We have every right to be angry

Anyone not enraged over government bailouts and debt either isn't paying attention or has given up

May 28, 2010|By Ron Smith

Media scolds on the left tell us we must behave and not show anger at what our politicians and those they serve have done to us. They rant that tea partiers are nascent Nazis, racist thugs disguised as middle-class Americans. We mustn't use words that promote anti-government sentiments. It's too dangerous. Instead, we must restrain ourselves and make believe that all is well, that the economy is beginning to rebound and that soon we'll be able to live like we used to — spending ever more money we don't have on acquiring ever more things we don't really need. The health of the much-ballyhooed globalization of the world economy depends on the American consumer's spendthrift habits. There have even been signs that some folks are buying into this fantastic scenario, stepping up to the plate with renewed confidence that the good old days are set to return pretty soon.

The evidence suggests otherwise. I don't want to further disturb you, but if you weren't interested in knowing what's actually going on, you wouldn't have read this far. One of the little-noted but all-important aspects of the mother of all credit bubbles that imploded in 2007 was how it was inflated by lowering interest rates to the point where they were effectively zero. This removed all incentive for people to save their money and thereby accumulate capital for productive purposes. The goal of the people on top was to reward borrowing while penalizing savings. As Charles Hugh Smith has observed, "More credit means more debt, which means more money for Wall Street, more fees and interest payments to the banks, and more taxes to the Savior State. Only the borrowers lose."

When the housing bubble collapsed, much of what used to be the middle class saw its supposed wealth melt away. The Federal Reserve responded by demanding a bailout of the biggest Wall Street banks, and the government quickly acted to do just that. Bailouts and stimulus spending became the strategy of the people behind the now-crippled speculative economy. It hasn't worked, either here or elsewhere around the globe, other than to add trillions upon trillions of dollars to the skyrocketing debt.

This is not a system that can be restored. Its unsustainability is obvious. It has run its course. When people tell us otherwise, ask yourself how realistic it is to believe we're in a recovery when many of our states are facing budget slashing that will result in higher taxes and the loss of many formerly secure government jobs. Is that a sign things are returning to "normal"? Is a recovery at hand when nearly 40 million Americans are on food stamps? The federal deficit is projected to total $1.6 trillion for 2010. Is that a sign of fiscal health? The catastrophic oil spill in the Gulf of Mexico will affect the food chain in a wide area for decades to come, causing a loss of livelihood to thousands of fishermen, shrimpers, resort owners and workers. Does this disaster fit in with rumors of economic recovery?

USA Today reported this week that paychecks from private businesses shrank to their smallest share of personal income in U.S. history during the first quarter of this year. At the same time, government-provided benefits rose to a record high. This confirms a dramatic shift in the source of personal income from private wages to government programs. Since the government programs depend on private wages to fund them, this is clearly something that can't continue. The newspaper did find a liberal economist, one Paul Van de Water, who says this means the system is working as it should, stimulating growth and helping people in need. As the economy recovers, private wages will rebound, he says. My frequent radio guest Veronique de Rugy of George Mason University says the Greek riots over cutting government benefits are a warning as to what happens with unsustainable income programs.

Meantime, the Wall Street casino players are doing better than ever for themselves, with record bonuses made possible by the government bailout of their earlier losses. Nice work if you can get it. So is lobbying the federal government. A story in National Journal details how K Street lobbyists made a record total of $3.47 billion last year, even as the new president was promising to reduce their influence. Clearly, that didn't happen. They were needed to move those massive "reform bills" through Congress.

If you're an ordinary citizen and not angry, you're either not paying attention or you've given up.

Ron Smith can be heard weekdays, 3 p.m. to 6 p.m., on 1090 WBAL-AM and WBAL.com. His column appears Fridays in The Baltimore Sun. His e-mail is rsmith@wbal.com.

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