Thursday, December 22, 2011

A few words about Occupy

Note: It's been a busy but good time 'round these parts--hence my absence from "here." Grades are in; the Mrs. and I visited Mexico City for a few days last week to visit the Basilica of the Virgin of Guadalupe on the Virgin's feast day (and, not coincidentally, eat some really good food); we spent last weekend with my mother in Austin; and now, our shopping done, we're relaxing a bit, pondering the value of Advent, and awaiting Christmas itself. I hope my reader(s) is/are not too frantic this Christmas season. That would be a shame.

The post below has been germinating since last month; I've just never had a moment to finish it up till now and, indeed, it felt like it was getting so long in the tooth that I'd given serious thought to not posting it at all. But this past Sunday we heard a sermon on the Magnificat that reminded me yet again that, while Jesus may or may not join in with the Occupiers were he here today, Mary, in her song explicitly declares that Jesus' being conceived (never mind his birth and ministry) is already a socioeconomic turning of the tables via a poor, pregnant, unwed Jewish girl: "He has shown strength with his arm;/he has scattered the proud in the thoughts of their hearts;/he has brought down the mighty from their thrones/and exalted those of humble estate;/he has filled the hungry with good things,/and the rich he has sent away empty." Whether we take that language literally or figuratively, it still compels us to contemplate the world today through its lens and act on what we see. It's hard to hear that language and not be reminded of the events of the past few months.



Mitt Romney (via Wikipedia), reflecting on his Bain Capital days: "It is one thing that if I had a chance to go back I would be more sensitive to. It is always a balance. Great care has got to be taken not to take a dividend or a distribution from a company that puts that company at risk. [Having taken a big payment from a company that later failed] would make me sick, sick at heart." Uh-huh. Image found here.

Just in case you think the Occupy folks have no legitimate gripes, here are a bunch of them. These protests have been a long time in coming.

Over at his blog Musings from the Hinterland, (very) long-time friend to this blog Randall has posted a couple of times on the Occupy movement. He and I have been, lo these many years, fellow travellers on many issues, the greatness of Cormac McCarthy and the loathsomeness of U. of Kansas basketball to name only two of the more important ones. However, as regards the Occupy movement, I fear that I must part ways with him.

In his post "A Question That Deserves an Answer," Randall explains that he is not opposed to the exercise of first amendment rights, nor does he deny that the protesters have legitimate grievances. He argues that the protesters are aggrieved with the wrong parties: "Simply put, the problems existing in our current situation can and should be laid at the feet of a government, which insists upon diddling with the market, whether that be for homes, student loans or whatnot. (See also, this from Newsweek about Congressional pursuit of individual wealth. Politicians of all persuasions are guilty. That's what politicians do, actually.)" Actually, I don't have much of an argument with this, either. I'll admit that the government can indeed distort some markets to the detriment of the economy; especially as regards home loans, one can indeed make an argument that the government should not be as involved as it is (though I'll also admit that I don't know enough about the subject to say what an appropriate level of involvement would be).

But then Randall goes on to say this:

Specifically, bankers did not cause people to buy homes they couldn't afford in the first place. I say this from having represented banks over the years and having sat in on meetings discussing the impact of various regulations on housing costs. Suffice it to say, I started hearing about the ludicrous rise [in] home prices back in the mid Nineties. What do I mean?

Until say 1990 or so, in order to buy a home, a person had to have 20% of the purchase price up front. The remaining 80% could be financed, if you had a good credit rating and a job. The monthly payment on that financed portion, including prorated property taxes, if any, and casualty insurance, could be no more and 28% of one's monthly gross salary. Further, one's total debt load, including house payments, could not exceed 35% of one's monthly income. These were not government imposed rules, but were standards across the industry based upon studies by loan underwriters, which determined the above were best to allow the repayment of the loan and minimize defaults.

