The Everyman Economist

The Everyman has been stirred up by the usual naysayers who are pointing the finger at the new Obama proposed budget. “Look at those 8,000 earmarks,” they’re saying. “What a travesty,” they’re saying. But here’s the truth. Earmarks are the only real expenditures in the budget that have a legitimate right to be there. “How can I make such a claim?” you ask. Let’s see.

There are 435 Representatives of the Everyman in the House and 100 Senators in the Senate. These politicians all represent only one constituency - us - that’s you and me. We elected these guys and we expect them to do our bidding in the sacred chambers so we get bang for our bucks. If we need a traffic light on the corner where we’ve seen kids get hit by speeding automobiles, we expect these politicos to get it for us. If we need a highway to help move traffic in our neighborhoods away from the busy streets, we expect these politicos to get it for us. If we need scientific research to help us learn about a disease that’s ravaging our families, we expect these politicos to get it for us. And yes, if we need a study to determine the effects of sewage on our local wildlife, we need these politicos to get that for us too. In short, the reason why these guys are all in Washington in the first place is to make sure that our local interests at the community, city and state levels are all looked after. And that’s why we have earmarks. Some may call them “pet projects” but I prefer to call them “necessities.” Now, among these earmarks you will find some that may not suit your appetite or interest, but without all the facts, you can’t possibly know why they’re there. And what’s more, it doesn’t matter because they have always been there and will always be there so we can all get what we pay for.

This may not all sound very appealing to Everyman, but you can be sure that without earmarks, the federal government will be spending our money on only those things that THEY think are best. Earmarks are a  miniscule piece of the budget and they help ALL of us have our voices heard. The politicos of both parties spend too much time demonizing what WE believe is necessary and riling up the Everyman for purely political purposes. Tell them all to Shut It! Get us our traffic lights first and then we can worry about some guy’s bonus at AIG. 

The Everyman’s head is spinning. He’s angry all over again and he can’t believe what’s he’s reading in the press and hearing from the talking heads about AIG, Citibank, Bank of America, Merrill Lynch, bonuses, toxic assets, earmarks and tons more. Everyman’s looking for a scapegoat. Someone needs to pay for this mess, right? One day it’s the overpriced traders and their obscene bonuses who are to blame and the next day it’s those overpriced senior executives and their obscene mansions in New York, New Jersey and Connecticut. But this blame game has to STOP. When historians look back at these times, it’s not the details that will matter the most, it’s the big picture and how we got here. And the overwhelming reason for our turmoil is one thing - lack of regulation. We became so complacent in our abilities to produce meaningful financial products that would serve all parties simultaneously, that we forgot the essential component of all good plans - the rules. We allowed Everyone, the Everyman included, to reap the benefits, but we threw caution to the wind and it all ran amok. Is it any wonder that the SEC was contacted many times over a period of many years about Bernie Madoff and his fraudulent activities, only to turn a blind eye. If the SEC wasn’t watching the chicken coop, then Everyone was asleep at the switch.

So what do we do now? First, let’s stop the finger pointing. Nobody is going to get it ALL right. Mistakes will be made and people will be human. It makes no sense to make ourselves feel good by making someone else a culprit. Instead, we need to demand of our leaders that we NEVER have this happen again. We must have prudent safeguards in place that will regulate the financial environment and prevent a meltdown. In the 1930s, Congress passed the Glass-Stiegel Act, which went a long way in helping us sort out the mess of that decade. Some say that when Glass-Stiegel was repealed in 1995, it was the beginning of our current problems and that may be true. But true or not, we need today’s form of Glass-Stiegel to pave the way to a healthier economic environment.

If the Everyman is going to vent his anger, it’s time to yell at the politicians and let them know that we need to bring rules back to the game. Only regulation will help create the proper solutions as we move forward. So forget about the anti-regulators - they’ve had their day and look where we are now!     

Back in September we applauded the idea of creating a Good Bank/Bad Bank scenario to solve the banking crisis and get the financial system working again. We don’t know why, but so far this scenario has not unfolded. Instead, the government has plowed good money after bad money into failing banks and while they have alleviated the pressure and brought the system back from the brink, they have only mustered a temporary fix. Make no mistake about it, as long as the toxic assets continue to plague these institutions, we will soon be back to where we were before…on the brink of collapse. We continue to believe strongly that the ONLY way to cure the system’s ills is to get the toxic assets off the books of financial institutions, even at a steep price, and let the assets take safe haven in a Bad Bank owned and operated by the federal government. Over time, these assets will crawl their way back to a level of reality and the government will likely profit from the distressed sales by the banking system. In the short term, the banks will be rid of this albatross and they will be able to get back to the business of providing money and credit to the Everyman and Everybusinessman, responsibly. Stop wasting time Uncle Sam! Stop allowing the patient to slowly bleed to death! Administer an immediate blood transfusion and let’s get the patient back to health right away! YOU MUST DO IT NOW!!!