Saturday, September 01, 2007

The Class Warfare of Mortgages

Chuck Schummer is right. Once again George Bush is behaving like a Democrat.

At each critical turn in his administration, Bush has turned to his neocon advisors who argue for a bigger and badder government. Bush handled the fallout from the Dotcom bust by giving tax breaks with no decrease in spending (a neocon ideal). Bush turned against the Powell Doctrine and the Constitutional demand to declare war in the invasion of Iraq.

The No Child Left Behind Act has done more to undermine the long held Republican belief in Federalism than perhaps any education policy in history.

Bill Clinton, of course, played the game in the other direction. He surrendered ground on a large number of Democrat issues to maintain power.

Bush is definitely in line with the democratic strategy. The Democrat strategy is to set the ends against the middle.

By creating a special class of mortgage (finance links) holders with a low rate, government secured loans, Bush has just created a situation where the people with the inside connections to get the special loans will be able to force the working poor out of the housing market.

Keeping with the Democratic Theme of playing the ends off the middle, the primary beneficiary of this bailout is the class of extremely rich bankers who have substantially more to lose in the subprime lending bubble than the poor schmuck who could just walk away from a bad debt a little poorer, but wiser. The platitudes of power politics bubble about all the empowered elite do to help the poor. Oddly, the actions seem to do more to secure the positions of the empowered elite.

BTW, the secret to pulling people out of poverty isn't in giving people more loans, or securing loans, or in regulating interest rates on loans. The secret to pulling people out of poverty is to create a financial structure that helps people build wealth.

Schumer is completely right. This program that helps preserve the financial fortunes of a wealthy banking class by creating a special class of mortgages is very Democratic. It is so very Democratic.


Charles D said...

I don't think Bush is adopting a Democratic strategy, he is adopting a corporate strategy as did Clinton. The 2 political policies have in common the effect of enriching corporations and financial institutions at the expense of the taxpayer.

Schumer (my Senator) is as much a part of this corporatist party as Bush, the main difference being that Schumer is mainly looking out for Wall Street and Bush is mainly looking out for the oil business. In effect, both policies are the same. I don't think it is fair or accurate to describe such policies as either Democratic or Republican or conservative or liberal. They are little more than diversions of the Federal treasury (our money) to the coffers of big financial firms and corporations.

To make this worse, the Dems and Repubs in a great show of "bi-partisanship", passed "bankruptcy reform" making it nearly impossible for an individual to escape ruin. When the ARMs start racheting up in the next year or two, millions of Americans will likely lose their homes - thanks to the greed of the bankers and their enablers in both parties.

We need to make this simple for ordinary voters to understand. I would propose the following: If you see any candidate's advertising regularly on TV, especially during prime time, reject that candidate out of hand - he or she is beholden to big money interests and is never going to respond to your needs.

y-intercept said...

It was Schumer who put forth the bailout as a prime example of "Democratic Thinking." I file it in the category of "action/reaction" thinking. I actually think action/reaction mode thinking is a few steps down from the "straight jacket of ideology."

There is a political school of thought that sees action/reaction mode thinking as the height of the democratic process. The ideal politician is one who spends their day studying public opinion polls. They then react to newsstories in ways that they hope will positively affect their position in the polls.

The media loves this style of thinking as it magnifies the influence of the media.

There is a good argument that Bill Clinton played this game.

Being a pseudo-intellectual, I prefer a situation where our legislators live in a world of ideas and strive to find a mix of ideas that lead to prosperity.

When a problem occurs, they try to look deeper and find the underlying causes of the problems.

I believe in the complete opposite of what Shumer said. I think the action/reaction mode thinking is the straight jacket. Even worse it is a straight jacket that tightens and systematically stangles the patient in the jacket.

It is in the world of ideas that one finds liberation. What you want to do in the world of ideas is find those that lead to a prosperous equitable society.

Charles D said...

I agree that poll-driven ideology is idiocy. The Democrats have become masters of that game and both New York senators are great examples of individuals who put their own political careers above the facts, any ideology or anything else.

