Bottom's Up or Trickle Down

I hope we can now punch the jaw of anyone who tells us the wealth trickles down...I think we've had 25+ years of proof that it trickles to offshore banks and private island-nations.

However, debt seems to rush to the bottom like Niagara Falls. In Maryland, the governor wants to to put in slot machines--and whose money will that drain? I feel completely nauseous when I consider how we are destroying the hopes and dreams and hard work of the poor and disenfranchised, paying for bailouts for wealthy greedy assholes, and watching our children's future being pissed away.

I am hardly an optimist, but even so, what is unfolding is horrifying beyond even my negative expectations.

This debate begins in the very earliest years of the Republic, with the Hamilton-Jefferson-Madison dispute over settlement of the nation's Revolutionary War debt.

As Joseph Ellis outlines in "Founding Brothers", Madison was profoundly skeptical of Hamilton's plan to settle the debts owed to holders of the nation's war bonds - inasmuch as speculators had by that point purchased the lion's share of these bonds (originally intended as a promise of payment to soldiers who served in the War). Madison believed (and Jefferson would later come to strongly support this position) that only speculators would make out if Hamilton's plan were adopted.

Hamilton's view was one generally shared by what would become his wing of the Federalist Party - that is, that the nation would more quickly prosper if a group allegedly disinterested, virtuous businessmen, were allowed to accumulate large amounts of capital. He reasoned that they would use this capital to further economic development. Hamilton would further argue that in incurring a debt, through settling these bonds, the nation would also be cultivating its credit-worthiness. And thus was born the "supply-side" argument.

In contrast, Jefferson profoundly mistrusted banks, and the idea of an economy divorced from the land. In this regard, as a plantation (and slave) owner, Jefferson had his own ax to grind. Still, there can be no doubt that Jefferson was fundamentally committed to extending the promise of America to as many citizens as possible, through the distribution of “unoccupied” (except for the Indians…) lands in the west. This clearly was a large part of his motivation in the purchase of the Louisiana territory from Napoleon.

From my perspective, given our system, the accumulation of capital is certainly important. But this can be accomplished in a number of different ways - one of which involves allowing people at the bottom of our current economic "great chain of being" to save. These savings then becomes available for banks to lend. And, in fact, one of the terrible consequences of Bush Administration "spend, don't sacrifice or save" rhetoric is that America has one of the lowest savings rate in the industrialized world. In a best of all possible "bottom-up" scenarios, Americans would ultimately both increase their savings rate, as well as spend enough to spur ongoing economic growth. But given recent FED policies, and its continual lowering of interest rates to artificially spur growth, there is little value in saving. What bank is paying rates high enough to even keep with inflation?

Moreover, in the top-down, Hamiltonian approach that Republicans have argued for now two decades, every effort is made to maximize the economic advantage of the economic elite - at the expense of the middle and working classes. Given this approach’s natural tendency to value management’s and large investor’s contributions over that of labor’s (and management’s efforts to further destabilize the position of labor through the exploitation of low-wage workers), and the sheer demographic imbalance between these respective American groups’ size, the effect has been to create an inverted, ultimately unstable, pyramid of unhealthy economic concentration.

As working Americans were goaded to spend, to take on debt, to buy into the promise of paper profits (in seemingly ever-appreciating stocks and real estate holdings...or so it once appeared), as part of Bush’s vision of an “ownership society”, management and the investor class continued to fundamentally erode the foundations upon which working Americans were standing.

And ironically, now that American workers have begun to stumble, they are not capable of taking down the institutions of the economic elite that has squeezed them for so very long.

That last sentence should have read:

And ironically, now that American workers have begun to stumble, they are now capable of taking down the institutions of the economic elite that has squeezed them for so very long.

Well, I failed economics in early High School so I didn't pursue a career in the subject. However, to my mind, it is criminal to use taxpayers' money to bail out those who caused this gigantic nightmare to begin with. Considering the individuals involved, not one of them will sleep rough or homeless.

Why should their companies be bailed out? And then what? They go and make false promises to more folks who can't afford to make the monthly payments?

I guess I'm skeptical. I wouldn't give more money to the big money guys under ANY circumstances.

Help where help is needed. I guess I'm more a bottoms up thinker.

Americans, smell the lies from Republicans.

John McCain is a liar and devious.

We as hard working American Taxpayers should "not" bail out Wall Street.

We need Barack Obama for President.

Barack Obama is for you, "Main Street".

Obama/Biden 08

September 26, 2008
Editorial
What About the Rest of Us?

Lawmakers were still wrangling Thursday night about the Bush administration’s $700 billion bailout of the financial system. Political theater was mainly responsible for the delay, but it will be worth the wait if lawmakers take the time to make sure that the plan includes real relief for homeowners and not only for Wall Street.

The problems in the financial system have their roots in the housing bust, as do the problems of America’s homeowners. Millions face foreclosure, and millions more are watching their equity being wiped out as foreclosures provoke price declines.

(snip)

It’s unacceptable that lawmakers have yet to come out squarely in favor of bold homeowner relief in the bailout bill. Treasury Secretary Henry Paulson, the biggest advocate of bailing out Wall Street, is also a big roadblock to helping hard-pressed borrowers. He wants to keep relying on the mortgage industry to voluntarily rework troubled loans, even though that approach has failed to stem the foreclosure tide — and does a disservice to the taxpayers whose money he would put at risk in the bailout.

- more -

http://www.nytimes.com/2008/09/26/opinion/26fri1.html?hp

Michelle and Mathew,

Thanks for your comments.

Yes, we don't need any more trickle-down economics. I noticed at Huffpo today that there might be a partial bailout which also includes accountability as well as money for the victims.

I hope that's the case.