Thursday, February 6, 2014

Majority Wants Government to Reduce Income Gap

Do you think the majority of Americans really want the government to reduce the income gap?

How do you think those Americans envisioning this happening?

What do you think their rationale is for wanting the government to do it, versus taking responsibility by simply "Buying American"?

CNN Majority of Americans Want Government to Reduce Income Gap

Methods that I can envision, do you have other ideas:
  1. Government: Tax long term dividends and capital gains over some annual amount as regular income, redistribute resulting revenues. Consequences?
  2. Government: Raise income tax rates on "wealthy", redistribute resulting revenues. Consequences?
  3. Government: Deport all illegal aliens ASAP, create labor shortage, drive up lower end incomes. Consequences?
  4. Government: Raise minimum wage, transferring the higher cost to consumers. (ie hidden tax) Consequences?
  5. Consumers: Work to spend their money with companies who employee the most Americans. Consequences.
G2A Why Do Liberals Buy Foreign Cars
Rush "Trees" Lyrics

76 comments:

Anonymous said...

I always have a problem with gap stuff because I think it creates, more often than not, a false juxtaposition of issues. For a gap to be a problem, both limits of the gap must be problematic. In the case of a wealth gap, for it to be a problem, it must be the case both that some people have too little money while others have too much. For myself, I don't think it's a problem that people are rich. I don't think you can be too wealthy. As a result there is not gap with anything problematic. The issue I have is that too many people aren't prosperous enough, that incomes are stagnant, and unemployment is too high, stuff like that.

One of my favorite Soviet jokes is about the farmer who complained to God that his neighbor had a goat and he didn't. "What do you want me to do about it?", God asked. "I want you to kill my neighbor's goat." the farmer replied.

--Hiram

John said...

In most of my solutions it seems the farmer wants God to take the goat from the neighbor and give to to him.

So how would you recommend increasing incomes for the lower 2 quartiles of Americans?

2009 Hennepin County Household Incomes

Anonymous said...

Where gap arguments are concerned, I do not view measures specifically addressed to the gap very favorably because I view the gap as an artificial construction, not a real problem requiring a solution. With respect to tax policy, we need to decide what our goals are, and what policy best achieves them. The issues involve politics, economics, finance, all real and difficult enough to address on their own. We don't need to add a complicating layer of problems which are not real.

With respect to the goat analogy, I don't think killing the goat is sound policy, but neither to I think that the superior economic power of the goat owner should be used to drive his neighbors out of business. To quote Don Barzini, "You must let others drink water from the well,".

--Hiram

Sean said...

If reducing inequality is the goal, there are lots of things you could do:

* end or reduce the preferential treatment of investment income and reign in the financial sector through a transaction tax

* raise the minimum wage or more radically, move to a guaranteed minimum income

* make it easier to unionize

* encourage job creation by having gov't subsidize new job growth

* allow more immigrants in highly-skilled, high-paid professions

* rationalize occupational licensing

* improve early childhood and K-12 education

* reform zoning and intellectual property laws

jerrye92002 said...

Is a good thing that we do not set public policy according to polls, because most of them are dominated by the People Not Paying Attention. I could just as well ask the question, "do you think everyone should have access to high-quality medical care?" The answer is almost always in the affirmative because not even conservatives are so heartless as to want to DENY people such things. But most people, especially in responding to polls requiring a snap, probably emotional response, do not stop to think through the question of HOW such an ideal situation might obtain. Well, in this case, the simplest solution is to have the government require every healthcare provider to simply give away their services free to anyone who asks for it, in whatever quantity asked, and to make it the very best they are capable of delivering. At that point – the reductio ad absurdum point – the flaws in this scheme become obvious. Yet when government takes us 10%, 20%, or 60% of the way in that direction nobody seems to be paying attention or willing to admit that those schemes are equally flawed.

As far as the income gap is concerned, Hiram is right; it is not possible for someone to be" too wealthy." And it is unfair and immoral for government to take, by force of law, from one person and give to another.

