After one year: America, the welfare state
Posted
Jul 31 2008, 02:12 PM
by
Todd Harrison
Rating:
"Self-reliance for the penniless and government aid to those who already had more than they could use was the plan."
- Nelson Algren, "A Walk On the Wild Side"
One full year. One full, impossible to believe stompdown screamer of a year. That's how long it's been since the credit machine on Wall Street suddenly slipped a gear, lost the chain and folded in on itself, howling with the awful griding sound of metal chewing metal. The real tragedy of it, the outrageousness of it, is that this machine's tear down is still ongoing, happening in horrific slow motion.
And so it is that the central bank announced yesterday it is extending the fat teat of acronyms that allow investment banks to borrow from the Fed through January of 2009. "Healthy economic growth depends on well-functioning financial markets," Federal Reserve Chairman Ben Bernanke told lawmakers in testimony earlier this month. "Consequently, helping the financial markets to return to more normal functioning will continue to be a top priority of the Federal Reserve."
Meanwhile, as banks jostle one another for position suckling the government teat, homeowners will have to settle for the dregs of the trough. Brett Arends, in a piece in today's Wall Street Journal, runs the math on the Hope for Homeowners Act and - surprise, surprise - finds that once you tally the "annual insurance premium" added on top of each loan to help pay for the program's losses, your interest rate right now would come to 8.1% a year.
One of the strangest of American myths is the notion of "America: The Welfare State." Say that outloud. Then give it five minutes. Doubtless some self-appointed propaganda minister and "defender of self-reliance" will trot out a stat that purports to show the massive government spending programs "designed to subsidize the poor and lazy."
In the Age of Self-Evidence, anything shouted loud enough, forcefully enough, is almost certain to be etched into stone somewhere, engraved on a government building and hailed as truth. It is, after all, self-evident. Look around, the poor and lazy are everywhere, constantly scheming to worm their hands into your pockets and help themselves to the fruits of your hard labor.
That's the popular lie. But these welfare programs don't so much subsidize anything as institutionalize it, just as the real winner in the War on Drugs has always been the budgets of those units formed to "fight the good fight." Yes, they institutionalize and structure things, like so many moats surrounding the castles of the kingdom of the rich.
There is no Welfare State, not for people, maybe for banks run by the rich, but for people there is only a protectorate of programs designed to shield the Wealthy from a teeming mass of filthy rioters and thieves who, without their economic stimulus checks, just might become desperate enough to scale the castle walls in search of victims to rob.
The weird part about this con is that the rich, the wealthiest 2%, don't even pay for these programs. They show the remaining 98% of us the money in suitcases, whet our appetites, and then close them up and walk away after we eagerly promise to fund the operations ourselves; like a deranged lunatic throwing dice against himself in a dark alley, shifting pennies from one pocket to another.
Maybe the lone nugget of grim consolation is that at least we did it to ourselves.
Top Stocks blogging partner Todd Harrison is founder & CEO of Minyanville.com. This post was written by Minyanville Executive Editor Kevin Depew. For related analysis from Minyanville, see Also:
Five Things You Need to Know: America, The Banking Welfare State
Banks Protected from On High
Thursdays With Story: Accounting for Change
