Bailing Out

H.L. Mencken once defined a Puritan as a person who lived his life in fear that someone, somewhere, was having a good time. A minor modification makes the statement true for all Americans, who spend an inordinate amount of time worrying that someone, somewhere, is getting over. There’s no better explanation for the failure of the economic disaster recovery bill in the House of Representatives.

The bill had flaws, as would anything whipped up in less than a week that was intended to address something as badly broken as our financial markets. It was still generally considered to be the adult thing to do, even if it meant holding one’s nose to vote for it. Reasoned, knowledgeable voices from both sides of the political spectrum agreed something had to be done, and the Paulson-Dodd-Frank plan was less offensive than any alternative likely to appear on such short notice.

Congressmen facing tough re-election campaigns walked away from their leadership’s entreaties in droves, regardless of party affiliation, though the Republican droves were proportionately twice as large as those of the Democrats. Constituents didn’t want to hear how these pinstripe suit, power suspender wearing Wall Street fat cats were going to benefit from the plan, even with the provisions for compensation reduction and taxpayer protection. They wanted an reckoning. Never mind there will be plenty of time after we keep the boat from sinking to apportion blame for who left the portholes open. The People want these guys dead, their wives raped, their children auctioned into slavery, and their pets sold to Chinese restaurants.

This is a not uncommon American reaction. Pick a social program, any social program. All it takes is Fox News to find one person in a thousand gaming the system, and there will he a hue and cry to dismantle the whole operation, no matter how many people It helps, or how good the return on our investment might be. No rational person will argue that anyone who takes unfair advantage of these programs should not be prosecuted and face serious consequences. Our national predisposition for zero tolerance provides a willingness to let nine hundred ninety-nine children to go without proper nutrition or health care because one lowlife on welfare took more than her fair share.

The entertaining irony is that no one enjoys getting over more than Americans. Maybe that’s why so many of us are worry about someone else pulling a fast one; we spend so much time thinking of doing it ourselves. Take this test: the next time someone complains about a welfare cheat or stock manipulator, ask if he claims every dollar on his taxes. Or skipped out on jury duty. Bought a hot television.

Here’s a scenario. You’re in a bar. A man comes into selling watches for twenty cents on the dollar. If you buy the watch and it works, you feel good because you got a deal. You know the watch was stolen, but it’s a victimless crime, right? The rightful owner was insured, no one hurt. Except insurance companies don’t lose money on stuff like that; they pass it along to their policyholders in the form of increased premiums, so you paid more for that watch than you think.

Scenario Two: Same bar, same guy. Except this time the watch is a knockoff and you’re the one getting screwed. Now you’re pissed, though the difference is a simple matter of whose ox got gored.

People often complain about how hard it is to know what’s the right thing to do. Doing the right thing is often hard, but it’s rarely hard to know what it is. Often what’s right isn’t in our selfish short-term interest; we pretend it’s tough so we can find an excuse for a more palatable decision. Nay-voting congressmen and are all over the airwaves today, rationalizing their decision not to do the adult thing, when it’s more clear by the hour it came down to re-election. This is how we define leadership in America.

Our capacity to rationalize ourselves into self-delusion is formidable. The other reason given for defeating the bill was, “It’s Socialism.” We hear that one all the time, too. The mere mention of a government health plan provokes “It’s Socialism” cries that roll across the landscape like thunder. Socialism is the third leg of the unholy trinity that would damn us all to hell if left unchecked, along with gay marriage and abortion. Yet the largest, most successful, and most popular government program ever created, an entitlement virtually all agree must be defended to the last dying breath, is so close to unadulterated socialism it carries the name: Social Security.

And there are those who wonder why there is no consistency in American politics.

Economics 102

Let’s get this straight: Business, as a class of American society, wants the government to allow the free market to operate. True capitalism is messy, they say, but it works in the end. People will lose their jobs and houses, college educations may have to be skipped, retirements gutted by lost pensions, but the general trend will always be upward if business is left alone to let things shake themselves out. The better and stronger ideas will, eventually, overcome the lesser and weaker.

Until it’s them with their tit in the wringer.

Now we can see what it means for the government to keep its hands off business. It means business is free to do what it wants, take what it wants at whatever expense to the general welfare, then run to the same government it vilifies when its unsustainable greed comes around to treat them as it treated all the others who constituted collateral damage when times were “good.”

It is said the institutional investors can’t afford to lose too much of their investment in Bear Stearns. The stock’s fifty-two week high was $159.36; the buyout is for $2. The stock lost 99% of its value, and we’re going worry that California’s pension fund will go broke over the last one percent?

We can’t afford the ripple effects on the rest of the economy? How about the people who have already lost everything? What are we to tell them? I’ve said before, people who got into mortgages they couldn’t pay don’t deserve much sympathy. How much do the people who wrote them deserve, or, more to the point with Bear Stearns, how much sympathy is due those who based their securities packages on mortgages they never bothered to verify were liquid?

The stockholders – and taxpayers, for that matter – should have recourse to sue the hell out of the Bear Stearns managers responsible for this. They’ve banked their hundred million dollar packages and bonuses. They’ll get by if they’re fired. Still advocate reduced tax rates for fund managers? Why? They appear to have no risk. Take any chances – Bear Stearns’ culture demanded it – and walk away with however much you can carry before the music stops, in case you’re the guy without a chair.

September 11. Iraq. Katrina. Now this. Will January 20, 2009 for Chrissakes hurry up so there will be something left to hand over to the next guy?