The purpose of the tax system has been radically perverted over the years. The sole purpose of the tax system should be to acquire the funds necessary for government to carry out its permitted and essential functions. Income redistribution of any kind should be eliminated. Mind you, this does not say that the tax system may not be progressive, but it should be perfectly progressive in either include all income, such as a flat tax, or all consumption, such as the FAIR tax. Both of these, as currently proposed, apply only to "disposable income," relieving the poorest folks of the tax burden they now carry.

Anonymous said...

For myself, I don't view reducing of inequality as a proper goal of tax policy. I do believe that one goal of tax policy is fairness, or at least an appearance of fairness.

The downside of not being governed by people who don't pay attention is that we end up governed by the people who do. And their interests can be quite different from those of the rest of us.

--Hiram

John said...

Sean's Ideas Numbered

6. End or reduce the preferential treatment of investment income and reign in the financial sector through a transaction tax

7. Raise the minimum wage or more radically, move to a guaranteed minimum income

8. Make it easier to unionize

9. Encourage job creation by having gov't subsidize new job growth

10. Allow more immigrants in highly-skilled, high-paid professions

11. Rationalize occupational licensing

12. Improve early childhood and K-12 education

13. Reform zoning and intellectual property laws

John said...

Looking at Sean and my ideas, I see the following sub-headings.

Wealth Transfer Ideas (tax/spend)
1,2,3,9,12

Drive Up Cost of American Products and Services
3, 4, 6, 7, 8

Consumers willingly buy higher priced American content.
5

I need more info regarding Sean's ideas numbered 10, 11, 13. What are these and how will they close the gap.

A consequence of "Wealth Transfer Ideas (tax/spend)" techniques may be to encourage some folks to move their money, business and/or transactions elsewhere to avoid the higher rates / fees.

A consequence of "Drive Up Cost of American Products" may be that American and Other consumers may buy even fewer American products and Services. May increase income at cost of USA Jobs.

Americans freely choosing to pay more to "Buy American" may create more US Jobs, encourage companies to increase US content, reduce unemployment and drive up incomes. Downside would be that other countries will lose some of the income they are using to import US product and services.

John said...

Until US consumers change their buying behaviors, it seems to me that most of the ideas will cost us American jobs or require significant wealth transfer. Thoughts?

Sean said...

#10 and #13 could be classified as "Reduce Expenses on Items that Make Up a Large Percentage of Lower- and Middle-Class Incomes".

#10 -- By allowing more immigrants in professions such as health care, attorneys, etc., we can lower the costs of those items through a little wage competition.

#13 -- Zoning laws drive up the price of housing in urban areas. For instance, height restrictions in Washington D.C. and NYC increase the price of housing by limiting the supply and forcing people to live further out from the city center. Similarly, IP laws (particularly in health care) drive up the cost of medications. If you wanted to reduce inequality, you could reform these areas of the law to be more permissive. (Not necessarily saying I agree, but you could do it.)

#11 would be classified as "Lowering the Barriers to Entrepreneurship". To work as a cosmetologist in MN, you need to take over 1,500 hours of classroom training at an expense of around $10,000 over 18 months to 2 years. Is that really necessary? Such requirements -- which have exploded over recent decades to cover literally hundreds of occupations -- make it harder for folks to start their own businesses.

John said...

Seems these may be good ideas to reduce costs in America, however it sounds like they may not close the income gap.

If we were to stop having an immigration policy based on the following statement, we may have fewer low skill/knowledge workers.

"Give me your tired, your poor,
Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door!"

Then again that may be too un-American...

Sean said...

If poor people have to spend less of their money on housing or health care or transportation, they have more money that can go to improving their long-term futures -- be that saving, investing, getting more education or training, etc. -- the kinds of things that propel people to higher incomes.

jerrye92002 said...

"Americans freely choosing to pay more to "Buy American" may create more US Jobs,..."

Actually, it may make the situation worse. By allowing US production prices to increase, we lose exports to international price competition. Depending on the product, it is better for us to ship the jobs overseas, so we can sell to the US AND to other countries at the lower price. And then there are the lower taxes and regulation, too.

John said...

It probably won't hurt, however will it help? G2A Why are Poor People Poor?

