we’d be ashamed to admit otherwise. There wasn’t a man voting for it who didn’t think that under a setup of this kind he’d muscle in on the profits of the men abler than himself. There wasn’t a man rich and smart enough but that he didn’t think that somebody was richer and smarter, and this plan would give him a share of his better’s wealth and brain. But while he was thinking that he’d get unearned benefits from the men above, he forgot about the men below who’d get unearned benefits, too. He forgot about all his inferiors who’d rush to drain him just as he hoped to drain his superiors. The worker who liked the idea that his need entitled him to a limousine like his boss’s, forgot that every bum and beggar on earth would come howling that their need entitled them to an icebox like his own. That was our real motive when we voted - that was the truth of it - but we didn’t like to think it, so the less we liked it, the louder we yelled about our love for the common good.
“Well, we got what we asked for. By the time we saw what it was that we’d asked for, it was too late. We were trapped, with no place to go. The best men among us left the factory in the first week of the plan. We lost our best engineers, superintendents, foremen and highest-skilled workers. A man of self-respect doesn’t turn into a milch cow for anybody. Some able fellows tried to stick it out, but they couldn’t take it for long. We kept losing our men, they kept escaping from the factory like from a pesthole - till we had nothing left except the men of need, but none of the men of ability.
“And the few of us who were still any good, but stayed on, were only those who had been there too long. In the old days, nobody ever quit the Twentieth Century - and, somehow, we couldn’t make ourselves believe it was gone. After a while, we couldn’t quit, because no other employer would have us - for which I can’t blame him. Nobody would deal with us in any way, no respectable person or firm. All the small shops, where we traded, started moving out of Starnesville fast - till we had nothing left but saloons, gambling joints and crooks who sold us trash at gouging prices. The alms we got kept falling, but the cost of our living went up. The list of the factory’s needy kept stretching, but the list of its customers shrank. There was less and less income to divide among more and more people. In the old days, it used to be said that the Twentieth Century Motor trademark was as good as the karat mark on gold. I don’t know what it was that the Starnes heirs thought, if they thought at all, but I suppose that like all social planners and like savages, they thought that this trademark was a magic stamp which did the trick by some sort of voodoo power and that it would keep them rich, as it had kept their father. Well, when our customers began to see that we never delivered an order on time and never put out a motor that didn’t have something wrong with it - the magic stamp began to work the other way around: people wouldn’t take a motor as a gift, if it was marked Twentieth Century. And it came to where our only customers were men who never paid and never meant to pay their bills. But Gerald Starnes, doped by his own publicity, got huffy and went around, with an air of moral superiority, demanding that businessmen place orders with us, not because our motors were good, but because we needed the orders so badly.
“By that time a village half-wit could see what generations of professors had pretended not to notice. What good would our need do to a power plant when its generators stopped because of our defective engines? What good would it do to a man caught on an operating table when the electric light went out? What good would it do to the passengers of a plane when its motor failed in mid-air? And if they bought our product, not because of its merit, but because of our need, would that be the good, the right, the moral thing to do for the owner of that power plant, the surgeon in that hospital, the maker of that plane?
“Yet this was the moral law that the professors and leaders and thinkers had wanted to establish all over the earth. If this is what it did in a single small town where we all knew one another, do you care to think what it would do on a world scale? Do you care to imagine what it would be like, if you had to live and to work, when you’re tied to all the disasters and all the malingering of the globe? to work - and whenever any men failed anywhere, it’s you who would have to make up for it. To work - with no chance to rise, with your meals and your clothes and your home and your pleasure depending on any swindle, any famine, any pestilence anywhere on earth. To work - with no chance for an extra ration, till the Cambodians have been fed and the Patagonians have been sent through college. To work - on a blank check held by every creature born, by men whom you’ll never see, whose needs you’ll never know, whose ability or laziness or sloppiness or fraud you have no way to learn and no right to question - just to work and work and work - and leave it up to the Ivys and the Geralds of the world to decide whose stomach will consume the effort, the dreams and the days of your life. And this is the moral law to accept? This - a moral ideal?
