Here is a question from many of my discussions with conservatives regarding individual responsibility v. some kind of systemic issue (actually often a false choice, btw). It comes from what seems like a conservative emphasis on personal responsibility and a denial of any kind of systemic problems in our financial (or other) area.
Say you give 100 people loans. If only 6 of those 100 fail to repay, that would easily be written off as their individual failure, right? If you had a 94% repayment rate, you would have to conclude that the terms of the loan were fair and the arrangement was set up correctly or fairly.
But what is the tipping point where you have to question the setup? If 30% fail to repay? If I had 30% fail my class, I would probably rethink my approach.
I ask, because I think most conservatives I speak to approach most of our broader economic issues solely from a personal responsibility approach, and do not want to question the system around those individuals. As I said above, I think there is often a gray area besides choosing between those two options. The criminal justice system is a good example. If a high percentage of African American men end up in jail, it might be a combination of both, right? Doesn't excuse the individual criminal acts that get them arrested, but might point to a system that is not doing a good job of addressing race, class, or education?
This also comes out of this previous discussion about the middle class. I believe firmly there are things that we as a government (remembering that the government is us in our system) to better encourage success and stability. My conservative friends tend to look at the decline in social mobility, or wage stagnation, or lack of individual savings--and chalk all of those up to individual people failing to make good decisions. I don't deny that, but also think there is something systemic that has encouraged debt and the other negative things we see.
18 comments:
Interesting point here Streak. I think you are right that run of the mill conservatives see the issue in these terms. I think though that conservative intellectuals see probably recognize the convergence between personal responsibility and systemic failure. The difference is that conservative intellectuals see the systemic failure very differently than the way you probably see it.
LB, I don't disagree. But how do they see that difference? Don't they seem to want to remove all the systemic checks which just puts more pressure on the individual?
Here is another factor my wife and I discussed the other night. 50 years ago, the average worker didn't have to negotiate all this stocks and bonds stuff. They might have, but their retirement was not dependent on it. My wife and I think we are reasonably smart, but we struggle in this area. How do we expect the average American to be able to manage all of that in a very complex economic system? And how would further deregulation or privatization make that anything but worse?
You're implying that the system is merely regulatory checks. A government that has a 3 trillion dollar budget does a whole lot more than just institute regulatory checks. So conservatives would see fixing the system as removing negative government influences which often includes regulation, but extends far beyond that.
I'm not sure I see the connection you're making between a retirement account and regulation. It seems to me that there is a disconnect between a individual's level of understanding of the financial markets and how regulated/privatized they are. A heavily regulated and public market could be just as complex as an unregulated privatized financial system.
So conservatives would see fixing the system as removing negative government influences which often includes regulation, but extends far beyond that.
Could you give some examples of what you mean? I can think of bombing civilians who are potential consumers and economic partners as a very negative influence (and I agree, for more than just the reason that it's bad for business), but I'm not sure if that's the extent of what you mean.
Leighton,
One example would be the government encouraging subprime mortgages, partially through Fannie Mae and Freddie Mac. By doing so, the market was flooded with numerous people who should never have had a mortgage in the first place.
Banks lent money to people who they knew could never repay their loans, but because they could sell those loans up to Freddie and Fannie, it was a relatively low risk proposition on a microcosmic scale. At the macro level though, when millions of people started to get loans they couldn't afford, the market collapsed.
Now I'm aware that there were plenty of other factors that have caused the current economic problems, but the role of Freddie and Fannie has to be considered one.
So conservatives would see (and many Republicans circa 2004/2005 did see) Freddie and Fannie as a negative influence on the system, which is not regulatory in nature, that ought to be fixed.
I see this in the area where I work, disability law. The hardcore conservative/libertarian might say that the disabled should either be taken care of by family and private charities or that they should have bought long-term disability insurance. Social Security, in many of their minds, should be disbanded.
I see several problems with this. Most families lack the resources to care for someone with a serious disability and there are many that just don't have family members that are willing to help. Private charities do a great deal, but I have never seen a case where they were able to do it all by themselves without some kind of federal or state help.
This leaves private insurance. My experience with these providers is not all that vast, but what I have seen has convinced me that it is a waste of money to get any kind of long-term disability insurance through my employer. Many frequently deny people coverage. I am working with a person that has extensive documentation from a variety of medical sources that she is disabled. Her only option at this point is to sue the insurance company, which is not cheap. In many cases, the insurance companies probably know that sick people don't have the financial resources to fight it out in litigation.
