Has The God of
Deregulation Failed?
By Richard W. Crockett
I have said it before and I will say
it again. I know of no social
system, which can operate successfully without rules. And that is of course what has been expected since about
1980. We have deregulated the economy with the hope that market forces, which
are mistakenly believed to work perfectly, will correct anomalies and excesses
in the marketplace. Regulation
came to be the dirty word, and de-regulation was worshiped as the new secular
Deity. But it is nothing less that
the rule of law that we are talking about. We have traded man-made law for the Òforces of
nature.Ó Do not forget what Thomas
Hobbes taught us about nature; that in the state of nature, Òlife is solitary,
poor, nasty, brutish and short.Ó And so after our drunken binge with
no-rules-deuces-wild economics, we are asking the taxpayers and man-made
institutions to bail us out.
Moreover, did you notice how it is being done? The guys running the man-made institutions are rushing in to
bail out the villains, not the victims. The error in Ronald ReaganÕs famous remark,
ÒGovernment is not part of the solution; its part of the problem,Ó screams out
at us today. For ReaganÕs
Republican successors are now taking refuge in the so-called problem government
to rescue the previously worshiped private sector. How come? Have
the high priests of unbridled corporate capitalism discovered that their God
has failed and have come to the people looking for a new God? DonÕt kid yourself. It is simply panic
and greed, or as George McGovern famously put it, Òsocialism for the
rich.Ó What is to be done? I
personally think no company or bank should be bailed out where the CEO makes
more than four times the lowest paid employee, or continues to do so after the
bail out, including all the subterfuges that they may attempt to contrive to
circumvent this rule. Not
practical or achievable? Well then, I think Barak Obama is close to having it
right.
ÒMore of the same
failed ideas are not going to solve our economic problems. I'm calling for a
$1,000 tax break for middle-class families -- not just because they need help
dealing with the rising costs of gas, food, and health care, but also because
our economy needs to be reinvigorated from the bottom up, not the top down. I'm
proposing a second stimulus package to save over one million jobs and provide
immediate relief to struggling families.Ó OK, reinvigorate the economy from the bottom up,
not from the top down. It is the plain recognition that business cannot
exist without customers. Top down economic policies ignore this fact.
Obama again. ÒAnd I'll end the
Ôanything goesÕ culture on Wall Street with real regulation. We can see clearly
that our economy is stronger when we protect investments and pensions,
and avoid devastating bankruptcies and bailouts.Ó Definitely protect pensions. We can see where we would be if the Republicans had
succeeded in privatizing Social Security.
And finally, Obama is right about this. ÒThis is no ordinary time, and it
shouldn't be an ordinary election.Ó I agree, and it should be the end of the
Òownership societyÓ in which the minions of capital seem to own everything,
including the government.
With the present administration, we
have an attempt at rescuing Òthe malefactors of great wealth,Ó to use an
expression from Teddy Roosevelt.
According to the New York Times, ÒHenry M. Paulson Jr., the
Treasury secretary, made it clear that the upfront cost of the rescue proposal
could easily be $500 billion, and outside experts predicted that it could reach
$1 trillion.Ó The plan includes
Òbuying assets only from United States financial institutions—not hedge
funds.Ó The Democrats in
congress are getting on board with the plan, but are insisting on one
caveat—Òthat the measure include relief for deeply indebted homeowners,
not just for banks and Wall Street firms.Ó Notice the form that the rescue takes. It exemplifies the
difference between Democrats and Republicans. It is sometimes said of Òbig government loving DemocratsÓ
that they maintain themselves in power through a kind of political machine
where government workers help them to win elections. The Republicans on the other hand are privatizers (perhaps
privateers) who like to use the private sector by contracting out government
responsibilities—taxpayer dollars dispensed through a kind of political
vending machine. Well, guess what. Secretary Paulson, according to the New
York Times, on Friday said, ÒHe did not want to create a new government
agency to handle the rescue plan.
Rather, he said, the Treasury Department would hire professional
investment managers to oversee what could be a huge portfolio of
mortgage-backed securities.Ó More
contracting? Or will they be government employees? Does the government pay
enough to get these people on board, or will they have to ÒcontractÓ with
them? Further could the size of
the portfolios to be managed be reduced if Housing and Urban Development (HUD)
rewrote the mortgages for borrowers and structured the debt so that the borrower
could afford it? By doing this,
the taxpayers could recover at least some of their hard earned dollars when
most of the mortgages are paid back.
A final point. Where do these guys get their advice on
the economy? This could be an
important question in this election.
Are they getting advice from deregulators like former Senator Phil
Graham, McCainÕs chief economic advisor until recently, when Graham called the
American people a bunch of Òwhiners,Ó and insisted that there was no impending
recession or depression, except for a Òmental depression.Ó It was all in our minds. And what of
Obama? The New Republic
tells us that ObamaÕs Òinner wonk-domÓ . . .Óis dominated by a group of
first-rate economists,Ó including Austan Goolsbee, Robert P. Gwinn Professor of
Economics at the University of Chicago, David Cutler, Otto Eckstein Professor
of Applied Economics at Harvard University, and Jeffrey Liebman, the Malcolm
Weiner Professor of Public Policy at Harvard University. These are heavyweights
in their respective fields with expertise in tax policy, health care policy,
and social security. They tend to
be centrists.
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