No Bebop

In a recession that has been exacerbated by investment fraud undertaken at the highest levels of the financial establishment, it seems preposterous that Republicans have not suffered more for their continuing assertions that the middle class and the poor are to blame for the current situation. Individuals buying too much house or failing to make their mortgage or credit card payments are so far from the real problem that it’s not even funny.

The reason the government is bailing out banks is because the banks created preposterously stupid ways to expand the granting of mortgages — “liar’s loans” without proper documentation of the borrower’s ability to pay, subprime mortgages at higher interest rates, interest-only loans, variable interest rate loans that reset within two or three years to double mortgage payments — and then took these ridiculous mortgages and bundled them into “investment instruments” on the theory that housing prices only go up. And the investment rating agencies like Moody’s or Standard & Poor rated these junk investments as AAA-grade because the people who created these bad mortgage-backed bonds are the people who pay the rating agencies. Fannie and Freddie may have had their problems, but they had next to no sub-prime mortgages and were not exposed in the way AIG or Citibank were.

About those sub-prime mortgages: They were often used to spark the sale of new housing, condos or McMansions, at top-of-market prices to people who didn’t qualify for a conventional 30-year fixed-rate mortgage. No doubt some buyers were too stupid to understand that they couldn’t own or maintain a house that cost 10 years’ wages unless they were picked to go on “Extreme Makeover,” but more often sub-prime, interest-only or “liar’s loans” were pushed to people who could have easily qualified for a conventional mortgage on a less expensive property. And the reason these shenanigans could take place is because the banks writing these mortgages were also the financiers of the development, so it was in their interest to make sure those houses were turned over quickly.

There also was not enough skepticism by lenders of folks who were clearly “flippers,” who were simply trying to make a profit by quickly turning over a house, so they didn’t care how stupid or unfavorable the terms of their loans were — they didn’t expect to have them long. Certainly a real estate agent is not unhappy when a property turns over three times in a year — that’s more commissions for them. And more loan origination fees for lenders.

Anyway,  when so much bad behavior can be attributed to the banks we’re bailing out, it’s clearly stupid to blame the small number of people who defaulted on mortgages for taking down the entire economy. And where stupidity reigns, can a Republican be far behind? Meet John Feehery , a former congressional staffer who worked for the last Republican Speaker of the House.

In a commentary posted at CNN.com, Feehery asks, “What’s driving the U.S. over a cliff?” He then goes on to answer by blaming absolutely everybody who has been a victim, rather than a perpetrator, of this recession. Here are his four big points.

First, why do we let people retire too early and then expect them to live so long without working?

Seriously. We’ve gone wrong because the average retirement age in 1910 was 74, while it was 62 in 2002. Feehery is apparently unaware that pensions were rare then, as Social Security didn’t exist yet, and that poverty among senior citizens was twice the rate for people under 65. Indeed, it was 35 percent as late as the 1950s. In case Feehery isn’t aware, one of the rewards for hard work under the American system is supposed to be a higher standard of living — and having one in three of any major demographic group in poverty works against that.

There’s also a business case for moving older workers out of the workforce, as they earn more, use up more of their perks and are less likely to embrace changes in their job description. In fact, there’s anecdotal evidence that workers aged 50-62 are the first to get the boot in any non-union workplace that doesn’t go by seniority for these reasons, even if they don’t actually apply to the workers in question. As for working way past current retirement age, see Digby for a treatment of another CNN piece that’s almost as tone-deaf as Feehery’s.

Feehery failed to make the argument that we’re also carrying those unproductive children of elementary age and older, who were in the workforce in much greater numbers in 1910 as well. And they worked for a lot less as well, which would be a great boon to the people Feehery currently represents at the U.S. Chamber of Commerce.

Second, why do most Americans spend so much of their health care expenditures in the last three months of their life?

Because the people for whom that is true are suffering from life-threatening diseases, you squack. “We are paying a lot of money for health care in which the patient ends up dead,” proclaims Feehery. I look forward to Feehery pulling the plug on members of his family the instant his health insurance provider complains that the treatment has gone one buck higher than the median cost for a person of that age. Feehery offers no solutions for this problem, as there aren’t any, and I hope his party ’s evangelical base points out to him that his argument can easily be scaled into approval of euthanasia.

 Third, why do so many people pay nothing in federal income taxes?

Ah, the “lucky duckies” argument. Note that Feehery said “federal” taxes here, because the poorest working Americans pay a wide array of taxes even though Uncle Sugar’s IRS takes pity on them. Social Security and Medicare taxes, state income taxes, sales taxes, local income and head taxes, maybe even property taxes if they’re lucky enough to own a home.

Feehery’s worried that these folks — 32 percent of Americans by his reckoning — are a blockade to tax reform because they have no incentive to vote for more taxes on themselves. And that their “failure” to fund government (a fake concern, as we have already read) is pushing the U.S. to bankruptcy.

Remember Willie Sutton’s jibe about why he robs banks? That’s why the IRS isn’t really concerned about dunning poor people to pay for F-22s.  The big money is at the wealthy end of the scale, which is why the Obama administration is proposing to raise the top tax rate a whopping 3.8 percent over what it was during the Bush years — the same amount it was under President Clinton, whose administration was one long economic growth saga. This particular increase in taxes motivated yesterday’s tea party protests, by the way, even though nearly everyone waving one of their ungrammatical signs got a tax cut this year under the hated Obama.

Feehery, of course, as a lobbyist for wealthy captains of industry, doesn’t think his clients should be tasked with bailing out the government, even though they can well afford to.

Fourth, why is it more profitable to work in the government than to work in the private sector?

This particular observation by Feehery is based on the statistic that government workers are paid nearly $12 an hour more on average than private sector workers. A fair fact to point out, but averages don’t always tell the whole story. For example, the government doesn’t run garment sweatshops, fast-food eateries, car washes, convenience stores, junk-jewelry shops or other such low-paid jobs, often held to 30 hours a week so as to keep employees from being eligible for health care or other benefits.

But if the government doesn’t pay people at the low end the lowest possible salaries, neither does it pay the folks at the upper end the highest possible salaries. Barack Obama makes $400,000 a year as president of the entire U.S. Can you name any private sector CEO who makes that little? There are probably as many people making more than Obama on Wall Street as there are people at all wages living in Hoboken, N.J. One CEO in today’s America typically makes more than Obama, Biden, the Cabinet, Congress and the Supreme Court combined.

That city of high earners is who Feehery represents, and his work doing so helps keep him in their income class, so of course he’s not concerned about whether they do their part to support this country. It’s government employees that are bankrupting the government. Everybody’s bankrupting the government except the folks who get the most from its existence. I often ask tax protesters whether they’d rather have $10 million here or in some low-tax haven like Columbia, because $10 million doesn’t go far when you have to expend a chunk of it constantly defending against rebels with robbery or kidnapping on their minds.

Quite frankly, most wealthy Americans don’t pay anything in terms of what they get from living under the most stable government in the world. Feehery and his fellow Republicans ought to get with the program — getting the best possible value from an asset is the cornerstone of capitalism.

Trackback URI | Comments RSS