I read an item recently (didn't note the source unfortunately) suggesting that income inequality correlates with the homogeneity of a countries population. The more homogeneous, the less income inequality, the more diverse the greater the income inequality. It is an interesting notion. When we feel like our countrymen are like us we are more inclined to insure that everyone gets a piece of the pie. When we start dividing ourselves in different "tribes" on political and ethnic lines we become less concerned about other American "tribes" and more of a winner take all society.
Looking back over more recent American history certainly doesn't contradict this theory. The last time income disparity became so glaring was in the 1920's leading up to the great depression. The decades before 1920 had been marked by a huge wave of immigration that filled our cities with ethnic enclaves and politically often faced off city dwellers against the largely home grown rural and small town folk.
Then the income disparity shrunk greatly after WW II. Perhaps the war effort made people become American's first and all the political and ethnic divisions faded in significance? Guys from all parts of the country, all ethnic and political views bunking next to each other in the barracks, or sharing a foxhole, can certainly break town tribal instincts.
The high levels of income disparity disappeared in the years after WW II. Clearly there was a different attitude then as the tax code imposed marginal rates of up to 90% on the most wealthy Americans as part of the effort to pay off the deficit from WW II and the great depression. The capstone of this tax effort occurred with the 1954 tax code passed by Congress which was, amazingly, passed during the only session between 1932 and 2000 where the Republicans controlled both houses of Congress and the Presidency. (Clearly the Republican party of 1954 was not the Republican party of 2011). Income disparity was then relatively low for the next couple decades - it began to grow again in the late 1970's, and accelerated greatly in the 1990's and 2000's, a time when immigration has become a hugely controversial issue and politics is bitterly partisan.
Why don't we maintain institutional memory - why do we have such different attitudes today than we did in after WW II? Probably because each new generation starts from our brains tendency to break the world in groups of us and them. Until each new generation has some learning experience to teach them the value of inclusiveness they see others outside their immediate group as less human and threatening.
I hope we don't need WW III to pull us back together as a country. Might not work anyway, since we abolished the draft after the Vietnam War. In WW II everyone served. In modern US warfare generally only the folks at the bottom of the income spectrum serve in the military, the kids of the well to do go to college and on to careers, seldom interacting with people who are not similarly blessed.
Friday, December 9, 2011
Monday, December 5, 2011
Constructive goals Occupy Wall Street could pursue - the housing market
We are not going to find a solution to the housing crises that involves either Wall Street or the Federal Government any time in the near future and our economy will not recover until we deal with the housing mess. In any economy the driving force is the people from 35 to 50, people still young and energetic, but with the experience and maturity to build or grow an economy. To use the latest Republican buzz word, the job creators. In my experience it seems it is the people in this group that have been hammered the worst by the housing market collapse. The hard working, imaginative and ambitious who got to the point where they felt like they could finally buy a house in the middle of the last decade are now locked into houses they can't afford to own the way they are currently financed, but also can't afford to sell. We are financially crippling the dynamic heart of our economy.
Government is not going to solve the problems in the housing market, for both partisan ideological reasons and structural reasons. The feds have created programs to refinance loans with great fanfare, then virtually no loans get refinanced. Occupying foreclosed houses will get some publicity and wring some concessions out of banks in the short term on individual properties but will not result in any action by the private sector or government that will begin to solve the problem.
What is the problem? It appears to be twofold.
1. The political problem - Republicans are living in an economic fantasy world and Democrats are ineffectual without Republican help. It really doesn't matter why Republicans policies are so out of touch with reality - whether it is an irrational belief that making money is proof of goodness, or simply they see rich folks as their constituency and are protecting their constituency the result is the same. They will not consider any plan to address the housing market that doesn't involve laws benefiting the same folks that caused the problems.
2. Structural problems - Getting a home loan used to be pretty simple, you went and talked to the bank, if they thought you were reliable and had the income to make the payments, they made the loan then held the mortgage in their portfolio until it was paid off. Gradually all those smart people on Wall Street started making it more and more complicated. No bank, to my knowledge, holds loans they make to maturity anymore. Banks make loans anticipating the mortgage will be sold in secondary mortgage markets, maybe sold repeatedly. So now instead of having to convince the banker across the desk from you that you are reliable and can pay the mortgage back, that guy across the desk from you has to meet the criteria set by a bunch of different people you never met. The old simple transaction has become a complex and tangled bureaucratic minefield, so even if you had the money in the bank to buy the house outright you still might not qualify for the loan.