Given the history of lottery winners, the unfortunate poor academic performance of poor kids in free schools, the few kids that take advantage of the programs we offer for higher education, etc... I don't know, though I hope you are correct.

John said...

Jerry,
So are you saying you think America should compete with Vietnam as a low cost supplier...

I think our "acceptable std of living " will need to fall a long way before we get there.

And maybe we can minimize our pollution regulations while we are at it.
Beijing Air Pic

And decimate our military also.

John said...

Or maybe this would reduce American costs...
China's Rivers

jerrye92002 said...

I'll agree with Sean's 10,11,12 and 13 as generally conservative ideas (not that that makes them any better). A good idea is a good idea.

#10 partly restores the notion of immigration to what it used to be-- of allowing immigration by those who can contribute to our society and economy.

#11 is an example of government over-regulation, interfering with economic activity without benefit.

#12 is absolutely essential, but having government involved deeply in education is not a solution but the problem.

13. Zoning laws are another example of over-regulation. A while back I was looking at the problem of low-income housing and discovered that I could build a suitable small-family home for about $8000 if the building regulations were eliminated. Rather than revising intellectual property laws to make it HARDER for drug companies to make a profit, we ought to streamline the FDA process and eliminate the "billion dollar gamble" of trying to qualify a new life-saving drug.

jerrye92002 said...

Yes, I think America can and should compete with everybody, and we have a number of advantages if government would just get out of the way. We have a huge store of capital, which can be used to vastly multiply the productivity of an American worker unless capital is attacked by government. I know personally of a couple of cases where labor costs were actually LOWER in the US. American workers are some of the best, and we have until recently been free to get rich through innovation and entrepreneurship.

John said...

I don't think it is "the help" that will get rich through innovation and entrepeneurship. They sure haven't been over the last 30 years.

Anonymous said...

I was listening to Morning Joe, this morning, and he had an economist named Jeffrey Sachs who was talking about budgetary problems created by our aging population, in the context of the recent CBO report. Now there is nothing new about the proposition that growing old is expensive, and is creating budgetary problems. Growing old isn't my favorite thing, after all, but the alternative isn't very appealing either. What I was waiting for was some solution other than the obvious one. None was offered.

--Hiram

jerrye92002 said...

Of COURSE "the help" gets rich by innovation and entrepreneurship. Where do you think "the help" gets a job? Can we get rich taking in one another's laundry?

John said...

Apple is very innovative and entrepreneurial, however a very large portion of their labor spend is overseas. Which of course is great for management and us stock holders, not so great for much "American Help".

I assume this goes for Google (ie Motorola), HP, Dell, etc...

jerrye92002 said...

Now you are mixing apples and oranges again. American innovation and entrepreneurship creates JOBS. The US government is the one forcing them to be created overseas.

Sean said...

Maybe us "liberals" have it all wrong. One can only imagine all the jobs that would be created in the suicide net industry if we allowed our labor standards to fall to a point where we could win back Apple factories.

jerrye92002 said...

I don't think our "labor standards" are the problem. I was referring to the high cost of regulation, plus the taxes on capital and corporations, plus the cost of worker rules like Social Security and Obamacare that make it just plain too expensive to hire an American worker, even though they don't get paid that much, and certainly too expensive to invest capital into making them sufficiently productive. Take just one example: in the US, most corporations do an ROI analysis, and any project with more than a 3-year payback is pretty much scrubbed off the list. In Japan, the ROI analysis does not have a time limit.

Now some want to raise the minimum wage. What do you suppose will happen to those jobs that are not worth the new wage?

John said...

According to this chart a very small amount of the total goverment spend goes to General Government and Other Spending. (ie regulations/regulatory) US Total Govt Spend

The vast majority are costs that will need to paid by someone within our economy. (ie people, business, gov't) Even in the 1930's before the increase in governement managed programs the cost of government was 20% of GDP. So even if you gutted the regulatory safeguards we have in place I don't see it making a big difference. US Total Spend History

As for the ROI issue, that has more to do with the greed of our Investors. They expect big profits every day on every undertaking... Therefore American firms find it difficult to make long term investments and decisions.

Sean said...

Aren't labor standards "regulation"?

