The Heart of Darkness (part 2 of 3?)..

I'm still contemplating how to end this, but since I said I'd write this, here's the next installment...


The Heart of Darkness (continued)


During 2001, and more emphatically again in 2003 and 2004, some forward looking economists started warning of a default crisis, and debt/liquidity ‘problem’ at Fannie and Freddie. The President took some note, but only in that he, and his fellow corporatists, wanted to free GSE’s from needing to purchase FHA loans on the secondary market by requirement. They didn’t seek to regulate the conduct of banks originating loans, and they certainly paid no heed to the obvious warning signs of flat wages and skyrocketing healthcare costs (or the less obvious but more ominous signs of rampant HELOC business among high credit worthy customers on existing properties, coupled with raids made by those same customers on IRA’s and 401k’s).

Those signs pointed strongly to the weakened state of the US middle-class. They pointed out that, contrary to current popular conservative talking points, “Joe 6 pack” wasn’t out buying over his ‘means’ or living beyond his income, but rather, his costs had exceeded his income. What he once could afford, had become unaffordable due to climbing gasoline, food, energy, education, and daycare expenses. He took out a home equity loan or line of credit (HEIL/HELOC), not to really to go to Bermuda, but just to afford a car when his old one finally crapped out, or to pay for his mom’s hip surgery, or to pay for his daughter’s in-state, land-grant university tuition. Very often, when he took out that loan, he did so with an ARM, assuming that rates would stay low (or maybe praying), and hoping, perhaps against his own better judgment, that a raise was ‘just around the corner’, or ‘better days were ahead’ as he/she was so often promised by the ‘rising tide’ crowd. The tax cuts of Bush were cold comfort (at $1500/year for the average family of 4) against an average increase in JUST energy costs of $3000/year, especially when the ‘cut’ was really just a loan taken out against his kids share of the public debt.

Finally, the country had been cutting discretionary government spending virtually without abating for 30 years, except in the area of schools – where it swung wildly between large cuts, and occasional large increases. Bridges, highways, power-grids, sewers, service buildings all were on subsistence level budgets, meaning the potholes got fixed, but the underlying roads very often never got improved, and too often got replaced much less frequently than needed. Road structures didn’t keep up with population growth, congestion magnified, and all the while tax base, the real ability of the middle-class to pay for the government they needed, eroded. Those at the top, while paying roughly double the percentage of taxes they did in 1981, paid HALF as a percentage of income of what they paid in 1981. The only reason their portion of taxes doubled, is that their incomes grew four-fold, while taxes were cut in half.

The consequence was the perfect confluence of less real ability to sustain government, less interest in oversight as ‘neo-conservative’ scorn overtook policy-making in regulatory bodies, and lower expectations of participation and support by those with the only remaining ability to support the system that had lavished wealth upon them.