“Well, we tried it - and we learned. Our agony took four years, from our first meeting to our last, and it ended the only way it could end: in bankruptcy. At our last meeting, Ivy Starnes was the one who tried to brazen it out. She made a short, nasty, snippy little speech in which she said that the plan had failed because the rest of the country had not accepted it, that a single community could not succeed in the midst of a selfish, greedy world - and that the plan was a noble ideal, but human nature was not good enough for it. A young boy - the one who had been punished for giving us a useful idea in our first year - got up, as we all sat silent, and walked straight to Ivy Starnes on the platform. He said nothing. He spat in her face. That was the end of the noble plan and of the Twentieth Century.
You would think after reports on tight credit, volatile markets and rest of the panic and doom-and-gloom scenarios for which Democrats bill themselves as the saviors of the Country and the Economy, they might realize people pay attention to what they say, however ignorant it is.
You would think one of the biggest providers of stupid Senatorial sound bites, Harry “The War is Lost” Reid (D-NV), would have learned to keep his pie-hole closed when asked about things he has no knowledge of. You’d think so, but you’d be wrong.
Reid stated in a recent news conference that he had heard a major insurance company with a household name was on the verge of insolvency. Today, news is out that three different insurance companies fitting this description, “… a major insurance company — one with a name that everyone knows …” had major stock selloffs following comments by Harry Reid that can only be described as “Look at me, I’m important and have insider information!!!!”
But with investors already on high alert after the Federal Reserve’s rescue of insurance titan American International Group Inc. on Sept. 16, and with the credit crunch still making funding difficult for even the largest U.S. financial companies, Reid’s comments were the equivalent of pouring gasoline on a grease fire.
MetLife plunged $7.19, or 15%, to $40.96; Hartford dived $12.20, or 32%, to $25.91; and Prudential slid $7.15, or 11%, to $57.65.
And no one can blame short sellers, because all three of the stocks are covered by the Securities and Exchange Commission’s temporary ban on short sales of financial issues.
Investors are so skittish that even a reference to an industry, let alone a specific company is enough to trigger volatile trading. Harry Reid doesn’t understand that. That he later backtracked with these words,
A statement from his office said that Reid was “not personally aware of any particular company being on the verge of bankruptcy” and that “he has no special knowledge about nor has he talked to any insurance company officials.”
reveals his ignorance even further.
In the midst of a financial crisis, the Senate Majority leader repeats a rumor he heard and for which he admits he has absolutely no basis for believing. This fantasy, created and employed to make himself and his position more authoritative, results in a sell-off which majorly impacts 3 of the largest companies in the country, threatens the jobs and investments of perhaps millions of ordinary Americans. But we’re supposed to have faith and confidence in Senator Reid and the rest of his Democratic (and more than a few ignorant Republicans) associates in the Senate.
Harry Reid doesn’t understand even “throw-away” comments in this financial atmosphere can ignite firestorms. Yet he expects a $700 billion bailout, quickly cobbled together, haphazardly grafted onto unrelated legislation and then passed through a Democrat controlled Senate so Senators could look authoritative and responsive - this is safe? Reid and Company don’t understand how today’s minor words impact tomorrow’s Market. But their major overhauls of Constitutional strictures and Economic reality are going to be just fine? See for yourself how small a spark can set off such a huge fire in this 18 second video.
Democrats caused our current financial mess with ill-advised but well-intentioned legislation like “The Community Reinvestment Act”. Their bailout solution is just as well-intentioned and just as ill-advised. There is a reason the Founders put incredible limits on the scope and power of the Federal Government’s authority. Not the least of which is that the Government should not have the power to destroy a company or an Economy with a throw away comment in a press conference. Only the people intimately involved with that company should have that authority; those working there and who invest in it.
Someone please inform Democrats, in DC and all across the US, of this. It’s too bad Nancy Pelosi couldn’t turn off Harry Reid’s microphone and shut off the power to the media’s gear for this press conference like she did to her House colleagues a while back. Somebody needs to get control of out of control Democratic, self serving blathering before it does more than savage a company or three and wreak havoc on the citizen’s finances. Next time around, Democrats might find the right words to destroy the entire Economy.
I am amazed at the capacity of those who should be natural allies to artificially impose an adversarial state on their relationship. This phenomenon has been described in Evangelical circles via the wry observation that “The Christian Army is the only Army in existence which shoots it’s wounded!”