The corporate tax rate issue is largely a canard. We have high statutory rates, but low effective rates. Our effective corporate tax rate is 13%, lower than the OECD average of 16%.

We can (and should) reform the corporate tax in a revenue-neutral way to make the statutory rate lower and end many of the giveaway credits and deductions.

http://thinkprogress.org/economy/2012/03/30/456005/reminder-corporate-taxes-very-low/

The ROI payback issue is one of corporate governance, not of regulation. Corporate governance has been perverted by our out-of-control financial sector, which places short-term investment performance ahead of allowing companies to take a long-term perspective.

We know what happens when we raise minimum wage: employment levels stay about the same, but people make more. Study after study shows that past increases in the minimum wage have had little effect on employment levels.

John said...

Spill Info

Now if only business would do more preparation and take more responsibility of their own volition. Maybe we would not need these all these government folks... Unfortunately they haven't so we do...

Coal Ash Leak
Gen Mills Investigation
FMC Super Fund Site

John said...

Sean's Think Progress Link

jerrye92002 said...

The cost of government regulation isn't in the army of bureaucrats "sent forth to eke out our essence," it's the cost of complying with the unnecessary or at least cost-ineffective complexity. That cost is huge.

http://www.theadvocates.org/intellectual-ammunition-2/

John said...

Intellectual Ammunition
Fed Regs Cost Summary

I wonder what they put as the value of clean water, air, land, etc? They were a bit vague. (Did you note that these economists were from NC and Appalachians??? Is it just me ore do I hear banjoes tuning up?)

Or that the value of being confident that your investments would still be there when you wanted to cash out. What would growth have been if most people left their money in their mattress for fear of fraud.

I dislike Sarbanes Oxley and it is costing us dearly... Thank you very much to the management of Enron and Arthur Anderson for that necessary evil.

And then there are the latest bank controls, thank you home mortgage folks for those necessary evils.

There is a reason why the world invests in the USA... They know we are transparent, controlled and they will get their money back.

I wonder how these folks put that all into their model.

Anonymous said...

Complexity costs, but systems tend to get more rather then less complex. There were all sorts of simple ways to do Obamacare, but all of them were rejected out of hand.

Why is that?

It's because those with the political power to influence political decisions benefit from more rather than less complexity, because specific complexities are more likely to be beneficial rather than otherwise to specific groups. As a timely example of this, I propose my yearly thought experiment. As you do your taxes, keep track of the amount of time you spend doing things that cost you money and the time you spend doing things that save you money in taxes. What you will find is that the simplest things, like transferring your income from your W-2 to your 1040, are the most expensive. Where you spend a lot of time is with the complexities; finding receipts, calculating bases, chasing down deductions. These are the complications, and while it might make sense to get rid of them, each has a powerful constituency protecting them, and all of us are less than enthusiastic about giving up tax provisions that demonstrably save us money.

--Hiram

Anonymous said...

The basic reason for the financial crisis we are recovering from, viewed from one perspective, is that we developed a system of financing so convoluted and complex that we were no longer able to either assess risk, or determine who was responsible for risks assumed. Sarbanes Oxley didn't create this problem, it was a response to it. Now I know the conservative line here, that the free market will decide and is a more efficient way of sorting these things out. But the problem is that these risks are created by people who are responsible for the gains, but not the losses. Managers who screw up are punished with multi million dollar golden parachutes, if at all and quite rightly so, because what they are really good at is shifing the burden of the downside risk onto someone else.

--Hiram

jerrye92002 said...

"... viewed from one perspective, is that we developed a system of financing so convoluted and complex that we were no longer able to either assess risk, or determine who was responsible for risks assumed." -- Hiram

That's brilliant. I especially like the "viewed from one perspective" part, because that feeds into our other conversation about how people can view the same facts and draw different conclusions. In this case, what you have described correctly is the complexity of our financial system, or at least a significant portion of it. The conclusion I draw, however, is that it is this very complexity that makes it impossible for a few bureaucrats or politicians to unravel. In fact, the effect of government is generally to make things MORE complex, less transparent and less effective. Sarbanes-Oxley was supposed to be a simple matter of making corporate executives responsible for fraud in their financial statements. It went vastly overboard and became just one more burdensome regulation with essentially zero benefit. The same thing is true of Dodd-Frank. And the recent mortgage meltdown would probably not have occurred except for the two giant government " bundlers" Fannie Mae and Freddie Mac.

