Wall Street v. Main Street

[this post and comments are directed overflow from the ‘Tea Party and Race’ post and comments found here]

One of the key TEA Party Movement (TPM) issues is “smaller” federal government. Another complaint common to both the TPM and people in general is the slew of financial bailouts.  Right now, as most of you know, Congress is currently attempting to tack financial reform. My questions, then are these:

(1).  What do you think cause the current crisis?

(2). What do you think is the proper remedy?

(3).  What do you think is the proper approach going forward?

(4).  How important do you think a “free market” is to American society specifically? To any society?

(5).  How “free” do you think our market truly is?

Discuss…

I don't know why I posted this picture...

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15 Comments

  1. Nance Confer said,

    May 4, 2010 at 11:31 am

    A chicken in every pot? 🙂

    Mike asked, in the earlier thread, whether we want a government that can redistribute wealth when its accumulation is at the root of economic problems like the ones we have now.

    Yes. I would like a government that properly regulates financial transactions to start with — my definition of proper being a system that doesn’t reward destructive greed and does put the consumer first — and that prosecutes fraud — like the sort of “who could have seen this coming” nonsense popular in big banker circles now. Well, many of us saw it coming and, if we could, they did. And still kept taking.

    So, a functioning government? Yes.

    Nance

    P.S. I would like, when BP is found not to have done all they could have and should have to prevent the environmental and economic disaster being visited on my state and others, to have their profits funneled to restoring our way of life until further notice. And I’d like a government that makes that happen. Instead of one run by pols looking to their next campaign contribution.

  2. JJ said,

    May 4, 2010 at 12:07 pm

    And this sovereign individual-trashing, oligarchy-turned-plutocracy WAS seen coming by a prescient few — who were mocked and/or ignored including by me, to my profound regret — back in 2000, before W’s first term even, never mind the second disastrous four years of pious looting and plundering of the populace:

    We need to ask the questions: should corporations be the primary arbiters of the public will, and should “market forces” alone determine the conditions of social justice?

    Unfortunately, a relatively small number of corporate managers and stockholders of the new plutocracy control the corporate state, and it is the incestuous relationship between corporate economic power and politics that is most disturbing. For example, Dick Cheney departed from Haliburton, the large oil exploratory company, according to the New York Times, with a $20 million package of stock options and other benefits. Today a corporate-military plutocracy rules virtually unchallenged, manipulating and manufacturing the news and safeguarding its position of power.

    . . .Had the candidates taken an introductory philosophy course at their universities, they would have seen that there is within Western civilization an historic nonreligious and rational humanist basis for morality. Moreover, humanist values are central to American civic virtues-a commitment to human rights, including freedom of conscience, autonomy of choice, the right to dissent-none of which is easily found in the ancient religious documents.

    Indeed, these documents have been used in the past to justify the divine right of kings, aristocracy, and oligarchy.

  3. Sevesteen said,

    May 4, 2010 at 12:22 pm

    There is no one single cause. I believe that a major factor was government meddling. An example is mortgages–the original redlining was federally encouraged racism, then an over-reaction trying to fix the damage resulted in “predatory” loans to people who couldn’t really afford to buy.

    If there was a government-involved remedy, it should have been something like partial guarantees of loans to others, rather than unrestricted donations to failing corporations. Bailouts often hurt the remaining well-run companies, because the bailed-out are artificially made more competitive. Loan guarantees would have made it easier for all companies to loan rather than favoring the ones that screwed up the worst.

    Going forward, the government should be limited to enforcing contracts, and regulating honest disclosure of relevant facts. I don’t know how far this should go. I’ve got a gut feeling we should do something to reduce the benefits of interlocking corporations, where a company can gain the benefits of being huge, while still limiting the liability to a particular smaller part. .

    A lightly regulated free market is going to wind up with the most efficient allocation of resources. It will have more ups and downs, but will result in the highest standard of living for the most people.

    I don’t think our market is nearly as free as it should be. Regulations almost always favor big business–compliance costs can be spread out among their entire operation, and they have tremendous incentive to find and exploit loopholes for competitive advantage. I’m fine with exploiting natural competitive advantage, not so much exploiting regulatory advantages.