In the early Nineties, the government decided that virtually everyone should own a house. Thus, the above underwriting standards went out the window, to the point where banks could loan up to 120% of the sale price and the requirements for getting a loan in that amount consisted of breathing. Not only were these new requirements mandated, but government regulators threatened to sue reluctant bankers for discrimination. Finally, to sweeten the pot, the government started guaranteeing more and more mortgages, the "Fannie" and "Freddie" you've heard about. There were other things, as well, but the above were the big ticket changes. With all that essentially free money around, home prices went through the roof, no pun intended. Eventually, we had an economic downturn, the notes became due and hundreds of thousands defaulted on loans they should've never received in the first instance, which the rest of us are forced to pay, thanks to the government guarantees that should have never been granted.
First of all, no one forced banks to loan money to underqualified buyers or toss their own self-imposed lending standards out the window; just because, as Randall says, banks "could" loan according to the standards they did doesn't mean they had to--and, as he surely knows (re his remark about the threat of discrimination suits), banks and mortgage lenders historically have had the annoying habit of refusing to lend to people of color, no matter how well-qualified they were (or, as was decided in a federal court just yesterday, disproportionally compelled minorities otherwise qualified for standard loans to sign for subprime loans). But more to the point: "government regulations" certainly didn't require that loan officers lie about the credit-worthiness of applicants or misrepresent the terms of their mortgages to signees, nor to do this not just a few times but to the tune of billions of dollars' worth of times. "Government regulations" did not call for the creation of mortgage-backed securities whose collateral was mortgages that their creators knew would fail, nor for their creators to lie to would-be investors in them as to the extent of their soundness. Indeed, banks have of late fallen into the depressing habit of fighting new regulations that would clearly be in their better interest--little things like, you know, actually having some cash on hand to cover all this reckless behavior that taxpayers had to rescue them from. Oh, yes: those poor helpless banks, very nearly wrecking the world's economy via their blatant circumventing of "government regulation" (that, by the way, they had a partial hand in writing) by engaging in speculation that, while not illegal, was certainly driven by nothing more than the desire (read: greed) for a higher return on investment than they could get for boring stuff like, you know, loans to businesses to expand and hire--you know, the things banks are traditionally supposed to do--and yet, like alcoholics, denying any sort of responsibility for the choices they themselves freely made. And yet they have the temerity, after TARP, to drag their feet on helping people to refinance their mortgages, to foreclose on people without notifying them beforehand, etc.

Has the government been part of the problem here? Sure--but a minor one, at best. For confirmation of this, have a look at this chart and accompanying explanation, which clearly show that loans made through the Community Reinvestment Act were by many measures NOT the major source of bad loans; instead, most bad loans were ones that banks had the most control over. Sure: lots of people--and that includes "wealthy" people not required to offer up collateral for loans--had no business buying houses and property over the past decade. But the banks freely participated in this. For Randall or anyone else to argue that the banks are the wide-eyed, innocent victims of "government regulation" is absurd.

And this brings me to Randall's other recent post on the Occupy movement. In it, he makes many valid, and true, points about, for example, the tension in the law between the exercise of free speech and the distinction between public and private space, and how almost all "the 99%" of this country would be members of "the 1%" of many of the world's other countries. All true. But then Randall says the following and, while it's true that there are some among us who feel a college education automatically and unjustly entitles them to three hots and a flop, he unfairly mocks right along with them the many more who have made more, shall we say, utilitarian choices regarding their majors and yet still have trouble paying their student loans:
I think that the protesters do have legitimate grievances. They are young people who have spent a substantial amount of time and borrowed money to achieve something, only to find that their "achievements" don't have the value they themselves placed on them. Whose fault is that? Is it Society's as a whole, who cannot see paying upper five or six figure wages for someone with a degree in World Religions, or is it the advisers who allowed/suggested they pursue such a course of study? Is their debt Society's fault or is it a)universities which raised tuition costs at a rate exponentially greater than that of actual inflation coupled with b)governmental policies which allowed banks to throw the students' debt to the government, who c)passed laws to prevent these same indebted, jobless students from discharging their student loans in Bankruptcy? Do the students themselves bear any responsibility for selecting their own course of study?
Perhaps, if "government" and "Society" would either stop preaching the virtues of a college education as a way to advance oneself materially or stop looking to education budgets as a place to cut whenever "trim the size of government" talk rears its head, I wouldn't have as much trouble with Randall's rhetorical questions. But for too long now, that has been the dynamic: too many students; too little money--from pre-Kindergarten to post-grad--to educate them properly; too few jobs for which their degrees prepare them (not just in World Religions, either)--or, more precisely, too few jobs that once paid well enough to live on comfortably but which no longer do, through no fault of the individuals themselves (apart from those who make dumb decisions).