The best way for government to reduce the income gap – remember it has increased significantly since Obama and the Democrats took power – is to just quit trying to fix it. Collectively we are smarter than all of Congress put together. Complexity can be managed by letting each of us handle our own affairs rather than having some know-nothing in Congress tell us what to do.

John said...

I think blaming Fannie Mae and Freddie Mac is a gross simplification given the fines that the banks have been paying out. Remember my view...

Irresponsible citizens took on too much debt.

Mortgage brokers and banks gave them loans with too much debt to equity / income.

Financial institutions packaged these questionably.

The regulators did not conduct due diligence.

Here is an interesting video I had not seen before. Finance Crisis Explained

Anonymous said...

"The conclusion I draw, however, is that it is this very complexity that makes it impossible for a few bureaucrats or politicians to unravel. In fact, the effect of government is generally to make things MORE complex,"

This is the argument that prevailed and which helped pave the way for the financial disaster from which we are currently recovering. And by the way, this is also a Marxist critique. Marx argued that capitalism was inevitably doomed because of it's inherent problems. The idea that nothing can be done about it's spiralling and destructive complexities is one such example.

Lenin famously observed that Communism would sell the rope capitalism would use to hang itself. He might have been wrong in his failure to understand that capitalism is perfectly capable of fashioning it's own rope for such a purpose.

--Hiram

Anonymous said...


Irresponsible citizens took on too much debt

I have always thought that it was more a question of irresponsible lenders, taking on too much debt. And the reason they could do that was because of enabling exotic instruments which allowed irresponsible lenders to lay off the bad loans to others.

I think of it in very individual terms. A young couple just starting out, wanted to borrow money to buy a home. Society says this is a good thing. Family values. George Bush's ownership society. What they find is that the price of that new home is pretty high. What do do? They need a place to live. They could rent, but rents are pretty high too. So they bite the bullet, they take the loan figuring if they work hard, they can pay it off. Did that make them bad people? Should it be their decision we should decide to punish? What the heck did they do wrong? Bearing in mind that the vast majority of young couples who took that deal were able to pay off their loans and yet see the value of their homes plummet do to the irresponsible choice made by others.

--Hiram

jerrye92002 said...

Wow. Talk about looking at the world through different ends of the telescope… My analysis of the financial meltdown was exactly the opposite. Government demanded that banks make loans to people on a basis other than their ability to repay, and then had Freddie Mac and Fannie Mae step in to buy those mortgages to protect the banks from the risks they had been forced to take. These secondary lenders then put government guarantees on these risky loans and packaged them for sale as investment vehicles – "mortgage-backed securities." So, without government intervention those loans never would have been made, would never have been defaulted, and the financial markets based on them would not have collapsed.

John said...

Hiram,
No they weren't bad people. They were irresponsible and likely naïve people. They didn't become bad people until many of them decided to let their underwater home go instead continuing to make big payments. Just because they could do this and get into a similar house for less money.

Jerry,
Please provide a source regarding the government pressures that were being applied to pressure the powerful bankers and investors into making risky loans.

I have heard rumors of this conspiracy, however I have seen no facts other than clips of some politicians saying "everyone needs a home... Don't think this would sway the businessmen.

And assume all these mega fines are just part of the government conspiracy to cover it up...

Anonymous said...

They were irresponsible and likely naïve people.

How were they irresponsible? they had to have housing, didn't they? And they certainly never had control as to whether their mortgage went under water. And of course the vast majority of them made their payments on time. The reason why the economy was hurt had to nothing to do with the decisions the young couple made. They didn't decide to sell their mortgage. They didn't bundle it into an exotic instrument. They didn't misrepresent the quality of that interest. And their lack of involvement in any of those decisions doesn't have anything to do with naivete or irresponsibility.

--Hiram

Anonymous said...