  4. Chugwater said,

    May 4, 2010 at 12:30 pm

    I want to push back a little that Wall St was entirely (or even mostly) to blame for the current housing bubble crisis. Don’t get me wrong, the leaders of Big Finance deserved to lose their shirts but I find it hard to believe that John and Jane Doe do not also shoulder a significant share of the blame when they signed up for mortgages they couldn’t afford. My wife and I moved twice within the past five years and taking on a bigger mortgage for a nicer home was tempting, but ultimately we knew it didn’t fit in with our monthly, annual, and long term financial planning. It’s not rocket science to compare your income with a mortgage payment. Americans had been doing it for generations.

    (1) We as a society wanted our toys now instead of working and saving to buy them when we had the money. When the music stopped it was time to pay the piper.

    (2) I have no clue. To say ‘more regulation’ is somewhat nebulous. I would prefer to find a way to ensure that the banks aren’t too big to fail. The threat of failure is the key ingredient to ensuring we don’t overconsume. Without failure we end up with free rider issues, and are prohibited from harnessing the market benefits of creative-destruction.

    (3) I don’t know what exactly needs to be done since much of it is too complicated for the average person. I just hope the cure is not worse than the disease.

    (4) To our society (and to a certain extent the rest of the world), a relatively free market is vitally important to innovation and economic growth.

    (5) Freer than most. We have a healthy dose of socialism and corporatism that obscures an otherwise true laissez faire system. Sometimes that’s a help (anti-trust) and sometimes it’s a hinderance (GM bailout, Byzantine tax code). I think most people on the left and right agree we can do with less corporatism. The debate lies in what to fill the ensuing vacuum with (if anything).

  5. JJ said,

    May 4, 2010 at 4:01 pm

    Thinking of the screwed up BCS system. No one finds fair to players or the public, yet everyone agrees it’s just “too big to fail” or even reform. The identified university presidents and coaches and their employees running the conferences and making the media contracts, wind up helpless before their “own” system. If Big Business can’t even work out a fair, humane and seemingly reasonable college football playoff market because of money and politics . . .

  6. JJ said,

    May 4, 2010 at 9:47 pm

    Robert Reich just blogged a reason he thinks this happened: the FTC is charged with policing “unfair competition” in our “free markets” almost everywhere except the financial sector, and banks are explicitly excluded.

  7. Sevesteen said,

    May 5, 2010 at 11:30 am

    I believe that IF we are being taxed, then that money should go to the betterment of the citizenry. And yes, I believe that corps/biz should be taxed more heavily. If we are afraid about them leaving for less regulated countries, then don’t allow them to peddle in the US. I am very very big on buying US. Look at the import to export ratio in the most financially secure countries and you will see *why* buying ‘local’ is better.

    I think this fits over here better, if you don’t mind.

    Thought experiment–What happens if we increase the taxes on all domestic manufacture of a particular product by 10%–Do you think it more likely that retail prices will go up by 10%, or that will come out of corporate profit? (which is often well under 10%….) Or will prices only go up 5%, but domestic market share goes down as imports become proportionally cheaper?

    Or–what if we had either a VAT or a retail sales tax instead? Imported goods would pay the same taxes as domestic, in addition to whatever taxes they paid at home, Our exports would be almost subsidized, by being nearly tax free.

    Although it feels good to say “tax the evil, greedy corporations”, all of these taxes wind up paid by the consumer, regardless of where they are applied. It makes a lot more sense to tax consumption instead of production–especially if a secondary goal is to reduce overconsumption. If this is limited to first time retail sale, that also encourages re-use.

  8. southern female lawyer said,

    May 5, 2010 at 11:43 am

    Thanks for the relocation Sevesteen. And you bring up some valid points – first, that I need to be more specific.

    When I talk about taxing biz/corps more heavily, what I actually mean is holding them to the Code/law/regs and not allowing them to take advantage of loopholes. It might help if people understand that I am looking at this from a former biz attorney and so I am thinking in terms of “deals” that biz gets for setting up shop and thinking primarily about real estate tax, etc. in addition to the many, many ways there are for an entity with $ and know-how to manipulate the tax Code to their incredible benefit. Really – it’s pretty gross.