Here at BCM, I address the situation a little differently. Invoking the wisdom of the ancients, and recognizing the GOP’s use of a pachyderm as the party’s mascot, I echo the question, “How do you eat an elephant?” and provide the traditional response, “One bite at a time!” I even have a blog category for instances of it taking place - Elephant Bites. Fortunately it doesn’t happen often. But any instance is stupid.
The latest may have been just this morning. A colleague, Leslie Carbone, reports she was abruptly and curtly disconnected from a White House conference call to which she had been invited. It should be noted I have no problem with a group monitoring and moderating access to their staff and planning. In fact, it’s wise to do so. However, they must also be willing to take the heat from whatever arises from such practices. And heat there usually is.
In this instance, assuming there is not some unknown, acceptable explanation for what happened, the White House is simply tearing off a mouthful of elephant with exquisite Henry the VIII technique! If they didn’t want Leslie on the call, no invitation should have been issued. If the invitation was issued, it should have been honored and any exclusion applied to subsequent calls. Beyond the question of professionalism, it’s simple, common courtesy.
Handling the situation as they did not only pushes allies away making them unavailable for other issues in the name of whatever issue is currently deemed important, it makes it difficult or impossible to reconnect later when the relationship is needed. It’s an object lesson defining the phrase, “Cutting off one’s nose to spite one’s face!”
And it’s more than that. It treats eActivists like Leslie as a battered spouse. I can’t believe the person who OK’d disconnecting her from the call was unaware of how it would be perceived. It’s like blackening your wife’s eye! Perhaps an apology will smooth ruffled feathers. But it has fundamentally changed the relationship in ways that probably can’t be reversed without a great deal of effort!
But why make such efforts mandatory by stupid behavior. There are a host of issues on which we can work together. As it is said, “Many hands make light work!” Intentionally alienating 90% allies is foolish and gives rise to another saying, “If we don’t have the time to do it right, where do we find the time to do it over?”
Following up on my post featuring an excellent video background for America’s current financial woes, I thought to dig deeper into The Community Reinvestment Act of 1977 (CRA). A lot of scrutiny is going to be directed toward it, and rightly so. Well intentioned at the outset, CRA was hijacked by the political Left and driven to this place and time by the unscrupulous with no regard for the consequences.
Signed by Jimmy Carter, CRA purposed to increase credit availablity in Lower and Middle Income areas (LMI). Such areas were often largely inhabited by the poor or minorities. Thus, if banks were lending less in LMI areas, it could mean they were discriminating. There was even a term coined, “redlining”, for the alleged bank practice of outlining areas on maps in which they would not do business, with a red pen. When the Housing and Mortgage Disclosure Act (HMDA) of 1976 did show low levels of lending in LMI areas, discrimination was assumed and CRA passed the following year.
Realistic alternative meanings for HMDA data were proposed and evaluated, but it was too late. Howard Husock reports
A September 1999 study by Freddie Mac, for instance, confirmed what previous Federal Reserve and Federal Deposit Insurance Corporation studies had found: that African-Americans have disproportionate levels of credit problems, which explains why they have a harder time qualifying for mortgage money. As Freddie Mac found, blacks with incomes of $65,000 to $75,000 a year have on average worse credit records than whites making under $25,000.
That assessment was over 20 years too late to stop CRA. By then it had already infected the banking industry and a catalyst had been found to accelerate the process.
In 1977 banking was heavily regulated. CRA required banks to report compliance. This information was used by regulators to approve mergers, to OK opening new branches and closing old ones. Doing business required good CRA compliance. During the 70s and 80s “Regulators asked banks to demonstrate that they were trying to reach their entire “assessment area” by advertising in minority-oriented newspapers or by sending their executives to serve on the boards of local community groups.” These softer compliance reporting requirements drastically changed in 1995 under Bill Clinton’s administration. CRA was amended, adding 2 features which began and drove the Housing Bubble.
First, compliance would now be measured only by one criteria: actual loans made. Husock writes
The new regulations de-emphasized subjective assessment measures in favor of strictly numerical ones. Bank examiners would use federal home-loan data, broken down by neighborhood, income group, and race, to rate banks on performance. There would be no more A’s for effort. Only results—specific loans, specific levels of service—would count.
It was no longer acceptable to prove you were looking for the smaller number of good loan candidates in a larger pool of bad candidates. CRA compliance would only be granted if you actually found someone to loan to. True to Leftist ideology, banks were no longer good community citizens if they provided equal access to loans. They were only good if they provided equal outcomes to borrowers. Responsible lending be damned!