Please provide a source regarding the government pressures that were being applied to pressure the powerful bankers and investors into making risky loans.

I have talked to a bankers about this. They were under a lot of pressure to make risky loans because risky loans are profitable, and because there were ways to lay off the risk of risky loans on others.

--Hiram

John said...

As I have said before... A banker tried to convvince me to buy a much bigger home because "I could qualify for it". I did some simple math and said no... It wasn't that hard to take personal responsibility for my finances. And to say no to keeping up with Jonesms...

Anonymous said...

The banker tried to persuade you to borrow more because he knew he could lay off the loan. The systemic problem was not that you were responsible for the loan, it was that the banker wasn't. But to be fair, the banker was under a great deal more pressure to make the loan than you were to accept it.

--Hiram

John said...

Hiram,
I don't disagree that the underwriters and brokers should have been more responsible. As I have said many times.

However your desire to give irresponsible, naïve, fraudulent and/or greedy consumers a free pass is something that I find deeply disturbing.

In your mind who is more guilty, the illegal drug buyer or seller... Based on your views regarding mortgages, I am guessing in your world view the drug addict is just a helpless victim and the dealer is 100% responsible for the transaction.

It seems to me that personal responsibility for one's freely taken actions is a foreign concept to you. Remember that no one forced those mortgagees to sign on the bottom line. They made their mark, and are 100% responsible for signing and accepting the obligation.

jerrye92002 said...

" Remember that no one forced those mortgagees to sign on the bottom line."

I view that transaction differently. I go to get a mortgage and I expect the lender to tell me whether he thinks I can pay it back or not and, if not, to deny me the loan. But since government told him not to deny loans, and was willing to buy up those loans and guarantee him the payments, what was his incentive to advise you?

The average borrower has no clue as to what they can afford, or what magic lenders use to determine it. They are responsible for paying off the loan, but they shouldn't be held responsible for what they weren't told.

jerrye92002 said...

Study says government forced banks to make risky loans.
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in

Anonymous said...

However your desire to give irresponsible, naïve, fraudulent and/or greedy consumers a free pass is something that I find deeply disturbing.

How were you were irresponsible? But you took out a loan that might very well have been used irresponsibly by someone with ultimately damaging effects to the economy.

Who is more to blame for bad drugs? The drug manufacturer who knew he was putting bad drugs on the street but was able to do it, because he was able to conceal their harmful effects from regulators, and medical professionals? Or the person who took the bad drug, naively certainly, relying on professional medical advice from his doctor?

--Hiram

Anonymous said...

With respect to the CRA, it was enacted in 1977, why did it only become a problem during the Bush years. Was it because President Bush put the banks under a lot of pressure generally to make loans?

But in any event, the financial crisis wasn't the result of taking on too much risk. It was the result of the development of exotic instruments and other processes that concealed risk, and the responsibility for risk.

--Hiram

John said...

CRA Contributed to Bad Loans

John said...

Hiram,
Wrong answer... " illegal drug buyer or seller"

I wasn't irresponsible... I waited to buy a home until I had 20% to put down, bought a much smaller house than I could have, didn't shirk my commitment to make the payments, didn't default, etc. A lot of people didn't take these simple responsible steps.

We have been tempted many times to buy one of those new shiny large homes in west Plymouth or Orono, but we do some simple math and determine that we can not afford it no matter what the bank says. See the bank does not know which car you will buy next, when you will flame out at work, how many vacations you "need", when you will get divorced, etc.

Some people dependent on their incomes should limit themselves to small houses or renting.

Jerry,
Good source. I agree that there were many factors that led to this perfect storm. That is my point here.

If the "average" borrowers are foolish and irresponsible enough to not know what they can afford and therefore max each individual loan because they can, we are going to have problems again and again.

Anonymous said...


I wasn't irresponsible... I waited to buy a home until I had 20% to put down, bought a much smaller house than I could have, didn't shirk my commitment to make the payments, didn't default, etc

But that stop you from being punished by a poor economy? You like the vast majority of home borrowers did exactly what you were expected to do. Yet the economy collapsed anyway.

--Hiram

Anonymous said...


