Too Proud to Beg?

In the middle of reading this New York Times article about the sad story of a town whose workers lost their pensions, I stopped at this quote, about one of the people who was affected and ended up dying, because he was also too young to collect Social Security:

“When they found him, he had no electricity and no running water in his house,” said David Anders, 58, a retired district fire chief. “He was a proud enough man that he wouldn’t accept help.”

There is something so sad and deluded and kind of American about the idea that someone who does not try to get help from the government when in a dire situation is being proud or honorable. I hate to say it, because this man’s situation was awful and could happen to any of us in these tenuous times, but it is stupid not to try to get help from the government if you have been rendered destitute. This country’s largest automakers recently got help from the government, as did its largest banks. Individuals get help from the government every day, in the form of disability checks, welfare, unemployment benefits, tax exemptions on home mortgage interest, free school lunches, etc. We pay taxes in part to insure ourselves if we fall into hard times, so we can collect say, Medicaid or disability. I don’t consider this man “too proud;” I consider him sadly deluded about how things work in this country.

Another way to think of it is that Americans — even those who are too proud to go to the government — do go to banks to borrow money in hard times. Most people are not too proud to do that, and many of them, even if they feel like they will eventually pay down the debt, are frankly not in a position to do it. So maybe it is best for someone who considers himself or herself above collecting government welfare to think about whether it is better to be psychologically indebted to his or her fellow Americans or actually indebted to a bank that charges an 18% interest rate.

The Senate’s bipartisan jobs bill…

This is probably why it is bipartisan (New York Times):

The jobs bill emerging in the Senate is pathetic, both as a response to joblessness and as an example of legislation deemed capable of winning bipartisan support.

After reading Don Peck’s truly depressing article in the Atlantic about how a new jobless era will be particularly devastating for those in my generation, who Peck says are ill-equipped in temperament and in job skills to deal with the years to come, I think we absolutely need a jobs bill that invests in me and my peers. Although I think that contrary to what Peck says in the article, my peers are in fact going to be able to deal with the road ahead, he is right that this recession has hit our group especially hard, as evidenced by the many people I know who have been unemployed for not insignificant periods.

Franklin Roosevelt often said in the early 1930s, when describing his forthcoming New Deal policies, that unemployment sapped the human spirit. Now, while I wouldn’t mind a little more vacation time, FDR was right that the infinite time without direction or money that is unemployment, is dis-spiriting. He also favored spending stimulus money on creating jobs rather than extending unemployment benefits (the latter is what the current Senate job bill proposes), because he said creating jobs for people was better for their spirits than was keeping them on the dole (However, he was not, unlike Republicans of late and New Democrats, a man who busied himself with vilifying people on welfare).

The problem with the current Senate job proposals is that it does not empower people who want to work, but instead focuses on providing tax credits and tax breaks. The problem is, these measures will barely make a dent, as the NYT says:

An even bigger problem is that the hiring credit is unlikely to work as intended unless it’s paired with other federal support to generate and maintain consumer demand — mainly extended unemployment benefits and more fiscal aid to states. No matter what Congress does to lower the cost of labor, employers won’t hire unless they believe demand will be sufficient to sell whatever the business produces.

So why isn’t our jobs plan focused on employing people who want to work? Why is it targeted mainly at incentivizing small businesses with tax credits that may not even give them enough money to hire people? And why is Max Baucus chairing this thing???

What is David Frum talking about?

In this excerpt from the Fareed Zakaria show on CNN – which otherwise features a surprisingly good group, with Eliot Spitzer, Naomi Klein and Stephen Dubner — former Bush speech writer David Frum somehow gets away with arguing that regulators should not overreact by setting stricter rules on financial instruments because such rules would stifle innovation.

It is pretty hard to believe that someone is still saying with a straight face that unregulated risky financial instruments like mortgage-backed securities were innovative. But Frum does, and  he reveals the speciousness of his assertion by basically  saying that technology innovations of the last decade prove that the private sector is creating innovative products all around. Frum does not tell us how developments like the smart phone and internet search technology have anything to do with banking “innovations,” and that is not the kind of precise question that is usually asked of a commentator on a cable television show.