As bad as the first change was, the second would prove even worse, especially seen from 2008’s perspective. Once again, Howard Husock says it best.
Crucially, the new CRA regulations also instructed bank examiners to take into account how well banks responded to complaints. The old CRA evaluation process had allowed advocacy groups a chance to express their views on individual banks, and publicly available data on the lending patterns of individual banks allowed activist groups to target institutions considered vulnerable to protest. But for advocacy groups that were in the complaint business, the Clinton administration regulations offered a formal invitation. The National Community Reinvestment Coalition—a foundation-funded umbrella group for community activist groups that profit from the CRA—issued a clarion call to its members in a leaflet entitled “The New CRA Regulations: How Community Groups Can Get Involved.” “Timely comments,” the NCRC observed with a certain understatement, “can have a strong influence on a bank’s CRA rating.”
This led to all manner of abuse. Deregulation massively changed the environment which existed in 1977 when CRA was first passed. Those changes were not taken into account by the 1995 changes to CRA, they were merely exploited by activists with agendas having nothing to do with lending. Deregulation meant more bank mergers, which in turn were dependent upon good CRA scores. But scores could be depressed, meaning expensive delays in business development, simply by formal complaints directed against a bank. It mattered not if the complaints were legitimate. The process was the costly component, not the outcome. Leftist groups like ACORN and others used this to their financial advantage. In vintage Jesse Jackson style shakedowns, they received real windfall profits as banks paid them not to follow up on threats of costly, frivolous complaints.
Even more disturbing, lending decisions were removed from bankers and handed over to activists as the activists were given a powerful seat at the table. ACORN in part, not banks alone, now controlled who got CRA mandated loans. Banks got the risk, while ACORN and others just got rich! In light of this, it is realistic to say it was not just Government Democrats who brought America’s current financial woes down on us, Democratic activists also played key roles!
It makes more sense that activists with no incentive to pay attention to risk would make bad loans than would bankers who understand the lending process. Why should ACORN care if the loans they hand out, but for which banks are responsible, are defaulted on? As we have learned in the last few months, ACORN should have cared. The numbers are staggering and the impact cannot be overestimated! Husock reports in 2000,
By intervening—even just threatening to intervene—in the CRA review process, left-wing nonprofit groups have been able to gain control over eye-popping pools of bank capital, which they in turn parcel out to individual low-income mortgage seekers. A radical group called ACORN Housing has a $760 million commitment from the Bank of New York; the Boston-based Neighborhood Assistance Corporation of America has a $3-billion agreement with the Bank of America; a coalition of groups headed by New Jersey Citizen Action has a five-year, $13-billion agreement with First Union Corporation. Similar deals operate in almost every major U.S. city. Observes Tom Callahan, executive director of the Massachusetts Affordable Housing Alliance, which has $220 million in bank mortgage money to parcel out, “CRA is the backbone of everything we do.”
Even worse, ACORN gets to double- and even triple-dip. Again from Husock, “In addition to providing the nonprofits with mortgage money to disburse, CRA allows those organizations to collect a fee from the banks for their services in marketing the loans. The Senate Banking Committee has estimated that, as a result of CRA, $9.5 billion so far has gone to pay for services and salaries of the nonprofit groups involved.” Activist organizations such as ACORN get shakedown payments, community influence and stature from being a reliable source for loan money and get what amount to “broker’s commissions” for doing so.
This is made even more relevant when one considers that the demon in the Housing market crisis is “greedy lenders” who engaged in “predatory lending practices” giving “huge loans to borrowers who couldn’t afford them”. I, personally, have wondered about the the numerous claims from borrowers that lenders didn’t fully explain their loan terms. I’ve often wondered why banks would engage in such suicidal practices. But if “lenders”, with literally NO liability or expertise yet armed with an agenda, controlled vast sums of loan funds, it becomes easier to understand. While many types of mortgages are currently in default, including loans to speculators who borrowed just to “flip” houses and not to live in them, it would be interesting to know how many bad loans came from banks and how many from ACORN’s “mortgage lenders”. “Greedy lenders making bad loans”, indeed!
