What Happened to the Bootstraps?

For as long as I have been alive Republicans have been saying that government hand-outs make people lazy and give them all the wrong incentives. Instead the better approach is for people to pull themselves up by their bootstraps.

So, now when the financial industry is in trouble because they took too much risk in trying to get too rich too quick, I'd like to ask one question -- what happened to the bootstraps?

Why didn't the Fed toss Bear Stearns a couple of bootstraps and tell them to piss off? Oh wait, could it be that Republican ideology only applies to the poor and the middle class? If you have a problem in your life that you need some temporary help with, you're out of luck. But if a massive company needs that same help, well, of course, the government is going to step in. It would be irresponsible not to!

Incentives matter. I agreed with welfare reform because if you give someone an incentive to take a check (even if it's a small one) for not working, you're going to produce a result where people will take that check rather than work much harder for maybe a little more money. It wasn't just a slogan when Bill Clinton said that welfare should be "a hand up, not a hand out."

If you give unchecked and unlimited welfare (unlimited in time, I know the checks were never huge), you encourage people to stay on welfare for too long. If you have no welfare, then you don't pick decent people up when they need a hand in their lives. We need balance in how the government handles this.

But the same has to be true of regulating giant companies in the financial industry. The Republicans claim to be laissez-faire - until it comes time to bail out their rich friends. Then they're knee-deep in government intervention. So, they won't bail regular folks out when they need a little help, but will jump right in to bail out some of the richest people in the country.

Don't get me wrong, I'm not a class warfare guy and I understand why the financial industry had to be stabilized in the short term. The problem isn't the bailout; the problem is what led to the need for the bailout. The government took away almost all of the regulations of the financial industry, and then is surprised when they acted in a way that needed to be regulated.

Without the government watching over their shoulder, the banks made far too many loans to investment vehicles that were far too risky. But the more loans they made, the richer they got. Except for one thing -- all that risk. But what did they care? If it all crashed, the government would have to bail them out anyway.

It's all a mater of incentives. If you give people incentive to risk too much without giving them adequate disincentives, you will get too much risk. And, of course, now, we'll get the typical Condoleezza Rice line, "No one could have seen it coming."

So, what are the answers? First, if the government is going to bail you out, then the government should be regulating you to make sure you're not going to need a bailout. I'm not a fan of over-regulation (but we're nowhere near that), but no regulation at all is just as dumb, if not dumber.

Second, shut the fuck up about bootstraps. If you're going to keep bailing out the largest companies in the world, you better be prepared to do the same for the average American when they run in to some trouble. Laissez-faire my ass. This is rank hypocrisy.

Third, you need balance, whether it's a hand up for the common guy or a regulation for big business. Too much of anything provides the wrong incentives, but too little leaves people hanging in the wind. We need some welfare and some regulation. Not too much, not too little.

Finally, when someone tells you about their ideology of free markets unfettered by any government intervention, they better not come crying home to mama when they need help from that same government they've been bashing for the last sixty years.

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Comments

[dadw5boys]

The Federal Reserve is acting Illeagally. They do not have the legal authority to offer taxpayer money to these firms.

[iupty]

Good article, one thing to add, cuz it's been on my mind for a long time:
Living without a purpose is the true culprit of laziness. When there's no sense of meaning or reason to your life, no low- paying job will fulfill it. So (in some cases) why bother? Then there are those who quite honestly don't really have a chance to improve their lives due to previous choices made and/or the general circumstances of their lives. What I've always heard from the "conservatives" is: oh well screw them, it sucks to be you, or just get your act together! The only thing is is that this lack of empathy creates anger, fear, and anxiety within the population at large. If you don't care about me, why should I care about you? And thus violence is born. Police and prison don't deter, for life is meaningless....except to make money.

[spencerh]

What happened? The same thing that always does. The Corporatists, who usually act like Objectivists, Neoliberals, or Economic Libertarians reveal their true face. When things are good, they are indistinguishable. They go on and on about free markets, no regulation, no minimum wages, no social services, low taxes, and privatizations - until they're in trouble, then they cry for a bailout. They are all detestable, but at least the latter three have principles.

[robinhood1]

I would hardly call the Bear Stearns takeover by JP Morgan a Federal bailout. Bear shareholders have seen their investment drop over 98% (based on the takeover terms) since its peak in early 2007. Maybe you would have preferred a bankruptcy instead, and all the disruption that would have caused to the financial markets. Would you have preferred to see the stock market drop by 20% over the past two days instead of rising? For better or worse, millions of Americans' retirements are linked to the stock market. If it tanks, chances are, your 401K will tank as well and so will the pension plans still offered by public and private sector employers.

[LeftRight]

First, I agree, the market is important to the retirement health of millions of Americans. However, the stock market is NOT the economy. Further, when we bail out a corporation which took on too much risk (which we are doing, since the fed is providing more than $30 Billion to JPMorgan to buy Bear Stearns) at the risk of inflation, I get concerned. Because with inflation, those millions of Americans whose retirement is tied to the stock market will be just as hurt, if not more!

[DHeil]

Robin: You are not exactly telling the full story either. The Federal treasury came up with $30 Billion from someplace. Try your taxes and mine. Add up all of the "little" ways our government assists and it makes a VERY BIG pile of money, and therefore a very big tax bill for each of us.

Perhaps it was wise for our gov't to act in a way that would stabilize markets, but the long term result for companies who might consider taking a risk with "other people's" money, is that those companies are more likely to take BIG risks with what they perceive as little downside. And that is Cenk's point. So, in the end, Cenk, your argument still stands valid.

[rmcneal103]

Your reasoning makes too much sense for a Republican to grasp.

