Homeowners' Shame

Since the foreclosure crisis began to be named in 2009, I have been noticing a pattern among homeowners facing hardships.  They are ashamed, so they keep their problems to themselves.

This speaks to certain moral convictions that form the bedrock of what many would believe makes a good U.S. American.  Because in the U.S., the concept of what it means to be a Christian is largely derivative from, or a corollary to, what it means to be a good U.S. American, these moral convictions find their way into the character and lives of good, church-going people.

Self-reliance is one of the moral convictions of which I am speaking.  Christians are likely to cite Paul's remarks to the Thessalonians in support of a belief in self-reliance:  those who will not work, shall not eat.  Again in Galatians, just after telling the church folk to bear one another's burdens, Paul turns around to say that each one should carry her own load.  Thus it is not outside of Christian faith to believe in the goodness of carrying one's own weight. 

Yet for faithful biblical and theological teaching, self-reliance is always tempered by being set in the context of community mutual responsibility.  Isolated from the communal context, self-reliance can become arrogance and blind optimism in times of good fortune, or it can transform into self-hatred in times of bad fortune.  "Fortune" is a key concept here, but one that self-reliance likes to ignore. 

Contrary to the self-deceptive claims of the Romantic/Progressive era, which led poets to wax eloquently about being "the master of my own fate," human beings are not individually in control of their own destinies.  First of all, human society is a complex, dynamic system in which many people are engaged in non-coordinated activities and agendas.  What I do may effect you, and vice versa.  Second, many powerful forces can affect the lives of particular people, completely without their own knowledge and participation.  The housing bubble, the house of cards called credit default swaps, and the entangled labyrinth of mortgage-backed securities were mostly invisible to average people.  Yet when these huge economic systems began to implode, they took away jobs, home values, credit availability, health insurance, and hope for many people.

Under new circumstances, people formed by self-reliance and the assumption that it mechanically leads to success, found themselves in a pit of shame.  They should have known, they thought, not to buy that much house, get that big a mortgage, borrow against their equity, etc.  Certainly there was a time, in another generation, when many people would have been more cautious.  Yet fed by a steady diet of "the rules of the old economy no longer apply" and "low downpayments are the new norm" and "housing values never go down," plenty of people were pointed, urged, or lulled into believing that extending more credit and taking out more debt would be an excellent plan, even a good example of self-reliance.

Closely related to self-reliance is the moral conviction of individualism.  This more encompassing concept asserts that knowledge, value, and action originate in the individual person.  Thus, individualists make up their own minds for themselves, adopt their own values, and do what they decide to do.  The myth that individualism perpetuates is that "doing it my way" is both a good idea and an actual practical activity.  The outcome is that people who do not have all the information that they need, have not experienced the pitfalls of certain activities, and may not be reasoning with full clarity, become convinced beyond the shadow of a doubt and "know that they know that they know that they know" what they should do.

Individualism linked with positivity can be a dangerous combination.  Many people think that if they do not think bad thoughts, entertain bad consequences as real possibilities, or say out loud what might go wrong, then everything will be fine.  This ignores that one person's thoughts and words operate without any relation to the risky, careless, and unjust actions of others who may be controlling millions and billions of dollars of economic power.

Individualists, counting on self-reliance, operating with positivity, expect that their efforts will lead to satisfying results.  They don't deny risks, but they have done what they should have done and things should go well.  If things don't go well, the self-reliant individual has trouble avoiding the conclusion, "I have no one to blame but myself."

Thus, shame has a powerful role in an economic crisis.  It protects the wealthy securities traders from a mass uprising against them because the average people blame themselves for their economic problems.  Many keep the problems to themselves, ashamed to admit that something has gone wrong. 

People who lose their jobs, have their homes foreclosed, and fall into medical debt may stop going to church, or even leave their churches, ashamed to admit that they are not prospering.  They theologize the problem to believe that they have sinned or failed God, interrupting the input-output machine of being a good person in order to get blessings from God.  They must be bad, for the blessings have stopped.

This shame makes it hard to organize people harmed by the economic downturn.  Some simply give up.  Others keep trying the same thing over and over, sure that if they just try harder the system will work.  Only a few get so fed up with the way that powerful economic institutions abuse and oppress them that they start to fight back.

What got me to write about this was a personal experience.  I am not facing foreclosure.  For now, my wife and I both are holding our jobs.  We are not in economic distress, as compared to many people.  We are, however, making lots of big financial decisions because we are relocating from North Carolina to Texas, while I still work in North Carolina.  After a year and a half of transition, we are finally preparing to sell our house.

