The Politics of Paralysis

The Politics of Paralysis

In today’s extreme political polarization, both Democrats and Republicans have reached a point of paralysis, where neither side can focus on the real issues as long as their brains are pre-occupied with demonizing the other. During a talk I gave last week about my recently published book, “Age of Entitlement – How greed and arrogance got us here” (Available from http://www.ageofentitlement.com/), the questions were narrowly focused on partisan attacks, instead of the real meat of the matter, which was taxpayers bailing out negligent banks even while our own 401Ks are halved because of Wall Street’s greed.

The fact that the bailout under President Obama is unfolding seamlessly from the bailout first engineered by President Bush should be sign enough that the top bankers have a stranglehold on both parties and all branches of government. I’m not suggesting a secret conspiracy with black helicopters and all. What I am suggesting is, what other outcome would you expect? After all, the key financial players in both administrations, Alan Greenspan, Ben Bernanke, Hank Paulson, Tim Geithner, Larry Summers, are all alums of the Federal Reserve or Wall St. banks, and as such will protect their own. Not necessarily because they are bad people, but just because it’s the only world they know.

Nowhere in the bailout debate is the common sense, time-tested solution: Failing companies that have made huge mistakes must be allowed to fail. The excuse “too big to fail” is worse than just an excuse, it’s legalized extortion. The stock market has functioned many years through ups, downs, and severe depressions. It has done so by refreshing the free enterprise system with the blood of failed business models. Smaller banks that didn’t make stupid risks would gladly fill the void created by the fall of Citibank and others.

Propping up zombie banks with taxpayer cash only serves to confuse investors as to where real value is. Ask Japan, who did the same with their banks in the 90’s and are now languishing with a stock market at a 25 year low.

Confidence cannot return to the markets with fake valuations and accounting tricks that falsely claim operating profits when in fact these banks still have huge losses and are in fact, insolvent. The bailout becomes nothing more than the people who caused the meltdown reimbursing themselves for their lost equity.

It’s all about personal responsibility. Not one single official in charge during the economic meltdown has come forward to say “Sorry, we really screwed up.” Not that it would make us feel better, but acknowledgement of past mistakes is the only solid foundation on which a recovery can be built.

No one, not politician nor voter, is taking responsibility for the crippling $11 trillion and mounting national debt on which we paid $451 billion in interest payments last year. It didn’t even come up during the last election cycle. Politicians didn’t talk about it because we didn’t talk about it, and we’re still not taking it seriously now. Why? Because people of all political persuasions are too busy trying to lay the blame on whoever isn’t in their clique.

Democrats would have to admit that they have to stop spending the next generations’ money on government programs, whether or not they have merit. Republicans would have to admit that 8 years of tax cuts without cuts to government spending have brought us to the brink of bankruptcy. There is absolutely no difference between increasing government spending, and cutting taxes without cutting government. Either way, we are spending money we don’t have and have no hope of paying back in our generation.