I think Randall may be guilty here of mistaking his own circumstances for those of most of the 99%. He notes in his post that he's done pretty well as a lawyer because he's good at it. I don't envy his success, but I admit to envying, just a bit, the fact that he has some control over the fees he charges his clients. He gets paid something close to what he thinks his skills are worth by clients who agree with him on the value of that service. He knows he can't charge too much, or else he and his family wouldn't eat quite as regularly as they've become accustomed to. That's about as free-market a wage system as there can be. (I know Randall has other expenses as well: employees, insurance, taxes, etc. that his fees also must cover.)

That's a kind of power over personal circumstances that most Americans simply don't have. We also, most of us, are good at our jobs. Most of us, however, are in the position of having to take what we can get in the way of salary and benefits. Over the past decade in particular, many of us, through no fault of our own, have been laid off, have taken pay cuts, have not seen a raise in some time, or (in my own case) have actually seen small raises in gross pay that aren't reflected in our take-home pay, despite gradual reductions in federal taxes over that time (in my own case, this has been due largely to increased health insurance costs). The power of employee advocates--unions--has also been eroding in various ways over the past 20 years; it certainly hasn't been employees who have told corporations to renege on their promises of retirement pensions; in my state of Kansas, state workers had not been telling the state not to pay its promised share into the state pension program over the past decade. At the same time, we see a gradual erosion in government services of all sorts due to the strange idea we've gotten in our heads that we see taxes as punishment for success rather than the cost of responsible governance. (I'm speaking here of principles, of course; we all have our lists of examples of irresponsible governance.) Not surprisingly, it's been the very wealthy who have had the most success in making this argument, such that, while it's true that, as John Boehner recently argued that the top 1% are paying over a third of all federal revenues and therefore it'd be unfair to ask them to pay more, it's equally true that over the past 20 years they are actually paying in taxes a smaller percentage of their earnings (from 33% in 1986 to 23% in 2006) even as those earnings have more than doubled during that same time.

[Incidentally, how do two GOP candidates for President propose to address the problem of the very wealthy actually paying a smaller percentage of income in taxes even as they have become very, very wealthy? Why, reduce their tax liability even more via their flat-tax proposals. Yep: that'll fix it.]

Randall goes on to make the case for the "job-creators":

I do believe the vast majority of these people have actually benefited from the system they decry. They complain about the so-called "one percent" but their desired destruction of same would actually harm the vast majority of those in the Ninety-nine percent. There isn't a "Mr. Exxon" sitting at home in boxers and a tank top stuffing billion dollar bills in cookie jar. Even if there were, to get those billions, he'd be hiring lots of people, who, along with himself would be pumping money into this country's fifteen trillion dollar economy. Not only that, but those shares of stock would be in millions of peoples mutual funds, retirement accounts, insurance policies, etc. providing a financial cushion for their future.
If this actually described most of the 1%, I think I and most people would be sort of okay with this state of things (though the obscenity of "Mr. Exxon's" regularly making tens of billions of dollars in quarterly profits and yet asking for government subsidies for oil and gas exploration is another matter entirely). But as Randall surely knows, much of the wealth of the 1% comes not from providing goods and services but through speculation in stocks and commodities that depend only on gambling on what markets will do, whatever resulting human and environmental costs may accrue be damned. In its most extreme form, this sort of wealth has been acquired via a contractual insulating of its beneficiaries from any sense of financial (let alone ethical or moral) responsibility for those costs. We all got a taste of this most clearly in 2008 when the government, post-TARP, had to honor the payment of Christmas bonuses to the investment bankers of the very companies whose actions resulted in government receivership and sent our nation's economy into a recession that we're only now beginning to come out of. Or, maybe you'd prefer this sort of insulation, in which we learn that Mitt Romney still earns millions from deals done by Bain Capital despite not being at all involved in them. He bears no responsibility for just how Bain earns its fees (no matter whether the companies that hire it regain profitability or go under); he's just a beneficiary. One, by the way, who had the nerve earlier this year to state that he's unemployed, too. It's a surprise his campaign hasn't yet printed up the bumper-stickers: "Mitt Romney: One of the 8.6%"

The Occupiers at times tended to seem a bit like dewy-eyed neo-hippies early on, but I think, now that they have people's attention, their message will sharpen come the spring. I hope also that some of them will have a look at this interview in the Boston Review with Lawrence Lessig, the author of a recent book on campaign finance reform. The passage below succinctly states what the Occupy movement needs to be saying (my emphasis):
[T]he challenge is for the movement to frame itself in a way that makes it clear that what they’re talking about is not wealth, but wealth procured through this corruption. The protest has a salience on Wall Street not because Americans hate the rich, but because Americans look at that wealth and say, “What the hell? How did you get to profit from the dumbest form of socialism ever invented by man, where we socialize the risk and privatize the benefit? You got to gamble; you got the upside; we got the downside. That’s outrageous.”