We should, ideally, have politicians who examine the facts about the major issues of our day and make their decisions based on those facts not on a pre-conceived ideology (left or right) and not on the basis of the popularity of a position. Alas, we have very few such individuals in either party.

That is why I advocate that voters turn away from all the heavily funded candidates regardless of their purported political stripe and vote for someone with integrity, or at least someone who has not been given the opportunity to trade in his/her integrity for money.

y-intercept said...

The decisions of law makers need to be issued as ideas (a law or a policy is really nothing more than an idea). We fall into nihilism when when reject all ideology. What we want are people who study the interplay of ideas in detail and come up with a framework of ideas that lead to widespread prosperity.

It is not ideology that is bad, it is bad ideology that is bad.

Charles D said...

No ideology is not necessarily bad. One has to take a look at the results of that ideology over time. Neoliberalism and claims that we are best served by maximum market freedom and minimum intervention by the state have demonstrated their failure, so we need to look at ideologies or create new ideologies that have a chance of success.

Ideology isn't bad as long as one is not so wedded to that ideology that one cannot recognize its failures.

y-intercept said...

It is odd that you would cite a political hatchet job attack from the Guardian in an article on seeking a path to widespread prosperity.

The article tries to put forward the Mont Pelerin Society as the great "bugaboo" of the modern age (I am using the term you like).

It does this in the bizarre way of noting that the Keynesian Economics that the Mont Perelin Society rejects had a wider following in the Nixon and Carter years than the free marketeers Mont Pelerin has ever mustered.

The only place where Mont Pelerin has had a sizeable impact is in monetary policy. By the late late 1980s, the Keynesian model had completed failed the world economy, by first throwing the world into a recession/inflation cycle. It then completely blew out in stagflation.

Both Paul Volcker and Greenspan were adopted the Chicago School model of a Federal Reserve that concentrated primarily on inflation. This broke us out of the economic cycles created by Keynesian policy. The amount of data that proves this is astounding.

The conclusion of the article is almost unbelievable. The conclusion is that Mont Pelerin is trying to set up the world for "catalyse crisis after crisis, all of which can be solved only by greater intervention on the part of the state."

It was the Keynesian who put together a formula where the government would thrash from crisis to crisis, getting bigger with each iteration. The Mont Pelerin Group is the screaming to an unreceptive audience that thrashing leads to more thrashing, and that the solution is less government intervention.

I talked about Mont Pelerin and not "neoliberal" as I really couldn't figure out who the author was trying to pan with that label. Some people used that term for the Clintonesque approach to politics. Some people used it for those readers of the Public Interest who stayed in the Democratic Party. It is used as insulting labels.

I met several of the people who went to the Salt Lake meeting of the Mont Pelerin Society. They weren't calling themselves neoliberals. Some called themselves classical liberals, or libertarians.

Charles D said...

It actually matters little what people call themselves or what other people choose to call them. I believe that all politics is about wealth distribution regardless of what they say about themselves.

There are political forms that concentrate wealth in a small number of families - monarchies and corrupt dictatorships. There are political forms that concentrate wealth in members of an elite group - in Pakistan, the army; in the US, the large corporations and the super-rich; in the former Soviet Union, the members of the Communist Party apparatus. All these forms are essentially totalitarian although they may have a limited or sham form of democracy.

There are political forms that insist on distribution of wealth based entirely on need or on an entirely equal basis. For the most part, these are limited to Utopian communities and have a very limited lifespan. A distribution of wealth that does not recognize or reward merit goes against human nature.

There are, fortunately, political forms that regulate the distribution of wealth so that no citizen falls into the extremes of either wealth or poverty. Only a democracy is likely to develop or sustain such a form, and it is very difficult to retain such a system since those at the top, recognizing that they are being artificially limited, are likely to use their resources to break those barriers if possible.

Probably no government has a pure form of any of these economic or political bases, but it is clear that morality lies with the democratic politics and the regulated economy. The US made an attempt to achieve such a moral balance during the New Deal period and after, but the forces allayed against it overwhelmed our democracy. Both our political parties have given up democracy, one eagerly and the other reluctantly.

This may not be terribly pertinent, but hopefully it will allow us some room to dialog further.