I’m reminded of the old saying about putting the fox in charge of the henhouse. Obama’s association with ACORN and specifically with lawsuits involving CRA compliance in Chicago taint him sufficiently in my mind to disqualify him as a candidate to lead this nation. If his idea of proper tactics and procedures is embodied in this sort of activity, if this is organization he sees as beneficial for a community, he should not be trusted with an even larger community to organize.
There will be more investigation into this matter in the days ahead. Stay tuned. And stay engaged. It may mean the difference between electing a man and a party that believes this sort of outrage is good for the American people and a man who believes in service to country over to service to self.
I’m traveling today so I’m taking the liberty of simply cutting and pasting the text of an email I got from my good friend Fred Thompson. Actually, I’ve never met the man, it just sounds cool to say it like that since he emailed me personally and all. FDT writes a regular column at TownHall and this was his from a day or so ago.
The Danger of Government Guarantees
I’ll bet it came as a surprise to most folks that the financial stability of the world as we know it depends upon the survival of a couple of outfits called Fannie Mae and Freddie Mac. Yet that’s what the so-called experts are telling us. Moreover, we taxpayers are now being asked to guarantee Fannie and Freddie’s tab, one that could make the $124 billion S&L bailout of the late 1980s look cheap.
So how did we get stuck with this bill? Well, Congress wanted to “do something” about what it saw as a “housing problem.” To them that meant that they should create an even bigger problem.
So Congress passed laws that made it easier for hopeful home-buyers to buy houses … even when they couldn’t afford them. Then the Fed and other regulators helped, in the form of easy money and loose credit standards for mortgages.
Not surprisingly demand for houses grew, home prices rose, lenders financed additional questionable mortgages, fueling even higher prices and so on. You get the picture. This is called a bubble.
Then an amazing thing happened – apparently impossible to foresee. Home prices did not continue to rise forever! Home prices came down and easy money dried up, causing the above mentioned cycle to reverse. In other words, the bubble burst.
So you’d think the in-over-their-heads homebuyers and the mortgage bankers would take the hit, and the market would right itself. No reason for an international meltdown here, right?
Not so fast my friends. Years earlier Congress established Fannie and Freddie as purchasers of these mortgages, which they could bundle up, repackage and sell to investors, freeing up more mortgage money. As government creations tend to do, the two companies grew until they either owned or guaranteed about half the nation’s $12 trillion dollars in mortgages.
Fannie and Fred were “government sponsored enterprises” which means heads they win, tails you lose. If they make money stockholders, creditors and Fannie and Freddie employees – some making millions annually – get the benefit. But now that mortgages have hit the skids, with mounting losses, the taxpayers potentially face trillions in exposure. This is because there is an “implicit” (read “actual”) government guarantee of Fannie and Freddie’s obligations and both are now too big to be allowed to fail. This is called the “bailout phase,” which will probably lead to a bigger bubble in the future.
Lost in this immense, complex mess is the root problem most people are missing: the government is gradually becoming the guarantor of seemingly every important aspect of American secular life, creating incentives and bureaucracies that cause failure and invite fraud.
In Fan and Fred’s case, it was in no one’s interest to turn off the bubble machine. Just the opposite. The system induced borrowers to take on financial obligations they could not afford and lenders to lower lending standards. Fannie and Freddie went along because their managers’ compensation depended on the firms’ short term financial performance. And investors continued to buy complex security packages they didn’t understand, because the securities were viewed as government-backed.
Heavy campaign contributions by those benefiting from this scheme induced Members of Congress to avert their gaze from the ugly mess that was unfolding.
You’d think we’d have learned by now: when the backstop of the federal treasury makes it easier for politicians, lenders, borrowers, welfare recipients, government contractors, or anyone else, to serve their own self interest at the expense of the taxpayer, many will do just that.
That is why we continue to see self-dealing, moral lapses, outright fraud and lack of management and oversight in a wide array of programs and government-sponsored entities, from housing to Medicare, education and the Small Business Administration, all costing taxpayers billions, even trillions of dollars.
Our Founding Fathers knew more than a little bit about human nature. It is one reason why in the Constitution, the federal government was given certain delineated powers and no others. I hate to burst another bubble, but our government simply doesn’t have the authority or the capability to be the guarantor or insurer of our every need or desire. Isn’t it time we started sending that message loud and clear to the big enablers in Washington?
