Thursday, September 18, 2008

Wall Street Fat Cats

It's funny how the McCain campaign is not railing about the Wall Street fat cats and their insufferable greed and how he's gonna ride into town and take care of em. It sorta reminds me of that Gil Scott Heron song about Ronald Ray-Gun riding in on a white horse...

But I digress.

Let's talk about how ridiculous it is that the guy who brought us (or was at least involved in) the S&L scandal, who even now admits to being "fundamentally a deregulator" is talking about how he's going to propose smart regulation to prevent these problems in the future. That's insane. He has absolutely no record of even understanding the mess. And his history is of being bought and paid for by folks he has been trusted to regulate. And his self described fundamental reaction to this is to put the foxes in charge of the hen house. Again.

And the media implies that both Obama and McCain are equally in the pocket of "Wall Street" because they've both taken lots of money from employees of Wall Street firms. WTF?!? Last time I checked, everyone is allowed to contribute to either or both candidates. And doing so does not on its face prove anything one way or the other. Just because you work for a company does not mean you are a lobbyist for that company. Ask the Obama donors who work for Walmart.

What is clear is that Obama has a record of being right on the two biggest mistakes of recent history: the Iraq war and the regulation of the economy. In both cases, he said we need to take a cautionary approach. In the middle east that means defend ourselves from our actual enemies and don't go starting wars for specious reasons. In the economy it means making sure that our regulations keep pace with the times. No surprise there, he's smart. These are difficult problems. Smart people understand difficult problems. They also know enough to know when they need people even smarter then them to deal with specific issues. I bet Obama has some really smart people who know the financial markets pretty well.

It's also equally clear that McCain has been wrong on these two issues. On the economy, he's been wrong for a very long time.

I also have some really smart friends who know the financial markets well. They are definitely gonna see their taxes go up under an Obama administration. But, like other people with lots of money, they understand that the merely wealthy or high income folks, those that make over the magical 250k that everyone is talking this year, but less than I-couldn't-spend-that-much-money-in-my-whole-life amounts like some CEOs (even piss poor ones like Carly Fiorino) will actually do better even with higher taxes.

Huh? How is that possible? How can they do better if the government is taking a larger portion of their paycheck?

Simple - the sorta rich (think annual incomes between $250k and $2.5M) can only do well when the upper middle class are doing well. And those folks can only do well when the middle class are doing well. And so forth.

In other words, keeping 75% of $300k is better than keeping 80% of $200k.

Put another way, trickle down economics is bullshit. That's not the way our economy works. You can't make poor people richer by giving more money to rich people. That's just stupid.

You can, on the other hand, make rich people richer by making sure that poor and middle class people have more money. That's because one way rich people get rich because they figure out ways to get poor and middle class folks to spend their money - to trade it for something of value that the rich person sells. And if those poor and working class folks don't have any money, those rich and sorta rich people can't sell them anything, and their big incomes get small, quickly.

The other way rich people get and stay rich it to get the gubment to carve out a special niche for them. But that's another post for another day.

The problem is that capitalism relies on people with money being greedy. If you own a company that employs people, you want to charge the most for what you sell and pay the least. In other words, you want to keep your workers as poor as possible, but you want your customer to be as rich as possible. Obviously, that is a tricky balance.

And when it gets out of balance, it almost never goes the way of the employees getting richer. And that's because the natural flow of things is for owners to buy better machines so that they need fewer workers (think fax machines instead of messengers). And to create more interesting financial instruments so that they can pay their workers less (think 401k instead of pensions). And to lobby lawmakers to let them pay less (think of how the minimum wage didn't get indexed to inflation).

So, over time, you have a situation where more and more money flows up the food chain, away from the people who spend it, and towards the people who just use it to hoard more of it.

And that is why we need a government that fundamentally has the little guy in mind. That means real regulation. That means smart, tough government that holds businesses accountable for the damage they does when they go overboard. That means folks who do not say "OK" when the fox shows up (dressed as a duck) and wants to be put in charge of the company that has the contract to hire the dog that guards the hen house. (The fox never shows up and asks "where the chickens?)

And who is it that has always worked for the little guy? Who is it that wanted keep strong regulation to prevent the current mess? Which 2 of our 4 presidential and VP candidates are smart, tough, honest and fundamentally oriented to helping normal working people?

If I need to answer that, you're reading the wrong blog.

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