Credit is tight, so even with a respectable credit rating, borrowing may not be easy.  Optimistically thinking that the process of getting a construction loan would not be hard, I was awakened repeatedly to realize there are many hoops to jump through and obstacles to overcome.  I can take that--life is not easy.

What caught me by surprise was a powerful emotional hit that came when a lender suggested that there were undisclosed details that would hinder the loan process.  Along with dread, there was a deep feeling of failure and inadequacy that welled up.  The dread was that feeling of wondering if there would be anything I would be able to do to solve the problem.  My self-reliance had not worked.  I was ashamed.

Now frankly, it was a very minor setback.  We continue to make progress on remodeling and getting credit to put our house in order.  It is not all worked out, but I'm not in the kind of mess many people are in.  But the reason to write about it is that I had a temporary and partial glimpse of what is multiplied millions of times over in this country with people who have lost jobs, lost homes, face foreclosure, face medical costs they can't pay, and feel ashamed.

If there is any truth in the Christian faith, then the teachings of the Bible should make it clear that the winners and losers of economic life do not equate to the ones God loves and hates.  Economics is rough in its sorting process.  Leverage, muscle, cheating, and injustice have inordinate power over people's destinies.  That is why the Sabbath Year and Jubilee systems were put into place in the biblical economic teachings. 

No economic system can claim to be just if it allows and promotes permanent indebtedness, homelessness, poverty, and joblessness.  There has to be a reset system to get people back into the economic game.

Moreover, our wealth is not our own.  It is for all of God's children.  Churches must find a way to leave behind their accommodation to modern economics and recommit themselves to be communities in which "there is no one in need among you."  We don't have to be ashamed to love one another enough to share our lives with one another.  That is the way of Jesus, who said, "Follow me."

Reverse Flow: Flip-Flopping the U.S. Economy

One feature of economic systems, as in ecosystems, is the flow of resources from one region to another.   For instance in an ecosystem, nutrients flow up the food chain.  If pollutants get into the system, they flow that direction too and concentrate in the top predators.  Rivers flow downhill, winding wherever the ridges and ravines of the landscape guide them, carving out their paths as they go.  In economic systems, money and wealth also flow through winding, complex paths.  Economic systems are human constructions, although the more complex they become the less direct control people have over them, for good or for ill.  People and organizations regularly intervene in the flow of resources in an attempt to redirect their flow.  Sometimes they do this with an eye toward the common good, but other times with an eye to personal gain.

There is an interesting history of redirecting the flow of rivers.  One of the more famous cases is the Chicago River, which used to flow into Lake Michigan.  As the city and its industry grew, the river became more and more polluted, and its toxic flow into Lake Michigan put poisons into the water supply of Chicago.  Eventually, a plan to reverse its flow through industrial canals so that it eventually flowed into the Mississippi Basin helped preserve the waters of Lake Michigan.  Of course, it means the sewage and pollution flowed somewhere else.

The Soviet Union, known for its massive statist vision of industrial progress, long debated and planned for reversing a portion of the flow of Siberian rivers whose waters were "wasted" by emptying into the Arctic Ocean.  Regions with growing industry, agriculture, and population could use the water better for the benefit of the Union.  The internal debates dealt not only with the methods and costs of water transfers, but also on the affect on the climate, especially in the northern regions.  Many argued that the reversal of waters would lead to a shorter growing season and colder winters.  Eventually the plans were dropped, although the mayor of Moscow has revived the idea to reverse a portion of the flow of the Ob river to serve other regions.

China has planned numerous water redirection proposals in order to deal with its growing industrialization and population needs.  Russia fears dams and canals in China will bring desertification to some of its important industrial and agricultural regions.  India and Bangladesh face even greater fear of ecological and economic damage from a plan to divert water from the Tsangpo-Brahmaputra River to the Yellow River.  Some of the most densely populated regions of the world are watered by the Brahmaputra, which flows east along the northern side of the Himalayas in China before turning south, then west through Nagaland and Bangladesh.  China's plan would send much of this water north and east, eventually thousands of miles away into Bohai Bay off the Yellow Sea, not far from Beijing and in the direction of Korea.

The point of talking about river reversals is that in each of these cases, some who had the capacity to redirect the flow of water did so, although not necessarily to the benefit of all who could be affected.  As China and India compete for industrial growth, and as each deals with a history of population growth, water becomes an ever more precious commodity.  The capacity to control the flow of this resource can become a path to survival and prosperity for some, and for impoverishment and death for others.  Even the powerful central administration of the Soviet Union could not amass the social and political power within the nation-state to reverse the flow of water resources according to its vision of a new society.  The Chicago River's transport of sewage benefits many people, but pollutes the Mississippi River basin and potentially many urban and rural water supplies as it crosses Illinois.