Couple of things. 1), I certainly did not mean to imply that our 3 trillion dollar government only does regulation. Of course there are many programs that our government does, and some are good and some are bad. But as Steve points out, I am not terribly convinced that we will be better off by removing the safety net or privatizing all of these things. The private sector could not handle the the needs of the poor in 1929 when health care costs were incredibly low.
2), on the issue of government, there is no doubt that some programs will have unintended consequences (of course, the same is true for privatized ideas too). And I think that Fannie and Freddie have had their problems, but I am still not convinced they are nearly as big of a part of the problem as many say. (Krugman has some charts that suggest that Fannie and Freddie are not the big player that conservatives have suggested.)
At a fundamental level, I am simply not convinced that loaning money to poor people, even poor people who don't repay their loans--was the cause of this mortgage crisis. I just don't believe there is that much money there. But there is one hell of a lot of money in loaning money to rich people, who are more speculative and more willing, as it turns out, to walk away from a bad loan than is a working class or poor person.
So from one perspective, we have been cutting taxes for the very rich since Reagan under some belief that A) they already pay plenty and B) any cost to them takes out of the economy because they drive it. In other words, I would suggest that conservatives have decided that the wealthy are inherently better than the poor because, obviously, they are smarter and work harder.
Yet, we have cut their taxes and now are paying bailouts for their insanity.
Little off the topic.
Oh, and LB, you asked about the complexity of the system, and you accurately pointed out that there is nothing inherently simple to a government program. I guess I am suggesting that 50 years ago, most people had a pension plan that was run by other people. They didn't have to work on their retirement, because that was part of their job benefits. We have moved away from that, for a lot of reasons, and a lot of those were good. But the outcome has been to make the financial world incredibly complex, and we seem to assume that everyone can negotiate it, or pay for someone to negotiate it for them. I just don't believe that to be true.
Streak said: "At a fundamental level, I am simply not convinced that loaning money to poor people, even poor people who don't repay their loans--was the cause of this mortgage crisis."
That wasn't the problem. The problem was overlending to people with decent jobs and decent credit, but who were talked into buying the dream McMansion.
Case in point. My wife and I have good credit I was apporved for my current mortgage at a time when were were making about $66K combined. My mortgage broker (who was also an investment councelor/saleman)encouraged a zero down loan (which I refused) and said we could buy a $350,000 home. I bought less than half of that. At $350K loan payment would have been 70 to 80% of my income.
That is why people are defaulting.
Tryign to make this about the poor is just trying to blame the crisis on brown people instead of where it belongs.
Who said anything about the poor? I said people who shouldn't have gotten loans. That includes people being offered 350K loans with 66K of income.
My point is that irresponsible lending was enticed by the involvement of Freddie and Fannie.
Streak, I've seen you reject places like the Heritage Foundation as biased sources, so frankly, you're going to have to find a better source than Krugman who's about as far to the left as they come.
"Tryign to make this about the poor is just trying to blame the crisis on brown people instead of where it belongs."
Bob thanks for stooping to the lowest levels of argument and playing the race card with absolutely no justification. This just confirms what I've thought for a long time. The liberal use of the race card is just a way of avoiding intelligent debate on important issues.
To continue my thought, because I'm pissed as hell right now. Streak, you always talk about how the grown-up Republicans need to take back their party. Well how about getting some grown up Democrats who actually want to debate issues and not play the race card the moment they can't engage in a debate. Even Joe Biden said yesterday the Tea Party isn't a racist movement. Time to stop playing that card and engage in some honest debate.
LB, let me say this. I think that Fannie and Freddie contributed to the issue, but I am simply not convinced that they are anywhere close to the cause, and for the simple reason that they didn't buy enough loans to cause the melt-down. And further, I think we have to look at the changes, made by conservatives in both parties, mind you, that repealed Glass-Steagal, and allowed banks to commodify loans. Those factors made bad loans worth a lot of money, and it is rather understandable that this happened after that. Yeah, Fannie and Freddie were part of encouraging that, but, from what I have read (and Krugman may be biased, but his numbers appear to be real), the real culprits were wide-open mortgage brokers who were outside Freddie and Fannie.
