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Apostolul Pavel

Having passed the stimulus bill, President Obama has recently turned his focus to the housing crisis. On February 18, the New York Times reported that, “Almost one in 10 home mortgages is either delinquent or in foreclosure, and analysts estimate that at as many as six million families could lose their homes over the next three years in the absence of government action.” Proposing $75 billion to keep people in their homes through refinancing and another $200 billion to avoid the collapse of government-controlled mortgage giants Fannie Mae and Freddie Mac, Obama’s housing plan has spurred new controversies.
The key objection raised centers on whether responsible taxpayers who have played by the book should rescue those who were careless with their spending; and whether taxpayers should once again pick up the tab for Wall Street greed.

Perhaps it is a peculiarly human tendency to search for scapegoats in times of crisis. A lot of energy in the political sphere is being expended on identifying who is to blame. Time recently did a cover on the top 25 people responsible for the economic meltdown. The personas range from former Federal Reserve Chairman Allen Greenspan, who advocated for bank deregulation, to Chris Cox, the ex-chief of the Securities and Exchange Commission (SEC) who failed to enforce even the lax regulations that remained. Number five on the list is the “American consumer” whose household debt has increased by more than 70% since 1982. (Funny that Time should measure the increase in consumer debt since 1982, because that was around the time the U.S. economy was coming out of another recession. One of the ways the U.S. got itself out of that recession was to increasing consumer debt ceilings to encourage more spending.)

There are some complex factors that contributed to this economic collapse. But what is really clear is that most people were pawns in a money game that was largely run by an elite few. To substantiate this point, allow me to state a few facts.
  • 1% of the U.S. population owns nearly 50% of country’s assets
  • 15% of population controls almost all of the country’s assets
  • 28,000 of the wealthiest people in the U.S. receive more income than 96 million of the nation’s poorest (see David Cay Johnston, Perfectly Legal, 2003)
  • 85% of $1 trillion increase in stock market valuation between 1989-1997 went to richest 10% of U.S. families (see William K. Tabb, The Amoral Elephant, 2001)

So, despite the fact that the majority of the U.S. population has seen falling wages, living standards and working conditions since 1980, the debate over housing foreclosures has shifted away from the rich elite and toward the “American consumer.” Frenzied politicians and citizens are trying to figure out how Obama’s housing plan will tell the difference between the “deserving” consumer that should be rescued from foreclosure and the “undeserving” consumer who should be left out to dry. To help discern the “deserving” from the “undeserving,” I thought I would devise a test.
1)       Do you have any credit card debt?
2)       Do you have any school loan debt?
3)       Do you have a car loan?
4)       Do you have a home equity loan?
5)       Do you think it is possible or likely that you will lose your job or business?
6)       Has the value of your home depreciated?
7)       Is your mortgage loan larger than the value of your home?

If you answered ‘yes’ to any of these questions, I imagine that this is what the ‘deserving’ would have to say to you, the ‘undeserving’…
 The Deserving: ‘You shouldn’t have gotten into all this debt. Now that you can’t make your payments, you expect to get a bailout from the government. That’s irresponsible!’
The Undeserving: ‘But the entire U.S. economy is structured on consumer debt! Besides, when I got into all those debts I had a good job with a good income. Now that I lost my job, I can’t make the payments.’
The Deserving: ‘Well, you’re clearly not working hard enough. Why don’t you go get a job?’
The Undeserving: ‘Because there are no jobs, the unemployment rate is over 10% and banks aren’t lending any more credit.’
The Deserving: ‘Well, then you just need to cut your losses and start over.’
The Undeserving: ‘But that means that I will end up homeless with my family.’
The Deserving: ‘Oh well!’ 

One month later…
The Deserving:
‘I can’t believe it! Even though I was totally responsible and didn’t have any debt except a 30-year fixed interest mortgage loan, I can’t keep up with my bills. Prescription medication, health insurance co-payments, my kid’s college tuition, utilities, gas, car insurance and food! I can’t keep up and I might lose my home… I guess I’ll just have to work harder, because I’ll never take any government handouts!’

There was only one problem for the Deserving… There were no jobs, no home equity loans, and no credit. 

Forgive the rhetorical sarcasm, but I am hoping that the faulty logic of this deserving/undeserving game is coming into focus. The problem is that today’s ‘deserving-hard-working-taxpayer-who-plays-by-the-book’ is tomorrow’s unemployed parent who will lose her home and livelihood. Approaching a structural problem that affects everyone by trying to decipher which American consumers are ‘worthy’ of help is like trying to rescue individuals from a sinking boat.

The debate over who deserves to be rescued and who does not has exhumed a fundamental contradiction in American values and culture. Crises like this are very difficult in a country that has a long tradition of rugged individualism. They are difficult because people aren’t used to thinking of themselves in relation to others, as inter-dependent rather than isolated units. This crisis has shown that there is very little political and economic value attributed to communal networks of support; and that the U.S. is remarkably out of practice when it comes to thinking about how to raise everyone up rather than structuring policies that benefit only a select few. We have an economic crisis that affects everyone, yet we keep trying to tackle it from an individualist standpoint of ‘How can I save myself and let others fall?’ But as my mock dialogue illustrates, the one who saves himself today may very well be the one that falls tomorrow.

I want to make clear, however, that I am talking about working and workless people. Corporations, banks, investment firms and the richest 10% of the population have demonstrated that their modus operandi is to continue to pursue their interests at all costs, and at the expense of the people.  This is why governmental policies—including temporary receivership of banks—must shift from an approach that asks for cooperation to one that requires these entities to relinquish their interests in order to save people’s livelihoods.

Though this approach is economically necessary, it is still politically unviable. The reason politics has trumped economics thus far has to do with a faulty ideological association between temporary government control of banks and the “s” word. But as those of us from Eastern Europe know all too well, governments and people have often chosen to hold onto dogmatic ideologies (in this case rugged individualism and deregulated free market logic) instead of acing to save people’s well being.