Trying To Discern Occupy Wall Street's 'Demands'? Think 'Jubilee'
Over at Salon, Alex Pareene writes about the struggle that the media is having discerning the "demands" of the Occupy Wall Street movement. As I noted earlier, I think it's pretty easy to discern the larger concerns of the 99% if you just start paying attention to the things that are happening to ordinary Americans. "But if the elites want a demand," Pareene says, "I say give 'em a demand." And he has a pretty good suggestion:
Household debt is at 90 percent of GDP. Any stimulus proposal -- even "dropping money from helicopters" -- would result in a massive transfer of money from indebted Americans to cash-engorged banks, rather than the spending spree that would theoretically put us back to work.
So my immodest proposal is simply this: Individuals and households in the bottom 99 percent who owe debt to any large financial institution that received federal government support during and after the 2008 crisis should see their debt forgiven. That would certainly stimulate the economy, as most people would suddenly find themselves with a great deal more money to spend on iPads (and food, and clothing, and housing, and healthcare). The debt can be forgiven by decree or if the government really wants to it can step in to pay it itself; I don't much care either way. (Though it'd be nice to see it just wiped off the books, to enrage the banks.)
Let's wipe the debt of the 99 percent off the books, tell the financial sector to eat it, and get on with our lives.
When the major financial institutions that are currently being "occupied" by the demonstrators found themselves submerged in a massive cock-up of their own devising, who rode to the rescue? The "99%," that's who. And they didn't just put a few coins in their cup -- taxpayers ponied up $4.7 trillion to help the financial industry survive. And under programs like the Temporary Liquidity Guarantee Program, these institutions continue to save money from the faith and credit that taxpayers have lent them. If turnabout is fair play, then it seems only just to suggest that it's time Wall Street did a solid for the folks that kept them alive, at work, and rolling in bonuses.
Spoiler alert! I'll use the same argument for those who would suggest that bailing out the American taxpayer constitutes a "moral hazard." Pareene has also anticipated this:
The problem with the proposal -- basically "moral hazard" -- is precisely the problem with the government's de facto policy of not allowing the financial industry to collapse under the weight of its colossal greed. If you believe Americans should be taught "the hard way" not to live "beyond their means," forcing credit card companies to take a haircut on the money they're owed would certainly lead them to limit consumer debt-spending in the future. Banks would rather receive regular payments from fixed-rate mortgages than trick people into ARMs if they thought the government was likely to step in on behalf of borrowers rather than lenders. In other words, forcing the financial sector to feel the pain of the rest of us would help align our interests. It would no longer be profitable to rip us off if the government stepped in to halt the Great Rip-Off.
Is the idea "radical?" Only if you allow that the mainstream Judeo-Christian values that I'm constantly told form the underpinnings of our society are similarly radical. What Pareene is proposing is nothing more complicated than the good ol' Old Testament concept of "Jubilee." And in a nice coincidence, here's E.D. Kain, talking the same game as Pareene over at Forbes today:
...Keynesian spending isn't the only way to fix a balance sheet recession and get consumer spending to kick back in. There's the old biblical idea of a jubilee - a national cancellation of private debts. That's what Fred Clark suggests could be a fix to our economic ills, and it's not a bad idea at all. He quotes this Reuters piece which spells out the value of such a program:
"More than three years after the financial crisis struck, the economy remains stuck in a consumer debt trap. It's a situation that could take years to correct itself. That's why some economists are calling for a radical step: massive debt relief.
Federal policy makers, they suggest, should broker what amounts to an out-of-court settlement between institutional bond investors, banks and consumer advocates - essentially, a 'great haircut' to jumpstart the economy. ...
Renowned economist Stephen Roach, currently non-executive chairman of Morgan Stanley Asia, has gone a step further, calling for Wall Street to get behind what others have called a 'Debt Jubilee' to forgive excess mortgage and credit card debt for some borrowers. The notion of a Debt Jubilee dates back to biblical Israel where debts were forgiven every 50 years or so. In an August appearance on CNBC, Roach said debt forgiveness would help consumers get through 'the pain of deleveraging sooner rather than later.'"
For a nation that's forgiven economy decimators, Gulf of Mexico destroyers, torturers, and pointless-war starters, debt forgiveness simply seems like a logical next step.
READ THE WHOLE THING:
A proposed demand for Occupy Wall Street [Pareene @ Salon]
Could a Debt Jubilee Help Kickstart the American Economy? [Forbes]