If the "average" borrowers are foolish and irresponsible enough to not know what they can afford and therefore max each individual loan because they can, we are going to have problems again and again.

The average borrow is able to repay the loan. I worry more about the average banker who is searching for irresponsible borrowers to lend money to, because he knows such loans are profitable, and because he knows he can stick me with the risk.

--Hiram

John said...

Happy to say... Other than having to change jobs in 2013, the housing crash had little effect on me or my extended family. My homes value had gone up with the bubble and then corrected. No issue there since I still live here.

Same with the mutual funds I held through the chaos.

John said...

Hopefully the government and investors learned they need to do due diligence.

And hopefully the govt stops promoting questionable loans.

Anonymous said...

Other than having to change jobs in 2013, the housing crash had little effect on me or my extended family.

Congratulations. But lots of people have been hurt by the financial crisis. They lost their jobs, and those who had jobs didn't get the raises they needed and deserved. Young people just starting out didn't get the employment opportunities they needed and had to settle for less. Investment portfolios were hit.

Lots of people did really well however. The bankers who stuck us with the risk which rewarded them did very well.

--Hiram

Anonymous said...

"Hopefully the government and investors learned they need to do due diligence."

That's really the great thing about these fraudsters, something they should be applauded for. They provide learning experiences for the rest of us.

--Hiram

John said...

I agree, those mortgagees who put almost nothing down and got to walk away from their investment/home when its value fell did behave questionably.

I wonder if they would have given their investment.home back if it had appreciated?

jerrye92002 said...

"Lots of people did really well however. The bankers who stuck us with the risk which rewarded them did very well."

I'm sorry, but one of my big pet peeves about this entire episode is the way the TARP program was perverted by the Obama administration. The original intention was that several hundred billion dollars would be used to prevent foreclosures on individual home mortgages. The banks would get the money, of course, but the unfortunate folks who had ill-advisedly (or with no advice at all) taken out those risky mortgages could have kept their homes longer, and the investors in these derivative instruments would have taken the bath.

Instead, the Obama administration used that money to essentially buy up ownership in the banks and attempt to coerce them into giving up their equity in these mortgages. The banks could not do that of course, so individual mortgage holders paid the price, taxpayers got fleeced, investment was highly discouraged and the overall economy tanked. A perfectly good socialist scheme went the way such schemes always do.

Anonymous said...

"I agree, those mortgagees who put almost nothing down and got to walk away from their investment/home when its value fell did behave questionably."

And my position is so did the banker who knew he was making a bad loan, but could do it knowing he could make a profit selling it someone else. So who is hurt by the deal? The borrower? As long as they don't come after him for the shortfall, he's ok. The banker? He got the profit for selling the loan. No, it turns out the rest of us, people who were strangers to the transaction, who didn't even understand what was going on, who were hurt by the transaction, in the form of a collapsing financial system and a declining economy. And it seems to be the case that no one disagrees with us. We are simply told that this is capitalism, and any attempt by us to protect ourselves from nonsense, is an interfere with freedom, in this case, the freedom they seem to have to bankrupt us. That, and the idea that regulation is complicating, meaning apparently that these folks would bankrupt us less efficiently.

--Hiram

jerrye92002 said...

Not sure I understand that last. It is the socialists telling us it is the fault of capitalism, while continuing to throw socialist solutions at the problem, making them worse than they otherwise would be. This last recovery from recession, for example, has been far longer and slower than from previous recessions, simply because of the government's actions trying to "fix" it.

Sean said...

Jerry, what evidence do you have that it is government making the recovery slower?

jerrye92002 said...

My evidence is that the government claims that they are doing everything possible to bring us out of the recession, reduce unemployment, etc. and yet this recession continues to recover more slowly than previous recessions when government was far less involved in the "solution." If you claim to be in charge of fixing the plumbing and the water is still up to my knees, I blame you.

Anonymous said...

"My evidence is that the government claims that they are doing everything possible to bring us out of the recession,"

I don't think the government claims this, and I don't think this is true. In many ways government has tried to sabotage the recovery, specifically when members of it tried to dishonor the national debt. This was a clear attempt to harm the economy for the political benefit of Republicans.

