What Have the Politicians in Washington Given Us?
So far Occupy Wall Street and its imitators across the country have directed their rage at Wall Street and the rich in general. But they would be better served if they aimed their criticism at the true authors of this country’s problems: the politicians in Washington.
Obviously there are unscrupulous businessmen, and some on Wall Street behaved unethically, if not dishonestly taking advantage of lax oversight and bailouts to make fortunes while the rest of the economy suffered. But, if you look at the one percent that OWS is denouncing, most of them got rich by giving us things that makes us better off, or at least things that we want. Of the top one percent of earners, roughly a third are entrepreneurs or managers of nonfinancial businesses. Nearly 16 percent are doctors or other medical professionals. Lawyers, engineers, scientists, and computer professionals make up another 15 percent. In fact, fewer than 14 percent are involved in the financial industry at all. And even those much reviled bankers provide valuable services, including generating the capital that enables businesses to start, expand, and hire workers. At the same time, the rich are paying a disproportionate share of the taxes and contributing more than $150 billion annually to charity.
On the other hand, what have the politicians in Washington given us?
Many of the students taking part in the OWS protests are reportedly concerned about the cost of their student loans. Since the average student who graduates this year will do so with a debt of more than $25,000, that concern is understandable, though there is ample reason to believe that government is more responsible for that debt than the rich or even the banks. But, as bad as that debt is, worse is the $48,000 that each of those students owes because the politicians in Washington can’t stop spending. That’s each student’s share of our $15 trillion national debt.
And that doesn’t even take into account the unfunded liabilities of Social Security and Medicare. If one counted the full indebtedness of the U.S. government, each of those students owes more than $196,000.
And, if they are worried about jobs, well the blame for that can also be laid at the feet of big-spending politicians in Washington. The International Monetary Fund looked at the relationship between federal debt levels and economic growth and concluded that from 1890-2000, those countries with high debt levels consistently experienced slower economic growth than those with low debt levels. Similarly, Carmen Reinhardt of the University of Maryland and Kenneth Rogoff of Harvard concluded that countries with a debt totaling more than 90 percent of GDP have median growth rates 1 percent lower than countries with a lower debt, and average growth rates nearly 4 percent lower.
And, it's not just debt, it is also the size of government. Numerous academic studies show that when government grows too large, costly, and intrusive, it acts as an economic anchor. For example, a pair of studies by Harvard’s Robert Barro found that “public consumption spending is systematically inversely related to economic growth” and and that there is a “significantly negative relation between the growth of real GDP and the growth of the government share of GDP.” Similarly, an empirical analysis of 23 OECD countries by Florida State University economist James Gwartney and his colleagues found that a ten percentage point increase in government consumption as a share of GDP reduced the growth rate of real GDP by one percent. In other words, as government spending goes up, economic growth goes down.
In fact, even the current economic crisis has its roots in Washington. The housing bubble and the crash which followed were driven in large part by government policies that discouraged old-fashioned lending criteria such as down payments, as well as government-run institutions such as Fannie Mae and Freddie Mac, whose implicit government guarantee encouraged speculation on mortgage-backed securities. Meanwhile, other government policies deliberately targeted housing loans to low-income buyers who were far more likely to default.
There are certainly more than a few bad apples on Wall Street. But for all their faults, we are generally better off with the rich than without them. Can anyone say the same for big government?
Photo Credit: geetarchurchy
Sign up to join the discussion
Guest Professor
Michael Tanner
A Cato Institute senior fellow, Michael Tanner heads research into a variety of domestic policies with a particular emphasis on health care reform, social welfare policy, and Social Security. Tanner's writings have appeared in nearly every major American newspaper, including the New York Times, Washington Post, Los Angeles Times, Wall Street Journal, and USA Today. A prolific writer and frequent guest lecturer, Tanner appears regularly on network and cable news programs. The New York Times refers to him as "a lucid writer and skilled polemicist."...
Competition has Finished
Grand Prize
Winner receives the Great Debater badge and + 10 mics.
Leaderboard
- Thomas Repetti
- 11 Mics
- Gary W. Patterson, Jr.
- 8 Mics
- Chris Inks
- 7 Mics
- Jon Awbrey
- 7 Mics
- Deepak Chandan
- 6 Mics
- Jacob Shmukler
- 4 Mics
- George Thomas
- 4 Mics
- Darin Jensen
- 3 Mics
- Steven Hobbs
- 2 Mics
- Michael Tracht
- 2 Mics
The Discussion
I incline to agree with both Mr. Tanner and Jeff Tarbell. Anne Landers used to say, "If it ain't broke, don't fix it." The *country* may be broken, but as far as Washington insiders are concerned, their system isn't. It gives them what they want: jobs, money, power. So why do they have an incentive to fix it? They don't. You would have to tear down the entire current system and rebuild it to get at the root of the problem. Do any of us have the time and energy for that?
There's big government, and there's big won't-do-anything-to-help-the-economy-so-our-party-can-regain-the-White House government. That's the one you're looking at right now.
Neither party is willing to really plug tax loopholes or hold Wall Street accountable. Obama's campaign was drowning in Wall Street cash, and he's surrounded himself with some of the same culprits who engineered this mess. They all sit on the same boards, from Wall Street
1 Replies
I can't believe some of the arguments that have made it into Mr. Tanner's article here.