    I know what breaks they get. Localities need biz and I don’t dispute that at all. It is just that the current system is more ‘get paid to play’ rather than ‘pay to play.’

    I suppose the best place to start is to abolish the current insane tax Code and streamline it so there are no loopholes, no contradictions, etc. So, in other words, not gonna happen.

    I think you and I agree on over-consumption and re-use. If the citizenry stopped by so much useless, pointless shit and put that money in savings…

    Well, a girl can dream.

  9. Sevesteen said,

    May 5, 2010 at 11:59 am

    I agree with you on tax codes, breaks and loopholes.–as I said above (and in many other places) complex regulations favor business. I particularly dislike where a big corporation gets tax breaks to locate in a particular place–it pits local governments against each other.

    I think the solution is to avoid legal complexity, and especially avoid regulation that is difficult to enforce–in all law, not just business law. We should not need lawyers nearly as often as we do, but since by and large they write the laws, they get to ensure their own necessity, I guess.

  10. southern female lawyer said,

    May 5, 2010 at 12:08 pm

    Anymore you need a Team (banker, lawyer, CPA, and insurance agent) to do ANYTHING tax and/or biz related. Obeying the law shouldn’t be that complicated. Personally, I would be happy to see my profession, if not rendered utterly redundant, then certainly rendered less necessary. Most people can’t afford lawyers but can’t afford to not get one when papers are served.

    And you are right that the lawyers are writing the laws, but they are getting paid to do so by big biz/whomever is the interested and moneyed party. Biggest mutual back-scratching game around.

    The problem with regs is that there is almost always a way to buy an exemption; ditto taxes, ditto everything. Obviously I am pretty staunchly anti-corporate dominance – I just see WAY too many situations where $ talks and people get screwed.

  11. JJ said,

    May 6, 2010 at 9:18 am

    Joe Scarborough and Maria Bartiromo are saying this morning how crazy it is to put the tax burden on “the most productive members of society.” And how the bottom half of Americans pay no income taxes. Got me thinking that richest doesn’t necessarily mean most productive any more, if it ever did. And bottom half of taxpayers certainly doesn’t mean least productive. Who’s contributing more to society versus sapping more of the nation’s wealth and capacity? Who caused more of the current economic crisis? Who’s doing more with less, in human resource development of the next generations, etc? And who is paying more taxes of all types while doing it, as a percentage of all that they own and take in?

    I’m not as interested in arguing the answers as I am in first just redefining the questions along productivity lines, rather than class warfare over income taxes. Seems to me actually applying their “most productive” measurement to tax policy is a good idea to suggest which Americans rightfully should be relieved of tax burden. Think of the improvement both real and rhetorical in fairness that we’d enjoy right away, over the false equivalency we’ve all been held hostage to in the disastrous recent past, of automatically defining most productive as whoever winds up richest and best infiltrated into government regulatory agencies and most lawyered up,

  12. southern female lawyer said,

    May 6, 2010 at 9:38 am

    JJ – I know a lot of people who support a ‘tax what you burn, not what you earn’ system. I think this is inherently more fair to tax in accordance with the burden one creates rather than an “income” tax, though I suppose it could also be said that sales tax is a “burn” tax. And, as I live in a state with a very high sales tax (9.75% on everything, including all food) and no income tax, I can tell you that it doesn’t work and that there are loopholes galore for “big ticket” purchases.

  13. JJ said,

    May 6, 2010 at 10:59 am

    Interesting, so it doesn’t get at “most productive” for tax breaks but instead looks at “most consumptive” for tax burden, sort of? Hmmm, I’ll ponder this a few hours.

  14. JJ said,

    May 6, 2010 at 2:15 pm

    So far I’m thinking that if all we did now is overtly decouple “richest” from “most productive” in the public mind, it would be a good step forward.

  15. JJ said,

    May 6, 2010 at 5:45 pm

    On today’s market drop, Fox News’ fawning conservative courtier Neil Cavuto: “We simply have no money. The world has no money. And right now the emperor has no clothes.”

    But hmmm, his media emperors Limbaugh and Hannity and Beck and their fellow let-em-eat-cake aristocrats have buckets of money, so I hope they have closets full of fine clothes too! [shuddering at televised alternative]


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