Now, about the race issue. I understand your frustration, LB, and Bob's comment may have been a little too strident on that point, but you have to admit that the Republican party has a serious lack of credibility with race right now. I really don't care what Biden said, I am absolutely convinced that much of the Tea Party's rage is about race. Sorry, but I do. If that means I am playing the race card, then so be it. I see them here in Oklahoma talking about "taking their country back and sending Obama back to Africa." And it isn't just the Tea Partiers. The Republicans in Arizona and Oklahoma on immigration will make most people cringe. Republicans on torturing Muslim detainees? The base cheers that. And let's not forget the Republicans equating welfare with single black women, nor of reaching out to some of the worst of Southern racism for electoral support.
None of this is to say that Democrats are free of racism, as we saw during the Clinton/Obama primary.
I understand that moral conservatives are frustrated at the issue of racism, and perhaps there are times when the charge is over-played. But your last comment about liberals playing the race card to avoid serious conversations (and I understand the anger, mind you) is a dodge.
"Now, about the race issue. I understand your frustration, LB, and Bob's comment may have been a little too strident on that point, but you have to admit that the Republican party has a serious lack of credibility with race right now."
My point was not too strident, it just wasn't directed at LB or any of his/her comments. In fact it was in reaction to Streak’s comment. My comment was directed at the general effort by many conservative commentators, George Will included, to make the collapse of the mortgage industry out to be a poor people/minority thing.
LB: you should not have taken this so personally as it wasn't directed at you, unless you are here to represent the conservative defense of Wall Street, which I doubt is the case.
BTW -
Could someone explain Fannie/Freddie to me? Do they back up only mortgages to low-income buyers, or all mortgages, or something else entirely?
In late 2008, there seemed to be part of conservative talking points to make the case that loans to low-income people and to minorities were the cause of the collapse. Here are a few examples.
Charles Krauthammer
Friday, September 26, 2008
Wall Street Journal
“For decades, starting with Jimmy Carter's Community Reinvestment Act of 1977, there has been bipartisan agreement to use government power to expand homeownership to people who had been shut out for economic reasons or, sometimes, because of racial and ethnic discrimination. What could be a more worthy cause? But it led to tremendous pressure on Fannie Mae and Freddie Mac -- which in turn pressured banks and other lenders -- to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity.”
Neil Cavuto,
September 16, 2008
Fox News' Your World, via Media Matters.
“…on the September 16 edition of Your World, Cavuto said to House Majority Leader Steny Hoyer (D-MD): ‘[Y]ou wanted to encourage minority lending -- obviously, a lot of Republicans did as well. There was a lot of -- expand lending to those to get a home,’ Cavuto went on to ask, ‘Do you think, intrinsically, it was a mistake, on both parties' part, to push -- to push for homeownership for everybody?’”
George Will
October 5, 2008
ABC’s This Week
"In fact, much of the crisis we're in today is because the government set out to fiddle the market. That is, we had regulation in effect with legislation that would criminalize as racism and discrimination if you didn't lend to nonproductive borrowers. We had Fannie Mae and Freddie Mac existed to rig the housing market because the market would not have put people in homes they could not have afforded."
I will stop talking about racism when conservartives stop using it to try to win elections.
Bob, forgive me. I shouldn't have spoken for you, especially when I was really speaking for me. I inserted poverty into the equation, LB did not. That was really my point.
I agree with you that conservatives have decided to blame the collapse on the poor and the minorities. That entire discussion about the CRA was all about race, after all, as the legislation was intended to ban red-lining.
I think Republicans have some credibility issues in both areas of race and class. LB, I also agree with Bob that our discussion of racism is not aimed at you. Nothing you have said at this blog makes me think you are a racist, or any more so than all of us. But your party, on the other hand, has some problems in this area.
"I think Republicans have some credibility issues in both areas of race and class. LB, I also agree with Bob that our discussion of racism is not aimed at you. Nothing you have said at this blog makes me think you are a racist, or any more so than all of us. But your party, on the other hand, has some problems in this area."
I agree.
I thought the discussion with LB was otherwise great.
To make this brief, let me say that I obviously disagree with both you and Bob on the racism issue. Perhaps it is best to leave it at that for now.
Thank you though for the nice compliments. I enjoyed the discussion as well.
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