Various parties, even those who claim to believe in free markets, are constantly evaluating the flow of resources in the economy and trying to think of ways to redirect the flow.  It is fairly accurate to conclude that those who insist on doctrines of the free market conveniently interpret freedom to be their own freedom while limiting the freedom of others.  They organize, spend, lobby, and manipulate to bend the laws governing economics in their favor and against the interests of those they consider their opponents or adversaries.  Many seek monopolistic structures whereby they can become the de facto market regulators in place of government regulation, or with the assistance of government regulation. 

An examination of the economic policy changes and their results in the forty years since 1980 ends up looking much like reversing the flow of rivers.  Paul Krugman's column, "The Old Enemies," of a week ago spurred me to see this comparison.  Here is an excerpt.

If you really want to know what’s going on, watch the corporations.

How can you do that? Follow the money — donations by corporate political action committees.

Look, for example, at the campaign contributions of commercial banks — traditionally Republican-leaning, but only mildly so. So far this year, according to The Washington Post, 63 percent of spending by banks’ corporate PACs has gone to Republicans, up from 53 percent last year. Securities and investment firms, traditionally Democratic-leaning, are now giving more money to Republicans. And oil and gas companies, always Republican-leaning, have gone all out, bestowing 76 percent of their largess on the G.O.P.

These are extraordinary numbers given the normal tendency of corporate money to flow to the party in power. Corporate America, however, really, truly hates the current administration. Wall Street, for example, is in “a state of bitter, seething, hysterical fury” toward the president, writes John Heilemann of New York magazine. What’s going on?

One answer is taxes — not so much on corporations themselves as on the people who run them. The Obama administration plans to raise tax rates on upper brackets back to Clinton-era levels. Furthermore, health reform will in part be paid for with surtaxes on high-income individuals. All this will amount to a significant financial hit to C.E.O.’s, investment bankers and other masters of the universe.

Now, don’t cry for these people: they’ll still be doing extremely well, and by and large they’ll be paying little more as a percentage of their income than they did in the 1990s. Yet the fact that the tax increases they’re facing are reasonable doesn’t stop them from being very, very angry.

Nor are taxes the whole story.

Many Obama supporters have been disappointed by what they see as the administration’s mildness on regulatory issues — its embrace of limited financial reform that doesn’t break up the biggest banks, its support for offshore drilling, and so on. Yet corporate interests are balking at even modest changes from the permissiveness of the Bush era.

From the outside, this rage against regulation seems bizarre. I mean, what did they expect? The financial industry, in particular, ran wild under deregulation, eventually bringing on a crisis that has left 15 million Americans unemployed, and required large-scale taxpayer-financed bailouts to avoid an even worse outcome. Did Wall Street expect to emerge from all that without facing some new restrictions? Apparently it did.

His comments made me look back again to refresh my memory of the tax rates of the federal income tax.  In preparation for war and in time of war, during the late 1930s through the 1950s, marginal tax rates for those earning high incomes stayed around 90%.  Those earning and amassing great wealth were expected to pay most of it back into the system to support military families, war efforts, road building, crime prevention, agricultural infrastructure, small business support, unemployment, assistance to the poor--including children, widows, and others.  It was only fair that a system which prospered because of the hard work of the masses would structure a downward flow of resources from those who were benefiting most from the economy toward those on whose backs those benefits had grown, and to those who were most vulnerable to the harsh effects of economic processes.

It would be remiss not to remind readers that the lower tiers of everyone's income are taxed the same.  As a person's income rises, the higher tiers of that income become taxed at higher rates.  For most of the twentieth century, the federal tax rates had many tiers.  As one's income rose, one paid a lower tax rate on the lower amounts, then progressively higher rates on the additional amounts.  It made for complicated math, but it made good sense for trying to strengthen the entire economy.  There are still several "tax brackets," but the percentage differences are much smaller than they used to be.

In the prosperous 1960s, the top marginal tax rate declined to the 70% range, where it remained until 1981.  Having moved beyond World War II and the Korean War, having repurposed industry away from the build-up of conventional war materiel, the U.S. revised the taxation system to allow those at the top of the economy to retain three times as much as they previously had of their marginally high incomes.

