Corporate Welfare Kings Lounging on America’s Sofa

by Tula Connell, Aug 31, 2007

The housing market must be really bad. Bush is making noise about taking action to ease the subprime disaster.

Today, he made a big deal about annoucing aid for home owners—but “urging” Congress to act and “directing” federal housing honchos to work on initiatives doesn’t go far enough fast enough to provide concrete assistances for home owners facing foreclosure.

The following paragraph in the business section of The New York Times this week sums up so much of what is wrong in the current corporate-run Bush government. Discussing the possibility of federal aid for the nation’s beleaguered home owners, the article begins:

Faced with a possible tidal wave of home foreclosures beginning this fall, Democrats and Republicans are battling over a philosophical question with huge practical implications: should the government ride to the rescue?

First, a correction: The government already has come to the rescue in the current subprime meltdown—to shore up the biggest of banking investors. The Federal Reserve didn’t need to engage in heated battles on Capitol Hill two weeks ago before it jumped in and pumped $62 billion into the available pool of funds for lending by the big boys. But as the above paragraph points out, you can bet when the pack is back on Capitol Hill, if lawmakers ever actually pass a bill to give relief for working families hit by soaring mortgage interest rates on terms many of them never understood, it will only follow a long and bitter battle.

Democrats in Congress are proposing measures to enable lower-income families to renegotiate their loans so they can stay in their homes and avoid foreclosure. Many Republicans likely will argue that individuals got themselves into loans they can’t pay, and it isn’t up to the government to bail them out.

So why is it OK for the government to bail out Big Business?

Corporate welfare is not new. It long has been a back-of-the-boardroom dirty secret. While the Ronald Reagans of the world paint distorted pictures of welfare recipients, they are busy handing out massive tax cuts to the richest of the rich, fighting laws that would tighten regulations on corporate accountability and raiding the Social Security trust fund to pay for wars like the one in Iraq, where Bush’s oil buddies are raking in profit hand over greedy fist.

Call it “trickle down economics,” de-regulation or deficit financing. Just don’t call it what it is: corporate welfare.

A recent snapshot by the nonprofit Economic Profit Institute (EPI) shows Bush’s massive tax cuts for the rich—$70 billion in 2006 alone—are eroding the retirement and health security of the nation’s seniors and others who are most vulnerable. Describing “the imminent collision between the Bush tax cuts and the benefits promised by Social Security, Medicare and Medicaid,” EPI notes that cost of these social programs up to 2017—which Bush calls “excessive”—is “dwarfed” by the revenue losses of Bush’s tax cut welfare policy for the rich.   

The latest twisted rationale for corporate welfare revolves around the buzz phrase “moral hazard.” Moral hazard is a bad thing, according to the corporatocracy, when it involves bailing out ordinary citizens who brought a financial crisis on themselves.  If the government gets them off the hook, the argument goes, they will never learn their lesson and will only get into more financial difficulty. 

Moral hazard somehow doesn’t apply, though, when it’s used to bail out rich investors. Although logically cutting interest rates to help hedge funds would encourage a resurgence of the same risky mortgage lending that led to the current turmoil—The New York Times says Fed Chairman Ben Bernanke sees the issue in a more “pragmatic” way.

The Fed’s actions and words suggest that, far from concerning himself with moral hazard, the Fed chairman is trying to protect, and thus reassure, ordinary investors in stocks and bonds.

By pumping a total of $62 billion [snip] into the pool of funds available for lending, the Fed can help enable small investors to continue to trade securities, confident that the checks they receive from their brokers will not bounce. This new liquidity allows the banks to provide credit to the marketplace without driving up interest rates.

Lesson: Bailouts for corporations and the wealthiest individuals are done out of pragmatism. Assistance to low- and middle-income families are handouts.

Remember that next time you go to the polls.

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