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Peter S. Goodman

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Bleeding Cash Conservatives Wasting Money To Punish Vulnerable Americans

Posted: 06/04/2012 12:01 am

Not so long ago, the term "bleeding heart liberal" had currency in American politics as a way to accuse someone of costly naïveté. Here was a label that could be slapped on anyone who advocated policies that aimed for fairness and decency, pursuing feel-good outcomes at the supposed expense of taxpayer interest, public safety and common sense.

These days we need a new term to describe a strain of politics that has become dominant in many areas of civic life, from the foreclosure crisis to long-term unemployment. We are living through what may be called the age of "bleeding cash conservatism," a time when powerful and mean-spirited authorities waste taxpayer money on their own version of feel-good policies that punish vulnerable people who have landed in trouble.

We see this notion at work in the continued unwillingness of Fannie Mae and Freddie Mac -- the government-controlled mortgage behemoths -- to write down loan balances for underwater borrowers (those who owe the bank more than their homes are worth). Housing experts and even economists inside these two institutions have calculated that forgiving some loan balances would be a net benefit to the American taxpayer, who is now on the hook for Fannie's and Freddie's books. It would limit foreclosures, keep more people in their homes and stabilize home prices.

But Fannie and Freddie's overseer, the Bush administration holdover Edward J. DeMarco, acting director of the Federal Housing Finance Agency, has repeatedly rebuffed appeals to pragmatism and arithmetic, instead preferring to wage ideological war against troubled borrowers.

DeMarco has maintained that he is championing the interests of taxpayers by refusing to expend more funds on homeowner relief. But this is bogus accounting that ignores the ways in which taxpayers continue to suffer the costs of the foreclosure crisis, from abandoned homes that sap communities of vitality to continued pressure on home prices as the market tries to figure out how much more distressed inventory must be absorbed.

Underwater borrowers defer maintenance on their homes, and they are more likely to slide into foreclosure. With this in mind, the Obama administration sweetened the pot, tripling the incentives that Fannie and Freddie receive when they cut principal balances, eliciting promises of a reassessment from DeMarco. But he has merely delayed since then, while releasing intellectually dishonest analyses of the effects of principal reduction that have been doctored to buttress his view that doing nothing is best.

DeMarco is a classic bleeding cash conservative. He is intent on delivering a message to homeowners who took on more than they could afford: This can only end in your ruination. He is more interested in teaching this moral parable than in getting the country past its housing crisis.

We see this same strain of thought at work in Congress and in state houses across the land, where Republicans have managed to limit the continuation of emergency unemployment benefits for many of the 5.1 million people who have been officially jobless for sixth months or longer.

Unemployment checks are the sort of expenditure that is virtually guaranteed to stimulate economic activity, because just about anyone who has been out of work for that long is desperate -- so desperate that whatever cash they possess tends to get spent on basic needs, like groceries. But in the toxic politics of today, "stimulus" is a tainted word, one whose very usage guarantees derision. Legislators in charge of the purse strings would rather pander to those inclined to see jobless people as deadbeats and losers than acknowledge the reality that people who have no money are starving the economy of spending power and limiting job creation for everyone.

They are bleeding cash conservatives, adopting policies that are guaranteed to weaken the economy while pursuing outcomes that feel satisfying, bravely drawing the line on sending a few hundred dollars a month to people who would presumably use their checks to buy yachts and country estates.

Bleeding cash conservatism is perhaps the natural outgrowth of the numbness many Americans now feel in the face of omnipresent misfortune, combined with the reality that even people who are relatively rich feel as if they are struggling in the face of yawning inequality.

Ever since the tax revolts of the Reagan years, Americans have balked at sending hard-earned tax dollars to people who have difficulty paying their own bills. This has reflected in part the embrace of smaller government, and in part a real need: As wages began stagnating for the vast majority of working people in the late 1970s, many felt the strain, which made them receptive to promises that they could surrender fewer dollars to Uncle Sam.

But bleeding cash conservatism takes us to a different plane. Its practitioners are not content merely to cut funding for programs with goals that are difficult to attain -- helping poor people, rehabilitating prison inmates, or improving public education -- they are eager to spend money to make sure that those in difficult circumstances are effectively penalized, putting faith in the moral curative of other people's suffering.

This is not only making the country meaner, but is making our longer-term problems bigger and jacking up the cost of addressing them. When 5 million-plus people are out of work for six months or longer, and millions more have dropped out of the labor force altogether, disappearing from the ledgers, society will pay one way or another. Ditto, when millions of homeowners are stuck in limbo, unsure of what comes next and unable to maintain what they own.

Few of us are wealthy enough to live on our own islands, fully insulated from the impacts of children raised by parents living out of cars, or bouncing in and out of shelters, and dependent upon food banks for their upkeep. We will pay when some of these children land in emergency rooms in need of care but not covered by insurance, or when some grow up and wind up in substance abuse programs or prisons. We will pay.

The only questions are when, and how much?

 

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