--Hiram

Sean said...

I don't think the "government claims that they are doing everything possible to bring us out of the recession". In fact, President Obama has been quite explicit about things he would have liked to have seen passed by Congress that has not occurred.

Let's not forget that Republicans saw the need for "stimulus" when the unemployment rate was at 4.8% during the Bush Administration, and are no kicking people off unemployment when the rate is two points higher.

jerrye92002 said...

"...tried to dishonor the national debt."

You keep saying that, but it simply isn't true. The federal government has always had more than enough income to pay interest and principal on its debt. In addition, they have enough to pay SS, military pay, and Medicare. Republicans even offered legislation to put into law exactly that-- something like the "Prevent Default" law-- and Democrats absolutely REFUSED to even consider it, preferring to "make the shutdown as painful as possible" and yes, that is a quote.

Democrats are the ones playing games with the debt. They are the reason our credit rating as a nation has dropped.

jerrye92002 said...

OK, so Republicans are "kicking people off unemployment." But studies all show that many of the unemployed find jobs just before or just after unemployment ends. Democrats like to talk as if the money to pay for this stuff falls from the sky or gets plucked off magic money trees in the National Arboretum. But I've been there and couldn't find a one.

jerrye92002 said...

"I don't think the 'government claims that they are doing everything possible..."

You are correct. OBAMA claims he is doing everything possible to fix the economic mess, while everything that is wrong is the fault of Bush and the Republicans. Poor Democrats. They want to help but they're just completely powerless.

Anonymous said...

The federal government has always had more than enough income to pay interest and principal on its debt

But they would be dishonoring other obligations which is the same thing as dishonoring the debt. This would be true even if technically the principal and interest were paid.

--Hiram

Anonymous said...

OBAMA claims he is doing everything possible to fix the economic mess

If so, he is certainly wrong.

--Hiram

John said...

Hiram,
"the banker who knew he was making a bad loan, but could do it knowing he could make a profit selling it someone else."

Personally I am not sure anyone made "bad" loans. They made risky loans based on home values, employment levels and wages continuing to increase.

Of course the house of cards toppled as soon as a couple of cards were pulled out. The housing bubble was a great appreciation ride for most owners until it wasn't.

Sean,
How long do you think people should receive unemployment benefits? In perpetuity?

Remember that the paid premiums apparently only cover ~26 weeks. Anything above that is apparently equivalent to welfare with no poverty / need requirements.

John said...

Personally I think both parties own the disfunction, however the spend was high and the wars were ending, so I am not sure where that money was going if not to "fixing" the economy.

Page 52 of this CBO doc is interesting. Let's all hope that our GDP starts growing aggressively so we can afford our government. Otherwise the housing bubble pop will seem like a minor inconvenience.

Sean said...

Unemployment benefits should continue until the ratio of openings to seekers is more in line with a growing economy. It's currently at 2.9 seekers to 1 opening, the first time it's been under 3:1 since 2009.

To put that in further perspective, though, 2.9:1 was the worst ratio in the early 2000's downturn.

jerrye92002 said...

"But they would be dishonoring other obligations which is the same thing as dishonoring the debt."

Actually, no. "Default" means failure to pay principal and interest on bonds and notes, not your contractual obligations and certainly not any "entitlement" promises you have made-- that is settled law. And the alternative is that we run up our credit card bill until the whole furshlugginer mess collapses. Is "kicking the can down the road" really better?

Sean said...

If Congress doesn't want to exceed the debt ceiling, they shouldn't authorize spending that goes over it.

Putting the economy at risk over not paying our bills isn't fiscall responsible by any definition of the term I'm familiar with.

John said...

I thought changing the laws to live within our means would have been another responsible option. One the Democrats could have pursued, yet didn't...

Pots and kettles...

jerrye92002 said...

"If Congress doesn't want to exceed the debt ceiling, they shouldn't authorize spending that goes over it."

That makes perfect sense, except that "Congress" consists of Republicans who say they want to live within our means, and offer plans to do so, and Democrats who loudly protest any thoughts about spending less or even slowing the rate of growth in spending.