On top of the complexity of the transaction the banks that control the process are understandably not enthusiastic about converting a bunch of loans on which they are getting interest of 6, 7 or 8% to loans on which they will getting somewhere around 4%. So they are perfectly happy to just wring their hands in sham sympathy and quietly let the complex process not work.
So what can OWS do? Here are some ideas:
1. Start organizing all the people out there who bought houses at the peak of the boom, are struggling to keep the house, and could keep the house with some financial restructuring. When they are dealing with the banks one by one they are helpless. But if hundreds or thousands get organized and are prepared to take concerted action, they could have the power to strike fear in the heart of Wall Street. Suppose half a million homeowners pledged to stop paying their mortgage payments on March 1 if some real refinance option was not in place.
2. A back up strategy (because it would take longer to implement) would be create an fund to make direct refinancing loans using local or state government bonds working through refinance agencies set up by branches of government. Local governments, for example, can offer tax free status on their bond issues to make the bonds attractive. Local governments could perhaps reduce the loan balances in some cases and take back an equity interest in the home as a way of protecting property values within the community.
At the State level an option that could get refinancing up and running pretty quickly in California would be to open up the Cal-Vet loan program to allow refinancing, and maybe even open up the program to non-veterans due to the dire economic situation in the State. The Cal Vet loan program has been around for decades, it is entirely funded by bonds paid off through the payments on the loans.
A non-government option would be to create a non-profit that little folks can invest in to create a pool of money, then use the money to refinance home loans, starting with those with the highest interest rates first. Google, Apple or other tech companies are making a lot of money off the generations that have been hurt by the housing collapse, why can't they kick in some money to create a fund to provide an alternative to the banking system?
Until there is an option to the banking system that threatens to damage the banks bottom lines, the banks are going to keep dragging their feet. If private sector banks started to see their highest interest rate loans disappearing from their balance sheets, and their loan portfolio's shrinking they might discover that maybe refinancing loans isn't such a bad idea.
Government is not going to solve the problems in the housing market, for both partisan ideological reasons and structural reasons. The feds have created programs to refinance loans with great fanfare, then virtually no loans get refinanced. Occupying foreclosed houses will get some publicity and wring some concessions out of banks in the short term on individual properties but will not result in any action by the private sector or government that will begin to solve the problem.
What is the problem? It appears to be twofold.
1. The political problem - Republicans are living in an economic fantasy world and Democrats are ineffectual without Republican help. It really doesn't matter why Republicans policies are so out of touch with reality - whether it is an irrational belief that making money is proof of goodness, or simply they see rich folks as their constituency and are protecting their constituency the result is the same. They will not consider any plan to address the housing market that doesn't involve laws benefiting the same folks that caused the problems.
2. Structural problems - Getting a home loan used to be pretty simple, you went and talked to the bank, if they thought you were reliable and had the income to make the payments, they made the loan then held the mortgage in their portfolio until it was paid off. Gradually all those smart people on Wall Street started making it more and more complicated. No bank, to my knowledge, holds loans they make to maturity anymore. Banks make loans anticipating the mortgage will be sold in secondary mortgage markets, maybe sold repeatedly. So now instead of having to convince the banker across the desk from you that you are reliable and can pay the mortgage back, that guy across the desk from you has to meet the criteria set by a bunch of different people you never met. The old simple transaction has become a complex and tangled bureaucratic minefield, so even if you had the money in the bank to buy the house outright you still might not qualify for the loan.
On top of the complexity of the transaction the banks that control the process are understandably not enthusiastic about converting a bunch of loans on which they are getting interest of 6, 7 or 8% to loans on which they will getting somewhere around 4%. So they are perfectly happy to just wring their hands in sham sympathy and quietly let the complex process not work.
So what can OWS do? Here are some ideas:
1. Start organizing all the people out there who bought houses at the peak of the boom, are struggling to keep the house, and could keep the house with some financial restructuring. When they are dealing with the banks one by one they are helpless. But if hundreds or thousands get organized and are prepared to take concerted action, they could have the power to strike fear in the heart of Wall Street. Suppose half a million homeowners pledged to stop paying their mortgage payments on March 1 if some real refinance option was not in place.
2. A back up strategy (because it would take longer to implement) would be create an fund to make direct refinancing loans using local or state government bonds working through refinance agencies set up by branches of government. Local governments, for example, can offer tax free status on their bond issues to make the bonds attractive. Local governments could perhaps reduce the loan balances in some cases and take back an equity interest in the home as a way of protecting property values within the community.
