Reagan’s Revenge

Pray for our Republic. She’s being placed in … very greedy hands.

Rep. Marcy Kaptur, D-Ohio, on the bailout

George W. Bush just signed the largest government intervention of the free market since the Great Depression, freeing up the better part of a trillion tax payer dollars for injection into large, private corporations.

I don’t know if it’s the right thing to do. It seems to me that the core problem is people defaulting on their mortgages, and so the way to keep things from getting worse would be to help them stay in their homes.

But I must admit that I do get some pleasure watching the hard-core, free-market Republicans having to swallow hard and support a massive goverment bailout. There can be no clearer evidence that deregulation is at least as dangerous as too much regulation. What, after all, did we think was going to happen? People and corporations alike tend to borrow as much as they can. Is it really surprising when they borrow more than they can pay back?

One accusation that I’ve heard from several conservative commentators lately is that Democrats are “making this a partisan issue.” That is not true — this has always been a partisan issue. The economic policies behind this crises are the result of free-market, Reagan-style policies. It’s easy to say “Let’s put politics aside” when you’re clearly the one to blame for the mess.

Back in 1980, Reagan started a trend. Several trends actually. He set firmly into motion the idea that all government is bad. He lifted taxes on corporations and the well-to-do. And he employed potential American military action. It worked well. Really well. And we’ve been largely on that track ever since.

The trouble is that government is essential, corporate greed is without limit, and American military power was more effective when it was left as a threat. Nevertheless Reagan worshippers have insisted that free-market is the only way to go, and their voting has resulted in the dismantling of financial safety mechanisms that were there for good reasons. (Their voting has also led to the use of American military power when it clearly should not have been used, and now the value of American military threats is virtually worthless, but that’s not what this post is about.)

None of us can claim to be surprised. In the last thirty years, the stock market has gone from something that only corporations and the very rich fiddled with, to something that attracts blue-collar day-traders who think of it as a lottery. The standard housing loan has gone from a strict 15% cash-only down payment, to zero down, interest-free for five years, and covering shocking gaps between income and purchase price.

But that’s not all. The loan-sharking business has been transformed from the black-market to a legalized, main-street, one-per block presence. In my hometown there is a little strip mall with about twelve business and four of them are payday, car title loan outfits.

What did we think was going to happen? It defies the most basic tenants of logic to think that each of us — each and every one of us — can buy a house that is far, far outside of our means, and furnish that house each year with the equity that the house gains. And buy cars with proceeds from playing the stock market. And that we could do this indefinitely, no less. 

In July, George W. said that Wall Street “got drunk and now it’s got a hangover.” He’s right about that, except that he’s under the mistaken impression that this is a recent and isolated incident. It would be much more accurate to say that Wall Street has been drinking heavily since 1980. 

But Wall Street hasn’t been drinking alone. I’ve certainly joined for my share. Anyone who has bought a house with nothing but a signature, or who has a 401K has been part of Wall Street’s party. It was fun. But now the party is over, and no one knows how bad the hangover is going to be or how long it’s going to last. We could well be looking at a ten year hangover.

Further reading: U.S. gambles blamed for world’s financial crisis, GOP, RIP?