Frum goes on to cite  interest-only loans as an example of innovation in the financial sector. Although it is very arguable that an interest-only loan represents anything more than an old-fashioned giant gamble on the part of borrower and lender alike , even if one accepts it is innovative, I do not see how financial regulation would prevent this product from being marketed. Regulation on such a loan, which would probably require measures like vetting a loan applicant’s ability to pay that loan and better disclosure of the risk of the product, would not fundamentally change the product itself. Of course, stricter regulation might cause more loan applicants to get rejected, resulting in less potential profit for the bank underwriters. But stricter regulation would prevent potential foreclosures and home loan defaults. David Frum’s assertion that regulation stifles innovation in this case does not really hold water. It leads me to wonder whether he knows what he is talking about, or if he does know, whether he cares, and how he still gets away with making this argument in the first place.

Will the Chinese and the Americans meet in the middle?

It is maybe a cliche at this point that China is ascending to a world power. In the latest article on that subject, Paul Krugman bemoans the country’s trade policies. Many end-of-decade articles pointed out that while the U.S. and other developed nations had basically zero growth on their nations’ stock indexes, and what I think is an even more dismal decline in salary, the markets in the “BRIC” nations–Brazil, Russia, India and China–grew explosively. There is no way this kind of growth will sustain itself–it never does, historically–but for the time being, I think it is important to take a certain perspective toward the growth of the Chinese economy in particular, as a lay consumer.

Although our economy is arguably abysmal right now and China’s is growing, I think Americans still enjoy standards of living the likes of which the Chinese or most other nations do not know. We have larger houses, more cars and did have more disposable income. Unlike millions of other people, we were, for many years, able to buy things on credit without proving that we could pay it back anytime soon. The current growth of China and decline of America is in some ways a leveling, where the Chinese move closer to what we have in this country just as we lose it.

This is not to say that I think what is happening is deserved. It is more that we should appreciate that for many years we had very favorable lending policies, could buy electronics and retail items for cheap (in large part, because of China) and could drive cars and live in homes that have great environmental and monetary costs (because of these lending policies), which most other people in this world could not do. We were not encouraged to live within our means, either. I think this way of life was egged on by an unfortunate mentality.

That is the Wal-Mart mentality–I’m as guilty of it as the next guy–of believing you should be able to get quality for cheap in areas like domestic services, infrastructure, schools. When they invariably do not see quality, many Americans immediately resort to blaming the local government or state governments or schools and insisting that they be deprived yet more money, and a vicious cycle of spending cuts continues.

Governments are not totally innocent–dishonest politicians have brought on massive tax cuts and freezes (see California, Colorado) and then people wonder why we have more congestion, worse public transportation, struggling schools and greater college and graduate school loans to shoulder. The answer is because we do not pay for quality. Quality–from health care to education to infrastructure–costs money and must be maintained. It is of course a question of priorities as to whether we want quality in these areas and whether we can pay for it all, but I hope in 2010 the American spoiled-ness that thinks we should get everything for less (see Wal-Mart) dissolves as our new economic reality becomes more clear.

My wishlist for 2010 is a total re-prioritization in this economy that would probably look un-American, or at least, un-American circa 1980-2009. This would mean…

Increase revenue from upper-income people, those who are still doing well by this economy, by…

• Raising taxes on the very wealthy. More tax brackets, so that millionaires and billionaires pay a greater percentage of their income to the IRS than people who make around 300K per year.
• As a corollary: greater enforcement of tax evaders (Fortunately, this has already begun).
• For the love of god, tax ibankers’ bonuses, as they are doing in Europe.

Spend to create jobs, improve infrastructure and maintain public services.

• Use this money to create jobs in areas that improve infrastructure and invest in American economies of the future.
• Also use money to help out states, which are having a terrible time balancing their budget and keeping basic social service programs.

Our leaders need to challenge us to overcome the selfish economic mantras of the ’80s-’00s. That will not be easy.