Opinion
Economic cures lie in gray zone
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Also by Ammar Al Marzouqi:
- Initiative critical for campus progress (April 9, 2009)
- Economic cures lie in gray zone (March 25, 2009)
- America and its violent problem (March 5, 2009)
- Madison renters need competition (February 5, 2009)
- Fixing America's torture debacle (January 22, 2009)
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In these difficult economic times, people tend to relegate logical and reasonable thought while sharpening their pitchforks and looking for a scapegoat to blame for the crisis we are facing. The most recent manifestation of this angry mob mentality was the outrage against the AIG bonuses. Even the president expressed anger, forgetting the bonuses were negligible compared to the billions given to AIG and ignoring the fact these bonuses were in the contracts all along. And that congress and the treasury approved the contracts knowing full well the bonuses were there.
Is this really what we need to be focusing on? These days, you often hear liberals rail that those rich hedge fund managers and investment bankers drove this economy right into this mess, and then got bailouts and bonuses as rewards. It may be true the government is forced to maintain these financial corporations or risk entering into another great depression, but Congress must nonetheless grow a pair and hold these so-called financial experts responsible. They must make it clear the only reason they still have jobs is due to the support of the American taxpayer, and hence they are no position to demand bonuses, office remodeling or corporate retreats.
On the other hand conservatives claim this crisis is a result of high taxes that inhibit “job creation,” and overregulation that forced companies like Fannie May and Freddie Mac to take on risky loans. This might be true if “the rich” paid their actual tax rates. But the fact is there are so many tax cuts and credits offered to those in the higher income brackets some end up paying a smaller percentage of their income than their secretaries.
For example, Henry Kravis is the 57th richest person in the U.S.; he made $450 million last year. Yet he still pays less — percentage wise — than teachers and firemen. Not only do Kravis and his peers get obscene tax breaks, but also their saved money went in no way toward job creation. Instead it went toward corporate takeovers in which hundreds of jobs were slashed, the assets of the companies sold and benefits of the remaining employees drastically cut.
And it might be true that through government regulation some companies were forced to undertake risky mortgages, but the tsunami of defaulting subprime mortgages had more to do with greed and the quest for a piece of the market action at the time than with regulation.
Even when it comes to looking ahead, we must stop playing the blame game and start accepting the hard reality we face. Liberals need to realize that even though the financial system bailout was passed in an extremely hasty and shady manner, it was necessary to delay if not prevent the collapse of the financial system. On the other hand, conservatives need to realize that even though the projects in the administration’s economic stimulus plan are contrary to their ideological beliefs, they are the best known means to rescue the economy.
For example, even though Republicans are adamantly opposed to government welfare, food stamps have the highest return for government spending. Every dollar spent on food stamps creates a dollar and 73 cents of economic activity, while tax cuts — the holy grail of republican principles — only create a dollar and 2 cents of economic activity. So even though they might not like it, Republicans need to realize that in our current situation welfare is a better option.
Another prime example of how partisan bickering and fear of higher taxes is stalling essential government spending was Gov. Bobby Jindal’s characterization of volcano monitoring as wasteful spending. That may have rung true in some people’s ears until the recent activity in Alaska’s Mount Redoubt.
So instead of standing against tax increases on a purely ideological basis, Republicans need to realize spending just might be the best way out of this crisis. At the same time, Democrats should stop blaming those working in the financial system for this mess and own up to their lack of regulation of those markets in the first place. At the end of the day, this country if facing a crisis and those governing it should look for the best way out of it, even if it lies in the ideological gray.
Ammar Al Marzouqi (aalmarzouqi@wisc.edu) is a sophomore majoring in computer engineering
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If the Republicans ever want to see the White House again, they better make sure they aren’t seen as saboteurs to this administration. I honestly believe that most Republicans regret what they did to Clinton, because, as it turns out, Clinton was probably a better free market conservative than Bush proved to be.
GOP: we’re looking for heroes, not anti-Obamas.
The greedy execs deserve all the public scorn they’re getting. I wouldn’t let up on ‘em. I’d also like to see Obama and his administration catch a lot of flack for giving away our federal tax dollars to them.
Here’s another entertaining thought, one that we’re all entitled to, no doubt. First, let’s go back to a year ago, before either major party decided on a candidate. No one in their right mind would’ve thought that anyone in Washington would even remotely consider the idea of using our federal taxes to bailout a bunch of wealthy executives. Obama would’ve been the last candidate to do that, right? Then, in the first week of October 2008, Obama and McCain both vote for the first emergency bailout package, totaling $825 billion. The week before, Obama’s supporters were saying “Nah, it’s a money grab. Obama would never vote for it. Never!” And then, shortly after the Senate votes for it, including Obama, they change their tune and say “Oh, uh, hey the bailout was needed! He had to vote for it!” Not surprisingly, the following week Obama changes his campaign slogan from “Change We Can Believe In” to “Change We Need.” Uh, OK.
So until Obama’s supporters wise up and admit that they, like the rest of us, have been had, the charade will play on. The economy will continue to spiral downward because voters/taxpayers are too scared to face the truth. And the truth is that the one politician they idolized and put their blind faith in because he seemed to be the one that could “heal the sick, right the wrong, walk on water” was just another false prophet. Just like the one we were all so happy to get rid of.
“but the tsunami of defaulting subprime mortgages had more to do with greed and the quest for a piece of the market action at the time than with regulation.”
Based on what facts? Government controls almost every aspect of this area of the economy. They control the entire money supply! So, how can this be blamed on “greed?” Notice that it is only such heavily regulated areas that have these so-called “greed” problems. You don’t see “greed” destroying the computer industry - one the contrary, greed has resulted in better and better products.
“So instead of standing against tax increases on a purely ideological basis, Republicans need to realize spending just might be the best way out of this crisis.”
How so? Why is it moral to tax innocent people to pay for the failings of others? Ideologically this is wrong, so why not stand up against it?
And what is the logic behind spending our way out of too much spending? Not only that, if spending is such a good idea why aren’t people convinced? Sensible people are trying to save their hard-earned money and the government is forcing them to spend it. Does might make right?
“but the tsunami of defaulting subprime mortgages had more to do with greed and the quest for a piece of the market action at the time than with regulation.”
What about the regulations FORCING the banks to loan money to “non-traditional” borrowers? You know, the people with bad credit but good “victim” credentials? The “greed” was fed by the ex-Clintonistas at SALLIE MAE and FREDDIE MAC who kept buying up risky loans.
We are well and truely fracked:
The federal budget deficit is set to quadruple in 2009 to $1.75 trillion and President Barack Obama’s budget will add another $4.9 trillion in public debt from the beginning of 2010 through 2016. But our fiscal future is in even worse shape than that. As PBS’s Nightly Business Report noted last night, the recession is rapidly making our entitlement crisis worse:
http://blog.heritage.org/2009/03/26/sayonara-social-security-surpluses/
So in 2018, when the Social Security program tries to redeem these bonds, the Treasury (having already spent that money over the previous 35 years) won’t be able to repay Social Security from any pre-existing store of cash. Taxpayers will be forced to pay extra taxes in order to fund Social Security’s 40 million retiring baby boomers.
It’s like a family that borrows money from its retirement fund each year to pay for vacations and expensive dinners. When they finally retire, their retirement fund consists of nothing more than paper IOUs.
http://www.heritage.org/Press/Commentary/ed111004b.cfm