[ndolomar]

Cenk, I believe the revised motto -- as evidenced by Bear Stearns' bailout -- is "...pulling another up by the cufflinks."

[bertisbert]

What we all need to grasp is that this is EXACTLY how the system is intended to work. If you are still scratching your head, then you should spend some time investigating what the Federal Reserve System is actually intended to do. As the "lender of last resort" to the large banks that make up the actual *cartel*, they have the unique ability to actually print our money, flooding the world economy with dollars that become, slowly, less and less valuable. That is also knowns as inflation. You may have noticed the drastic decline in the dollar's value over the past few years.
The people that trade currencies in bulk KNOW THE GAME. You and most other common investors are freaking CLUELESS. The insiders saw all this coming. They were selling their overvalued financial stocks, dumping real estate and related investment vehicles, and dumping dollars. It is a classic cycle that will repeat itself until either of two things happen:
1) The Federal Reserve system is dismantled and banks have to play by the same rules of the market as everybody else, or
2) All of the blood is sucked from every single middle-class taxpayer and our economy is exposed for the sham that it is.

To me, the choice is easy. But to continue down this road and saddle future generations with debt and a huge goddamn inflation tax as a result of a corrupt, secret cartel that is simply private banks disguised as a government institution - we are all going to feel pretty fucking stupid when this becomes common knowledge.

Read up, folks. The information is out there and CNBC and your Congressional rep's don't want you to know. Would you want to give up that kind of information? That's real power - SIEZE IT!!

[ColoradoAngryRU]

I have come to believe Republicans believe the old saying, "do as I say not as I do."

[julianna]

Spot on as usual Cenk. It's all about looting the treasuries and common wealth, no matter where it resides, and making the wealthy wealthier.

[dadw5boys]

Wlefare moms need oversight and regulation not the people who actual can hurt the economy or the no bid contractors.

[realpolitic]

The bootstrap was repossessed.

[Advocate123]

Cenk, You are 100%, except you base in on a false premise.

Bush is not loved by Conservatives!!

Conservatives, like myself, didn't want him to bail out anyone.

This is why his approval rating is so low.

Medicare Part D, Foreign Aid, Increased spending, no child left behind, etc. These are all Big Government programs that are anti-conservative.

Your argument is essentially a strawman. No Republican championed this.

You people on the Left need to realize that Corporations are no conservative; they are opportunists. If they can make money helping the environment with government subsidizes, they will. If they need a government bail out, they will lobby to get it.

The problem is that liberals create a big government to "help the poor." Not only does it hurt the same people that it is intending to help, but it allows industrialists to take it over. This was exactly why Milton Friedman was against Big Government, not to help Big Business, but to prevent them from taking it over.

Strawman my friend, Strawman.

Advocat123

http://copiousdissent.blogspot.com

[MajorKong]

Somehow I don't think he was elected twice by liberal Democrats. You put him in office, you take the blame for him.

To a "true believer" like Advocat here, conservative ideology can never fail, it can only be failed. That's why you now hear the argument "Bush isnt' really a conservative".

[Quaoar]

Nice historical revisionism there. The conservative Republicans could have stopped Bush's policies dead in their tracks when they had a majority in Congress. They did no such thing. Therefore, they are supporters of these policies.

[LeftRight]

As are the republican voters who voted him either into office twice, or at least close enough to steal it twice!

[LeftRight]

Wrong, EVERY republican in office (with a Ron Paul-type exception) supported his policies. What you keep forgeting is that what was once called neo-con is now the definition of conservative! Unless the conservatives had stood up before this, claiming that he wasn't one of their own, then they has taken him in!! What you call conservative is now almost liberal!

[julianna]

"This was exactly why Milton Friedman was against Big Government, not to help Big Business, but to prevent them from taking it over."

Bull$hit, it was all done in the name of multinationals. Cut jobs, cut entitlements, deregulate and privatize state industries. And unfortunately, because these are unpopular policies, societies had to be shocked into submission. If you think the "Chicago Boys" didn't know about the atrocities or didn't advocate them, you're absolutely crazy.

And you're right Bush isn't a conservative, he's a neoliberal, and why the hell do seemingly intelligent conservatives keep voting against their best interests?

[Advocate123]

Stop plagiarizing Naomi Klein babble. I read her book, and her arguments are so lacking it is laughable. She claims she has numerous cites. I went to the cited parts of her book because I own Friedman's books, and most of the statements were taken out of context.

Now, back to the reality. There is a clear distinction between Conservatives and Republicans who get elected. The reason why Bush has such poor approval rating is because he is a "Compassionate Conservative" A.K.A. Huge liberal.

JFK cut taxes, was pro-life, wages wars overseas against communism, and was openly religious. Would he be allowed in the Democratic party today?

[FightingTheRight]

"For as long as I have been alive Republicans have been saying that government hand-outs make people lazy and give them all the wrong incentives. Instead the better approach is for people to pull themselves up by their bootstraps."

The RepubliCONS I have heard say this, are usually the ones who never "pulled themselves up by their bootstraps"!

(Think Rush Limbaugh)

[realpolitic]

Yes, look at all the no-bid contracts handed out in Iraq and many are cost-plus, meaning we guarantee the company a profit in addition to whatever charges they run up. It is an invitation to graft and unaccountability, especially when Rice at the State Department blocks all efforts to look into spending. Republicans favor crony capitalism.

[Cathexis]

"Oh wait, could it be that Republican ideology only applies to the poor and the middle class?"

DING DING DING!!!

We have a winner! ;-)

[Sumocat]

Exactly right. Keeping the financial industry from sinking too low is government regulation, same as when they keep the industry from rising too high. Being for one and against the other is simple hypocrisy.