Starting in the 1980s, the top tax rates dropped drastically.  The reasoning was that so many tax loopholes and exemptions existed, the people in the highest brackets were mostly avoiding paying those rates.  If loopholes and exemptions could be eliminated, then maybe they would end up paying their fair share with lower tax rates.  Ever since that time, people whose income is higher than 80% of the nation have paid a significantly lower portion of their income in taxes.  Yet they have grown to pay a larger share of the total federal tax bill because their incomes have increased four times faster than the lower income portion of the population.

Thus the last part of the twentieth century witnessed changes in the flow of resources within the U.S. economy.  Ross Perot's famous "giant sucking sound" was redirecting the flow of wage income away from U.S. workers and toward overseas workers, not merely in the Americas, but also in China and other Pacific economies, and even a few African economies.  On the taxation front, the wealthiest U.S. taxpayers now had to pay only half of the percentage of their marginally higher incomes than had previously been the case.  A major policy for redistribution of wealth was fully underway, with the help of government policies on trade, taxation, and labor.  But these were not the only massive wealth transfers happening.  Another regulatory change also redirected the flow of resources.

Usury caps had for centuries helped to prevent overconcentration of wealth among a few.  Keeping interest rates at relatively low levels slows the transfer of wealth from the lower-income groups toward the wealthy lords of finance.  As interest rates rise, debtors find it harder to get out of debt.  The history of sharecropping, company towns with company stores, tenant farming, and other such systems illustrates again and again that the power of lenders has to be held in check for the benefits of the economy to accrue in a fair and just manner.  Usury laws imposing interest rate caps are one of the best methods to do this.  But around 1980, a series of changes in law eliminated the regulation on interest charged by banks, credit card financiers, and other financial institutions.  The massive growth of consumer credit, the housing bubble, and many more destructive trends have led to huge transfers of wealth from average workers toward a financial elite through bonuses, short-term gains, and eventually through bailouts of the banking, finance, and insurance industries.

On one side, changes in tax policies reduced the flow of resources toward shared benefits and the common good.  In the middle, the flow of resources to U.S. workers stopped growing or declined, as wages flowed overseas.  On the other side, the income of low- and middle-income people began to flow into profits for the financial industry through a system designed to keep people perpetually in debt through high interest rates, exorbitant fees, and deceptive policies.  Like reversing the flow of a river, the resources stop going where they used to.  Instead, they go elsewhere to benefit a few and harm others.  This is not an argument for never meddling.  It is an argument for making decisions with the good of all people in mind.  That is what the biblical teachings on economic life tell us:  put in place economic structures that will prevent permanent indebtedness, harsh economic class divisions, and rewards for manipulating money markets.

Trade and Health Care Costs

I am not what you might call a "free trader," because what usually goes under the name of free trade is really a way of giving advantages to the parties (whether corporations, oligarchies, nations, or private businesses) who already have the greatest financial power. Breaking down "all" trade barriers gives the wealthy an open door to expand their economic power. Theoretically, it opens doors to small businesses, weaker economies, and entrepreneurs to gain access to larger markets, too, but that remains mostly in the realm of possibility when the big players are capable of exploiting the opportunities with greater speed and organizational prowess.

I put "all" in scare quotes above because so-called free trade and so-called free markets are never really free. Deregulation opens up paths of freedom for capital, that is for the financially powerful, but it often keeps up the barriers that would benefit common people. The unseen hand of Adam Smith's market is not strictly pursuing the common good. It is often the unseen hand that writes the fine print in legal documents, adds unrelated earmarks to legislation which benefit a few, holds the cigar and cocktail in the backroom where portentious decisions get made without considering the good of the average person.

Dean Baker calls the bluff of the "free traders" by bringing up health care. He proposes,

Suppose that people in the United States paid twice as much for our cars as people in Canada, Germany, and every other wealthy country. Economists would no doubt be pointing out the enormous amount of waste in the US auto industry. They would insist that we both take advantage of the lower cost cars available elsewhere and take steps to make our own industry more efficient.

For some reason, economists do not have the same attitude towards health care.

He goes on to discuss how the economics of health care is working against the U.S. Too many people in the U.S. operate under the misconception that "America has the best health care system in the world." Obviously the residents of the US have better health care than many places in the world, but the World Health Organization's most recent rankings of the health care systems of the nations of the world places the US at 37th out of 190, barely in the top 20 %. The right-wing free market advocates will pick at the WHO ranking system, pointing out potential problems with the statistics they consider, but taking pot shots does not make the glaring problems go away, especially the growing problems of lack of access.

So paying twice as much for less is not a good deal. If you want to read the rest of Baker's article, you can find it here.