The argument that government debt hurts economic growth is to simply imply a causation from a correlation you've found? That's it?
I mean, come on. Am I supposed to believe that the reason China and other developing countries have higher growth rates is because of low debt? How about the many more obvious reasons, like say the fact that they are developing and have a lot of room to grow?
Mr. Tanner, thank you for trying to bring some balance to this very unbalanced debate.
You really can't bribe someone unless he agrees to accept it. If corporations are effectively buying less regulation and the like, politicians are accepting it and doing their bidding. If liberals think Wall Street should not be a part of it's own regulation, why do they insist that the people who are taking their bribes are the right people?
The OWS perspective is that bankers are all crooks, but the protesters don't grasp the fact that banks don't legislate, politicians do. The moral of this story is that change must come by electing new people to Congress who won't take bribes from
anybody and eliminating those things cause bad laws to be enacted.
1 Replies
This account has been disabled.
1 Replies
The Fannie and Freddie argument ignores the fact the private sector led the way in the subprime market. For the first 2 years--they would later enter the market in a big way--Fannie and Freddie were barred from the subprime market by the Federal Housing Enterprise Oversight Agency . Furthermore the implicit government guarantee of the Fannie and Freddie loans--something that most people on the left and right agree was a bad idea-kept the market from panicking about those loans.
Most of the private subprime players were not subject to the CRA that supposedly forced banks to make bad loans and there is no evidence of the kind of court battle you would expect from well-funded companies if they truly thought they were being forced to make potentially catastrophic loans.
1 Replies
Washington makes the rules. But it's not completely 'either/or.'
The revolving door tween W.DC and Wall St is well known.
It's both and then some.
Not all the stringpullers are American citizens
Mr Tanner.
One question. Who pays your salary? Isn't it the same Wall Street Monsters that OWS is demonstrating against, as well as their Republican Servants? Last I heard, that's where CATO gets its funding.
So what I see here in your article is not fact, or even honest opinion, but instead its what you are paid to think about. Ways to obfuscate, transfer blame and otherwise muddy up the waters of rational discussion regarding what needs to be done to right the ship of state that is America. And sadly, I see that otherwise intelligent souls are paying attention to you and yours.
Only twice in the history of the country has the disparity between the ultra rich and the rest of us been so great. At the start of the Great Depression and NOW.
4 Replies
This account has been disabled.
And who pray tell do you think made the strongest effort to roll back regulations and oversight? Who paid for the campaigns of many of these politicians? The same people and organizations who ultimately benefited from the toxic environment and caused the economic implosion.
The problem with just pinning the blame on Washington is that it sides steps the very reason our political leadership is in the sorry state its in: the excessive amount of corporate money and influence flooding into the political process.
Ultimately who benefits the most from lower taxes, less regulations, little oversight, and extensive government spending? The same corporate entities of Wall Street who want less regulations, less accountability, and more of our money.
You miss the central issues of OWS, i.e. a system that rewards greed and the accumulation of money and power at the top and the resulting farce of a representative democracy that we live under.
Magrit Kennidy has shown that 40% of everything you buy goes to interest, in one form or another. And, 20% of your 401k goes to bank skimming. Media is controlled, quite tightly with an echo chamber that deludes, and misinforms, particularly low information voters. Laws are written by lobyists, politicians owned, and critical decisions are made by financial interests who are not accountable to the public . Conservatives and most libertarians lack empathy and extol rugged individualism that is blind to the contributions of wage slaves, and outright slaves. They are blind to their privilege.
I agree with a large part of what is said in the article. I always found it a little funny that the Occupy Movement chose to occupy Wall Street, as if the bankers were one day going to come into work and choose not to try and make millions of dollars. Because of that, I always thought the movement would have been better off occupying Capitol Hill.
That being said, it is difficult to defend the bankers even if they do "generate the capital that allows businesses" to thrive. That function of Wall Street is great when it is working, but when the same bankers take those businesses' workers' mortgages and 401Ks and bundle them and/or leverage them at unconscionable rates only to see their house of cards come tumbling down is when everyone can and should take issue with their practices.
The truth is, some on Wall Street, many in government, & the whole of the Fed all share the blame for what has happened. The one thing they have in common is the inherent fallibility of human beings which is something that cannot be legislated into genetic non-existence. The best bet is to regulate what can be done. Where do we get the most benefit from the application of this? We get it from binding the government. If we take away the government's ability to hand out special privileges to anyone & reintroduce the protection of the individual as its top priority, as society & all else grows from the individual, then we succeed in keeping groups from growing anti-competitively through legal protection from the government while guaranteeing true legal recourse to those who are wronged.
I applaud your attempt to bring the two camps together. However, I don't hear anyone from OWS complaining about Solyndra or the auto bailouts. They also favor bailing out home owners and student loan holders.
When it comes to campaign spending, we hear a lot from OWS about the influence of corporate money, but not a peep about the unions shelling out millions of dollars to the very same people who often determine their salaries and benefits.
As for spending, they all want to slash the military, but don't touch the real drivers of our debt; medicare, medicaid, social security.
In sum, there seems to be a lot of selective outrage. Libertarians should be given credit for having a consistent message. It would be nice if OWS followed suit.
29 Replies
This account has been disabled.
2 Replies