I was talking with an old friend about where, oh where, can one find a truly unbiased political analysis? And I thought, for fiscal policy at least: investors. I've been investing as my "job" now for 18 months, and one thing that I've noticed is that no matter what is happening in the market, in the world, in politics, these guys can always find a way to make money. And that's all they care about. If Obama is pushing green jobs, they dump money into First Solar, if Cheney is bent on starting world war 3, they pour their capital into Halliburton. They don't care what's going on, they just find a way to take advantage of it. So these guys have a vested interest in trying to look at things on a factual basis, without a bunch of rhetoric or wishful thinking. If they engage in that, they are likely to lose their shirts in the market. So to get to the bottom of the health care "debate" (translation: ignorant shouting match), forget absolutely everything that people are talking about - none of it is relevant. Go to Motley Fool and read up on HMO and pharmaceutical stocks.
On that thread, I started digging around to see what investors thought of the economic stimulus plan, and was actually surprised to learn that Ronald Reagan also pushed through a $750 billion economic stimulus plan early in his first term (okay, Obama's is $787 billion, but Reagan's was 1981 dollars, so it was actually bigger). http://kemosabe.blogs.mu/2009/05/20/ronald-reagan-signed-his-750-billion-stimulus-plan-into-law-in-1981/ The key difference is that Reagan gave his stimulus primarily to the wealthiest Americans in the form of a massive reduction of the top tax bracket rates and claimed that the money would "trickle down" to the middle class. He paid for it by doubling the social security taxes paid mostly by the middle class, and then borrowing the money from the social security fund to pay current obligations. (I was also surprised to learn that the social security trust is actually just a bunch of IOUs http://www.blog-on-politics.com/obama/how-does-obamas-stimulus-package-compare-to-what-reagan-did-when-he-became-president ) Alas, it was not enough and we are still paying $100 billion a year in interest on the Reagan deficits. Reagan is the poster child for fiscal conservative policy. So, it would seem that fiscal conservatives are not opposed to handouts, just to handouts that go to someone other than them.
People also carp about Obama bailing out the auto industry. Okay, those guys mismanaged their businesses into the ground -- but what would have been the end result of the US auto industry finally and utterly collapsing? The entire economy would have imploded, and the cost to the government would have been much higher. So... lesser of two evils seems to be the case here. It turns out that Reaganomics also brought us a bailout of a failing industry - savings and loans. Although the bailout didn't actually happen until George Sr. took office, it was actually caused by Reagan's deregulation, making his policies doubly culpable. So, what is the difference between the two? Again, fiscal conservatives don't have a problem with handouts to their finance buddies, but balk at propping up a bunch of middle class auto workers. Case in point, look at how fast W jumped on giving $700 billion to the financial industry last year. Again, deregulation brought us that whole spectacle with derivatives and other intractable financial instruments that amounted to trading on hot air, but no one batted an eye at shoveling all that cash into the pockets of the very people that mismanaged us into the crisis. But, again, what would have been the end result and ultimate cost of the US financial industry utterly collapsing? Lesser of two evils.
In the end, it's all welfare. The government gives money to people in trouble who may or may not deserve it, depending on how much one believes that hardship is brought on by one's own actions (or lack thereof). There is fundamentally nothing different between the fiscal conservative and the fiscal liberal in this respect. Welfare is welfare. One group tries to get as much as possible into the hands of the top 1% on the backs of the other 99%, and the other group tries to redistribute the top 1%'s share down to the masses. $750 billion to the top one percent or $750 billion to the other ninety-nine percent - no difference in the federal bottom line, but a big difference to the bottom line of most individuals.
So which group is better? Which group has it right? I guess one's opinion boils down to two simple factors: 1) is the handout going into your pocket?, and 2) are you able to ignore #1 based on some belief (e.g., corporations and individuals should be encouraged to accumulate as much wealth as possible by any means necessary, my church teaches me to help the poor, I already pay to build bridges for the poor to live under, I believe I need to be able to pay my mortgage next month, whatever).
In the end, I tend my garden, manage my own affairs in such a way that I am reasonably insulated from the political winds, feel sad that the CFO of Enron escaped with $250 million, and it doesn't bother me that a chunk of my income goes to buy cereal for kids in the inner city.
Thursday, August 20, 2009
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