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October 1, 2008

It's Class Warfare, I Think

Posted at 10:21 AM

With the Dow shooting up more than 500 points today in the wake of a 'no' vote on the Washington bail out bill, this is beginning to feel a little like "Who's On First." I can't figure out who's on which side and what's going to protect us from them.

"Protect us from who?"

"The bad guys."

"Wall Street?"

"No, Washington."

"You mean the Democrats?"

"No, the White House."

"Who are they protecting us from?"

"The Republicans."

"The White house is protecting us from the Republicans?"

"Yes, along with the Democrats."

"I'm confused. I thought you said Washington's going to protect us from Wall Street."

"No, Wall Street's came roaring back today. They'll show Washington they don't need the taxpayer's money."

Let's take a step back. For the past couple of years, some smart people have observed the absence of significant social class backlash here in America, even as the wealth gap between rich and poor increased. This theme emerged most clearly in the post-game analysis of George Bush's easy re-election in 2004. In spite of having created tax policies that favored higher earners while real incomes dropped among the middle-class, the majority of Americans cast their vote for the "candidate of the wealthy."

Not that W. would characterize himself as the rich man's president. He launched something called the "ownership society" which was designed to hoist more Americans to the next rung on their personal economic ladder. In retrospect, however, it seems to have been interpreted as license for banks to drop all prudence and go on a lending bender.

Certainly borrowers shoulder blame for deciding to go into hock to the banks. After all, no one put a gun to their head and told them to join the ownership society. But, in my opinon, the lending terms for many of these new borrowers were obviously onerous and went too far in compensating the lenders for the risks they took in dealing with subprime applicants. Lawmakers and regulators could have easily created criteria and oversight to deliver fairness in this environment. It's shameful that they didn't. They could also do this right now in the credit card industry but they aren't. Again, shame on them.

Now the tables have turned. As of this writing, the U.S. Congress has failed to pass any kind of a Wall Street bail out. We've learned that Congress, especially those in vulnerable districts, yielded to their constituents' requests on the eve of election day and delivered a 'no' vote to the "Emergency Economic Stabilization Act of 2008." Main Street talked. Washington listened.

By sending Congress back to the drawing board on the Wall Street bail out, Main Street declared war on Wall Street and we've witnessed the re-awakening of class warfare. It's not exactly the worker rebellions of the Twentieth Century but it has led to a number of angry emails and some pretty saucy talk from TV's late night talk show hosts. Now, we'll see how the power elite in Washington and Wall Street respond. One message from Main Street to Wall Street and Washington is clear: If this is what you meant when you called for an 'ownership society,' you can keep it.

* 1 Comment

Posted by: Ralph at October 1, 2008 11:01 AM

The fantastically wealthy in America have always not just tolerated, but revered by the rest of us because we believe, for all its warts, America is fundamentally meritocratic. It could have been us. It could be our kids. We tolerate the rich because the cost to us is small and we believe the rich are not an aristocracy or oligarchy, they're sometimes just who worked the hardest.

When the failures of the rich rain down on Main Street, though, folks get mad. That's not part of the deal. We understand that the rich occasionally get that way at the expense of the poor, but they shouldn't get poor at our expense, too! Main Street isn't revolting because the rich are rich, they're revolting because they perceive the rich looking for a free ride that the poor don't get.

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