Monday, September 29, 2008

Truth & Consequences

When the sky is a bright canary yellow,
I forget every cloud I've ever seen;
So they call me a cock-eyed optimist,
Immature and incurably green.

Don’t take this wrong, but there is a certain sense of relief that we find ourselves facing the most serious economic crisis since the Great Depression at the same time that a significant percentage of Americans believe electing a hockey mom as Vice President is in the best interests of the country. The temporal joining of these two realities demonstrates that, in fact, fundamentals learned by paying attention in school trump the more visceral “wish it were so” by which Americans have been carrying on lately.

I’ve been struggling to get these thoughts down. The country’s financial situation has worsened on a daily basis, leaving each evening’s draft out of date. Today, the House of Representatives rejected the Bush Administration’s negotiated legislation intended to forestall the complete collapse of our economic system. Read that last sentence again. Whatever your politics, and whether or not we are, in fact, on the verge of financial Armageddon, the fact that Congress, responding to underinformed constituent concerns, declined to adopt remedial legislation and assumed the risk of the consequences, says volumes about the challenges we face.

I have heard people rant and rave and bellow,
That we're done and we might as well be dead;
But I'm only a cock-eyed optimist
And I can't get it into my head.

I’ve run out of time to share my pondering on these issues. I do not pretend to have a strong understanding on the underlying economics. Clearly, I am in good company in that regard. Accordingly, I’ve decided to go back to basics.

In grade school we were taught that if you spent more than you could afford you would end up facing dire financial consequences. Long before we grasped concepts like cash flow, operating expenses, and credit default swaps, my classmates and I understood debtors’ prisons. Charles Dickens’ graphic portrayals of the fate of indigent residents of 19th century London offered a clear warning about the evils of spending beyond your means. Personally, I might have made better decisions had the specter of prison ships harbored in Lake Minnetonka entered into the equation. However, I have never lost sight of the need to be able to fund the repayment of any debt incurred.

We are now reaping the consequences of a collective failure to adhere to the basic economic lessons learned in grade school. As offensive as I find it to spend tax dollars on a Wall Street bailout, particularly since it means those dollars will not be available to fund an Obama administration’s more progressive use of tax revenues, I am having a hard time scapegoating East Coast financiers. The “bad loans” from which the meltdown germinated were gleefully pursued by borrowers who knew, or should have known, that they were taking on debt they could not reasonably expect to repay.

I am aware that complaints abound over the practices of unscrupulous mortgage brokers. However, the scope of actual fraud and/or simple misrepresentations pale in comparison to the amount of arm’s length mortgage debt knowingly acquired under the assumption that constantly increasing home values and the availability of subsequent refinancing funds would eliminate the need to remember the lessons of grade school.

I am having trouble accepting Congress’ rationale for turning down the proposed fix, i.e., their constituency will not stand for a “bailout” of Wall Street. Whatever form the bailout takes, it results from demands for cheap and consequence-free credit by those same constituents. The crisis results from the elimination of meaningful regulation of the investment community by the same conservative Republicans who derailed the proposed fix.

The result, in my mind, causes Main Street’s complaints about Wall Street’s complicity in the current crises to ring hollow. The finger pointing at faceless “Wall Street” is a classic mechanism for not owning up to our own shortcomings. American consumers financed “have it all” lifestyles without regard to the consequences of any rough water in their vast pool of debt. Now the collective inability to service the outstanding debt has had a ripple effect that, with the convergence of all the waves of floundering debtors, has grown into a virtual tsunami.

I hear the human race is falling on its face,
And hasn't very far to go,
But every whip-poor-will is selling me a bill,
And telling me it just ain't so.

Under the Paulson/Bernanke proposals, as amended, the Federal government will replace the missing pool water on behalf of the pool owners and post lifeguards to prevent too much splashing in the future. Would be borrowers will be required to demonstrate the ability to swim before being allowed back into the pool. Effectively, consumers will be forced to take a hard look at the basics of taking on debt and to live within their means for the foreseeable future.

In the alternative, Main Street is clamoring for a painless fix. The vocal constituency that doesn’t want to see tax dollars used to solve our problems and provided cover for members of Congress who opposed the fix today needs to take the time to educate itself about the real causes and unavoidable consequences of the economic crisis. Which leads me back to Governor Palin.

In my mind, the clamoring for a painless fix and the enthusiastic support for Governor Palin share a common element: both are intellectually dishonest. We live in times where it is fashionable to forgo independent analysis and rely instead on the advocacy-driven opinions delivered in the form of sound bites and slogans. It is easier to think that evil Wall Street financiers can be held accountable for all our economic problems than it is to acknowledge the need to own up to our excesses and accept that consumers (
i.e., those who consume[d]) are going to have to contribute financially to the solution. It is easier to pretend that June Cleaver (with attitude) is qualified to serve as Vice President of the United States because it satisfies some visceral disgust with politicians than it is to think seriously about the implications of electing a candidate who is so inexperienced that Senator McCain’s campaign is refusing media access to her for fear of generating ridicule.

We might wish there were easy answers. We might wish that Disney’s screenwriters were scripting the life and times of the Vice President/President of the United States so there are nothing but happy endings. We might wish that a decade of unfettered access to credit markets resulted in nothing but responsible borrowing with no adverse consequences.

Unfortunately, in the real world, wishing doesn’t make it so. I learned that in grade school.

I could say life is just a bowl of jello,
And appear more intelligent and smart,
But I'm stuck like a dope with a thing called hope
And I can't get it out of my heart,
Not this heart. ("Cockeyed Optimist" by Rogers & Hammerstein, "South Pacific")


Anonymous said...

Today I am officially announcing my intention to get you to run for office in the off-year elections of 2009. We'll begin at the top; that is, we'll run you for Mayor of our prairie community. There will be plenty of support for you.

Charles Leck said...

I must have pushed the anonymous button when I submitted the comment above. Of course, I didn't mean to. So, not being a coward, I identify myself.
Charlie Leck

Allison said...

Do you think Ms. Josephine Six Pack tonigh will have to ask the moderator of the debate, if she could 'use a life line?'