But the real problem, the cause of this whole mess, is simple: every few decades, our economic system morphs into a structure that rewards making things less than it rewards creating financial time bombs with multi-year fuses. We’ve been rewarding the financial time bomb makers more and more since Reagan took office. And this is also the second time since Reagan took office we’ve been bailing out the financial time bomb makers at great cost to the rest of us – the previous time was during the S&L crisis.
Things have now evolved to the point where for some reason, when the market for time bombs disappears its considered some sort of a tragedy. This time around, we’ve already helped out the grifters, including many investment banks, commercial banks, derivatives traders, and now we’ve moved on to helping the marks. And rewarding any of them, the grifters or the marks, is a problem for several reasons. It rewards the bad behavior of the financial time bomb makers and reduces the incentives the rest of us have to watch out for the crooks. (And yes, I know, people living next to foreclosed homes suffer too. But externalities come in both positive and negative varieties, and folks who benefited from home prices rising for no reason don’t have a complaint when the home prices drop back in value because people found out the rise happened shouldn’t have happened in the first place.) It also keeps an unviable system going, and it does so at great cost.
But there’s one more thing. Since this whole thought process, this current iteration of the art of rewarding of the financial time bomb makers, dates back to Reagan, it pays to go back to Reagan… And when Reagan conjured up images of the Cadillac-driving welfare queen, it pissed people off not because there were people who needed help, but because supposedly many people who were getting help were, according Reagan, living better than the people being taxed to help them. And while I for one have never had a problem with seeing some of my tax money go toward helping the unfortunate, and I’ve never had a problem with welfare, at this moment in time, I know with absolute certainty that more most of the new-fangled welfare from the last six months is directed to helping people who are better off than I or have lived much better than I in recent years (investment banks, commercial banks, derivatives traders, and now homeowners) than the poor. I resent it. Does Obama really want a country where the folks who make and pick up time bombs are rewarded at the expense of those who are too honest to make time bombs or were smart enough (and in some cases, lucky enough) not to pick them up?