Private profits, public losses
Submitted by James on Sun, 01/31/2010 - 10:54am
Of all the dark trends ushered in by the Ronald Reagan's Great Leap Backwards, the economic model based on "private profit, public risk" is among the most alarming. High on Reagan's free market kool aid, federal regulators began a systematic process of spreading financial and environmental risk to the public sector while private enterprise reaped record profits. George Bush carried on the tradition, pushing public risk to its natural endstate: widespread public losses.
That's what we're seeing in the downward spiral of the foreclosures mess today, where developers and bank executives made out like bandits, luring people into taking on more debt than they should have to buy over-priced homes. If the losses had been limited to the developers, banks and the homeowners themselves, that would have been fine by me. But they weren't. The losses of this collective greed spread far beyond the boundaries of any particular home site or industry. The losses cascaded through the entire global economy, ricocheting through other sectors like shrapnel, decimating innocent bystanders who had no role in the debacle whatsoever. The profits were private, but the risk and losses are now being absorbed by the public, spread farther and wider than anyone could have ever imagined.
Not surprisingly, free market extremists at John Locke Foundation thinks this is all well and good. Quoted today in the Charlotte Observer as an "expert," Stagemanager John Hood says:
During recessions, households lose incomes and lose homes. It is a reality that cannot be wished away. The notion that the government should try to renegotiate all these mortgages is understandable but wrong-headed. There is no government program that can make a home affordable for a family that cannot make the payments.
By attempting to intervene to prevent foreclosures, the government is creating a great deal of uncertainty that has its own harmful effects on the housing market. The longer you keep people believing they're going to afford homes, the longer you sustain the market uncertainty.
In other words, Mr. Hood offers a hearty "fuck you" to the public and "rock on" to the cabal of bankers and developers who threw our economy into a tailspin.
I happen to agree with Hood that the foreclosure mess is a reality that cannot be wished away. But it can be taxed away. With large commercial banks now back on track to earn billions in profits, it is time to insist that they clean up their god forsaken messes.
Hood vs. Harvard
Note the alternative view from someone who actually deserves the descriptor of "expert" in the same Charlotte Observer story:
Do good. Be nice. Have fun.
Amen brother
I am old and my house is paid for. And the value has dropped. But not the tax value. That rises so that our illustrious county commissioners can vow that they did not raise the tax rate. My stock portfolio and my house value falls. I'm trying to figure out how long I can afford to live and still have enough money so that the county will not have to foot the bill to put me under.
I read Elizabeth Warren's study
on the hollowing out of the middle class. I once knew a very wealthy person; good guy really just had a *lot* of money. I used to kid him about that and ask, "what does all your money buy you really?". He got serious all of a sudden and said, "Freedom; it buys me freedom".
Kinda chilling now that I think about it.
-b
--
There cannot fail to be more kinds of things, as nature grows further disclosed. - Sir Francis Bacon
Kind of begs the question:
"Freedom" from what?
I think he was refering to
worry. Freedom from constantly worrying, which he said he used to do before wealth. And by the way, this guy was and is a good guy, don't get me wrong.
-b
----
There cannot fail to be more kinds of things, as nature grows further disclosed. - Sir Francis Bacon
Wish it was me :)
I think you are probably right on what he was saying boball. No doubt about it, wealth does free a person from a great deal of worry. I sure would like to be in that kind of shape! :)
We here are not looking at this correctly
There seems to be a very large contingent of posters on BlueNC that are against the free market and capitalist efforts in our country et al. I think that is a poor focus.
No doubt the corporations in our country and the strong business interests have had an enormous amount of influence in American politics. No doubt there has been graft and corruption within that element. No doubt that an enormous number of regular citizens have been negatively affected by these truths. But, let's be honest here. Many, MANY, governmental officials and MANY governmental policies have had an equal number of negative affects on our citizens. If we make this "government vs. corporations" exclusively, people that rely on obtaining good jobs and/or government assistance lose in the end.
There has to be a balance. Our government must make sure that the taxes obtained from capitalist efforts and from individual income taxes are spent in a way that is not only frugile but where it is needed...not just expedient. Our employers must make sure that they do not try to take advantage of this situation by doubling up on the requirements of their employees so as not to hire more people. I have been in that situation and trust me, that happens a lot of the time. Just more reason why workers should consider unionization (but, that is something for another thread).
There is no way government can insure everyone has jobs in America. We have to strengthen our businesses. It is our system here in America and although we should make sure we regulate it so as not to allow it to abuse our workers, we most certainly have to realize who employs our citizens and just how much in the way of taxes our government receives from high employment.
No one I know is against capitalism
Use this analogy:
Just because a woman is raped by a man doesn't mean she will automatically be against all men. And just because the economic health of our country has been raped by some sectors of private enterprise, doesn't mean we should be against all businesses.
On the other hand, it would be stupid to think that men who are rapists should be allowed to do whatever they want ... and it would be stupid to think that businesses who are destructive should be able to do whatever they want.
I don't know anyone who is advocating an end to capitalism. Much of this recent furor over business behavior is a result of the Supremes saying corporations can spend unlimited money to influence elections.
As you suggest, it is all about balance. And the balance is clearly tilting too far in favor of free market extremism. More to the point, those on the right are scrambling to push it even farther with the privatization of public schools, public infrastructure, highways, Social Security, state universities, and, of course, war itself.
Do good. Be nice. Have fun.
James, that was not the meaning of my post
I am appalled at the Supreme Court's ruling. Please do not try to make my post about how important I believe our capitalist system is being favorable to that ruling.
Read my post again. Try to understand what I am saying. No corporation should be exempt from making sure they "do the right thing" with regard to their employees. No government should "mandate" any employer to do things that severely affect their bottom line.
I think I would be better off not discussing this issue with you any further. You have been a business owner and I have had to manage over 60 employees for a business owner. You learn things from that. I respect you too much to argue it.
Thanks, James
I hear you
Truth is, I'm more than a little depressed today by the sad state of our nation.
That said, I agree with you on one thing. The health care legislation proposed in the Senate and the House would mandate employers to do something that will severely affect their profitability. That's why I'm against it and in favor of a single payer plan.
Do good. Be nice. Have fun.
Single Payer...
I seem to be arguing with you here today, but on the issue of "single payer", we agree.
Thank goodness.
No arguing
This is the thing I love most about BlueNC ... a place to talk it all out. I'm not arguing with you about anything today ... just testing my own resolve about who I am, who WE are, and where our collective responsibilities lie.
All is well.
Do good. Be nice. Have fun.
Speaking of winners and losers
It looks like everybody loses under the approach our federal policy makers are using in healthcare.
Read this diary and hurry up to the doctor before the first of March if you're on Medicare.
Do good. Be nice. Have fun.
Here is what happens when John Hood free market goes Wild?
Bank leaves trail of flipping, .By Russell Grantham and Paul Donsky
The Atlanta Journal-Constitution
Atlanta’s downtrodden neighborhoods proved a gold mine for Omni National Bank and its founders, who amassed tens of millions of dollars’ worth of mansions, company stock and a private jet after launching an unusual bank that financed renovations of inner-city houses.
Note: Both Bank CEO's were major Republican Donors over the years
http://www.ajc.com/business/bank-leaves-trail-of-287645.html