The further to the left or the right you move, the more your lens on life distorts.

Sunday, September 28, 2008

Main Street

A friend of mine is a heavy hitter in South Florida Democratic politics. He tells me that in conversations with our Democratic Congressman, email is running 100 to 1 against any bailout effort designed to address the credit markets debacle. It seems that taxpayers are infuriated that they are being asked to bailout the Wall Street Masters of the Universe.

I can understand the taxpayers’ frustration and anger, but what we’re really being asked to do isn’t a bailout of “Wall Street at the expense of Main Street”—a mime repeated by Barack Obama, the Congressional leadership, and many of the dim bulbs in Congress, who a few years ago resisted reforms that may have allowed us to avoid this crisis altogether. What we’re doing is bailing out irresponsible people—mortgage holders who knowingly got in over their heads, mortgage lenders who acted as predators entrapping unsophisticated borrowers, politicians who didn’t seem at all worried about “Main Street” just a few years back, and Wall Street execs whose greed and irresponsibility allowed the bomb to detonate.

And now, responsible people who borrow within their means, pay their taxes, and accept little, if any direct government assistance, are asked, as usual, to bail out those who were irresponsible. What else is new?

It also occurs to me that I’m a member of a relatively small and somewhat exclusive group. The group comprises 10 percent of all taxpayers in the United States and yet, we collectively pay 70 percent of the $1.1 trillion dollars in income taxes collected. We do this knowing that 40 percent of the population pays no income tax at all. We do it even after listening to class warriors suggest that the “rich” don’t pay their fair share. We do it year in and year out, griping a little maybe, but voluntarily writing the check on April 15th.

To put what we do in perspective, every year we pay just about the same amount as the entire financial institution bailout—about $700,000,000,000, with no expectation of a return and no real desire to get one. All we ask is that the President, congressional leadership, and members of Congress—the folks who write laws and instantiate legislation—protect us from the irresponsible people who can put our financial lives in jeopardy. It appears that’s too much to ask.

It’s likely that the $700B bailout will show a long term return and the taxpayers will be off the hook for a substantial percentage of that money. After all, beneath all of the bad paper and unpaid loans there sits actual real estate—houses, condos, apartment units and the like. In the long term the housing market will revive and those assets will be sold off—in many cases at a profit from the deeply discounted rates at which the bailout will purchase the loans. But if there is a liability, 10 percent of the taxpayers will be left holding 70 percent of the bag. I wonder if Barack Obama, Nancy Pelosi, and Harry Reid think that's fair?