And so I think that if the Occupy movement could understand itself to be an expression of this deep frustration with the way our government has been corrupted, if it can say, whether or not you believe in capitalism, nobody believes in crony capitalism, and crony capitalism is what we’ve got, it would stand a greater chance of success. And unless we can find a way to unite across left and right to embrace the fight against crony capitalism, I don’t think we’re going to see any chance to fight against this extraordinary power that can block reform even after the worst financial crisis in 80 years.


The Occupiers, at their most serious, aren't talking about getting rid of capitalism; they don't envy the wealthy. They simply want for more of us to have a shot at what our parents called "upward mobility," which, because of basically-flat wages for the vast majority of us, tax codes benefiting the wealthy (and, in particular, their wealth generated via capital gains), the decreasing power of unions as a counterweight to the power of corporations, the increasing costs of health care and higher education and a gradual devaluing/outsourcing of skilled labor, has been harder and harder to achieve over the past decades. They ask us to contemplate the world through a different lens--or, rather, a lens that we had all looked through from the end of WWII till the end of the Seventies but then discarded. Those who argue on behalf of the status quo must make not just the legal but the moral case for protecting profit margins at the expense of workers, at the expense of paying their fair share in taxes that, via the funding of infrastructure, law enforcement, education, etc., benefit the wealthy disproportionately, and at the expense of the physical and social environment. This is not a call to overthrow capitalism--we are far better off with it than without it. It is, rather, a call that it either acquire a conscience or that government do more to protect us from its excesses.

This isn't too much to ask for at Christmas time, is it?

4 comments:

R. Sherman said...

Thanks for the plug.

I guess. :)

I need time to digest, contemplate and respond, but not "respond" in a snarky way, but to explain my thinking a little more.

It's really not the gripes, themselves, which trouble me but the philosophy behind them. I trying to toy a coherent argument together and will post same at my place.

In the meantime, a very Merry Christmas to you and yours my friend. I hope you get to Mobile or Mobile comes to you.

Cheers.

John B. said...

Randall,

Thanks for seeing this post as a discussion of, and disagreement concerning, ideas. I kept toying with adding a disclaimer regarding you as a person, but then I didn't want it to sound like "Caesar is an honorable man."

I didn't say this in the post, but I read through most of the items you linked to in your posts; my take on them, which I think I do reflect in my own post, is that those folks are misunderstanding the Occupy movement--whether unintentionally or deliberately, I can't tell. But for them simply to say that income inequality has not increased dramatically over the past 30 years is simply wrong; and those who argue that income inequality isn't a social problem and, even if it is, shouldn't be one addressed by government, clearly have forgotten history. There is very real danger in having a class of people so wealthy that they become insulated from feeling even the most basic obligations of being citizens. That, of course, is not the same thing as saying that the Occupy movement hates rich people or doesn't value the acquisition of wealth. It is saying, At what point do the costs of those activities interfere with the political and social health of the state and its citizenry, and what should the state do to mitigate those costs?

I don't have answers to those questions, but I see them as legitimate questions. I hope I've also made clear in my post that I hope the Occupiers will ask them in useful ways.

I look forward to reading your response. And as for the Christmas wishes: right back atcha.

Nutsy Fagan said...

Thank you for this thoughtful post. You clearly express what I feel on this subject but am usable to put down coherently. Nothing is simple or cut and dry, but I think you have covered this fairly and truthfully. A

Randall needs no defense. Anyone who reads MFTH should know he is made of the right stuff. We Agee on much except for politics. That is what keeps things interesting

Vince said...

From the War to the seventies was a golden age right enough. But the excesses causes profound envy which laid the track for where we are right now. Even today you've the remnant of that madness where vast cash was pumped onto robot operated car factories in Detriot. These places got themselves into trouble not from making cars but from leverageing future income in a vain attempt at returning to the nirvana when Grosse Point caused Washington the tremble.
Similar with your steel industry. Crap steel, made with methods from the middle of the previous century, at a price that was a combo of huge salaries and huge profits.
What was good about that time if you were part of the circle. Cash did circulate. Today it doesn't. Today the nearest description I can get to is that of a colonial economy where everything is being sucked out in order to benefit others elsewhere.