At the State level an option that could get refinancing up and running pretty quickly in California would be to open up the Cal-Vet loan program to allow refinancing, and maybe even open up the program to non-veterans due to the dire economic situation in the State. The Cal Vet loan program has been around for decades, it is entirely funded by bonds paid off through the payments on the loans.
A non-government option would be to create a non-profit that little folks can invest in to create a pool of money, then use the money to refinance home loans, starting with those with the highest interest rates first. Google, Apple or other tech companies are making a lot of money off the generations that have been hurt by the housing collapse, why can't they kick in some money to create a fund to provide an alternative to the banking system?
Until there is an option to the banking system that threatens to damage the banks bottom lines, the banks are going to keep dragging their feet. If private sector banks started to see their highest interest rate loans disappearing from their balance sheets, and their loan portfolio's shrinking they might discover that maybe refinancing loans isn't such a bad idea.
Constructive Goals Occupy Wall Street could pursue - engaging Republicans
The emotion and outrage that fuels occupy wall street is a powerful force, but I feel like the reason we have a disfunctional Congress is because we have too many people in this country whose views have been cast in concrete by linking ideas with the strong emotions that are generated by confrontation.
Back in the 1960's and 1970's the social movements of that time galvanized young people on the left side of the political spectrum, who really felt like they were on the side of all that is true and right and anyone opposed to them deserved to be dismissed.
History has shown their was a degree of truth to their beliefs - much of what were radical ideas at the time - particularly in civil rights - are now commonly accepted as truths of what America stands for.
But I believe the dismissive and somewhat arrogant attitude of the leftish movements are to some degree the source of the irrational group-think and obstructionism that marks current Republican politics. People of a Conservative persuasion who are running the Republican party now were young folks growing up during those years and got pummeled for expressing Conservative views. So they learned to express their views among themselves rather than trying to engage the left. You see the results in the extraordinary Republican primary playing out before our eyes, where political views that ignore history, objective data and common sense cannot even be expressed by a candidate without the candidate being marginalized in the party for not toeing the party line. Republican ideology has become the political equivalent of a bulldog - so inbred it is littered with genetic defects.
Occupy Wall Street should avoid going down that same road. OWS should be arranging discussions of basic policy questions in a format that protects participants from abuse and inviting Republican organization to join to present their views. A format for discussions that focuses on data rather than ideology and encourages people to think about whether their political beliefs actually accomplish the goals they seek can be found at www.Theidp.org
I believe if this kind of engagement could occur in enough parts of the country we could break the logjam in Washington in a few years, and it would certainly contribute to a more civil and productive government in the longer term.
This is not a path to be pursued by those just out for the experience. Engagement requires discipline, research and tolerance. You have to want to be a force for good.
Back in the 1960's and 1970's the social movements of that time galvanized young people on the left side of the political spectrum, who really felt like they were on the side of all that is true and right and anyone opposed to them deserved to be dismissed.
History has shown their was a degree of truth to their beliefs - much of what were radical ideas at the time - particularly in civil rights - are now commonly accepted as truths of what America stands for.
But I believe the dismissive and somewhat arrogant attitude of the leftish movements are to some degree the source of the irrational group-think and obstructionism that marks current Republican politics. People of a Conservative persuasion who are running the Republican party now were young folks growing up during those years and got pummeled for expressing Conservative views. So they learned to express their views among themselves rather than trying to engage the left. You see the results in the extraordinary Republican primary playing out before our eyes, where political views that ignore history, objective data and common sense cannot even be expressed by a candidate without the candidate being marginalized in the party for not toeing the party line. Republican ideology has become the political equivalent of a bulldog - so inbred it is littered with genetic defects.
Occupy Wall Street should avoid going down that same road. OWS should be arranging discussions of basic policy questions in a format that protects participants from abuse and inviting Republican organization to join to present their views. A format for discussions that focuses on data rather than ideology and encourages people to think about whether their political beliefs actually accomplish the goals they seek can be found at www.Theidp.org
I believe if this kind of engagement could occur in enough parts of the country we could break the logjam in Washington in a few years, and it would certainly contribute to a more civil and productive government in the longer term.
This is not a path to be pursued by those just out for the experience. Engagement requires discipline, research and tolerance. You have to want to be a force for good.
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