Lead up to economic crisis should have raised red flags

Tuesday, October 14, 2008 | 9:31 a.m. CDT; updated 2:38 p.m. CST, Monday, February 2, 2009

The pending Presidential election is forced to compete for news with a troubled economy, one deemed by sundry pundits, scholars, economic doom sayers and prognosticators to range in degree from severe recession to global depression. We are told by socialist leaning "experts" that capitalism has failed of its own flawed premise — by the right that government interference is the proximate cause — while the rest of us hope the solutions do not get sidetracked by overzealous legislators more interested in assigning blame than finding a cure.

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Actually, the catalyst for the economic crisis, the housing market crash, should have been easy to forecast. In my memory, to qualify for a home loan, one had to show steady employment, enjoy reasonably good credit and, except for certain G. I. loans, provide 10 to 20 percent in down payment. However, in the late 1990's, with both political parties sharing culpability, the American Dream of "everyone a home owner" was foisted upon the lenders with little consideration of the consequences.

The government's "leveling the playing field" by requiring loans be granted to those without requisite qualifications, waiving down payment and, in some instances, lending up to and including 125 percent of the purchase price should have flagged someone's attention. One would believe that a more prudent administration and legislature might have foreseen that opening the piggy bank to those previously considered poor credit risks was an invitation to disaster.

The collapse of the housing market and its attendant effect on credit availability has caused massive unease on Wall Street as seen in the downward spiral in the stock market. Accordingly, when the government creates a financial snafu, that same government hits on the taxpayers for the cash to ease the credit crunch. Historically, with or without the infusion of taxpayer money, the market would have corrected itself — the action of Congress may or may not speed the process.

One of the more troubling aspects of the stock market turmoil is seen in the "I told you so"'s of elected officials, editorial commentary and letters/blogs praising the decision to deny social security reform by partial privatization. Citing the current stock market woes, the critics pointed out almost gleefully that this money lost in the stock market would have been devastated retirement accounts, particularly those of senior citizens.

That these fault finders either failed to do their homework or are engaged in a deliberate deception is apparent to anyone who has studied the proposal. The first deception is the notion that seniors would be adversely affected — the reality is that persons over 50 years of age are not eligible, instead they remain vested in regular social security.

The partial privatization plan presented by President Bush was identical to that of the commission chaired by former Senator Moynihan of New York and supported by former Senators Bob Kerrey and Bill Bradley of Nebraska and New Jersey respectively — three Democrats. In giving up a portion of the social security contribution to establish a private account for individual investment, the younger worker had a nest egg separate from social security, one that could be passed on to his or her heirs.

Contrary to the misinformation provided by the plan's opponents, each worker had the option of participating or of remaining invested in the traditional social security net. Additionally, those electing for private accounts could choose to invest in savings bonds, government securities, or the stock market. Regardless of the investment option selected, any choice would out perform social security over the long haul.

Partial privatization provides a dual benefit to younger workers — the remaining portion as a safety net plus the individual account of their own. The opponents of private accounts mounted a spirited and decidedly disingenuous campaign against them by insinuating that American workers were not capable of managing their finances and by enlisting the aid of the AARP whose age 50 plus membership really had no dog in that fight.

Oddly enough, the leading edge of the resistance is found in the Democratic Party which likes to portray itself as the champion of the working man and woman. The late Senator Moynihan may have provided insight into this enigma when he was asked why liberals were reluctant to alter social security so that it guaranteed wealth as well as income. He jokingly responded, "It is because they worry that wealth will turn Democrats into Republicans."

J. Karl Miller retired as a colonel in the Marine Corps. He is a Columbia resident and can be reached via e-mail at

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John Schultz October 14, 2008 | 9:55 a.m.

Good points on Social Security privatization and some of the bogus arguments against it. Below is a recent article that I thought raised some good points on this issue as well, especially in light of the recent market turmoil:

(Report Comment)
Charles Dudley Jr October 14, 2008 | 10:23 a.m.

The one problem is privatization does not guarantee security and although the government is only a little better at doing this there is only a minority of citizens who want privatization. I wonder what the original founders of Social Security would say today if they could speak on this issue. If those funds people payed in were not allowed to be touched by the Feds who consistently borrow off of them yet pay nothing back those funds would still be there. What we need is new legislation in place to prevent the Feds from skimming off of those funds.

(Report Comment)
John Schultz October 14, 2008 | 2:49 p.m.

Correct, privatization does not ensure security, but prudently investing over decades of employment and showing the proper risk aversion (i.e. moving from stocks to bonds and similar income generators as one ages) would do a heck of a lot better job than the current government system.

People have a desire to make good investments when they plan for their retirement; government has no such mandate.

The founders of Social Security might have one thing to say about it, but I dare say the founders of our nation would have quite a different opinion.

(Report Comment)
Charles Dudley Jr October 14, 2008 | 3:29 p.m.

Ya John the founders of our nation would be alot more towards the government taking care of their own citizens who have paid in their shares over time as one would think and wondering how the idiots we have in office today have screwed things up so miserably as well. They would also wonder I suppose about all of you uncharitable fat cat so called partakers in the human race who only care about yourselves and not about anything else but your own money and your obvious greed and the need for power over your fellow citizens.
Ya our founding fathers would have alot to say about how things are run today.
I bet this past President would have alot to say:

(Report Comment)
Mark Foecking October 14, 2008 | 3:53 p.m.

The founding fathers wanted as little government as possible. They wanted this nation to be one where people could act as they wanted, spend as they wanted, without heavy handed taxes that only benefitted certain people.

Somewhere that message got lost.

Our government was originally created to provide for common defense and regulate interstate commerce, not redistribute wealth. That happened in this last century, when politicians found out how good a vote-getter it was.


(Report Comment)
Charles Dudley Jr October 14, 2008 | 4:17 p.m.

Ya too often this society forgets as well this country was founded on Christian Principles as well and one of those principles is taking care of your own. Others are taking care of the elderly,taking care of the infirm,taking care of the less fortunate and many more. I do not think our founding fathers would approve at all of how people treat each other today at all.

(Report Comment)
John Schultz October 14, 2008 | 4:27 p.m.

Davey Crockett understood the message after it was explained to him, below is one link I found to the story I have heard before:

Read it and let me know what he got wrong.

Yes, we should take care of our own, not government. I volunteer, I donate to charity. I walk the walk, Chuck. uncharitable fat cat so called partakers, indeed. <snort!>

(Report Comment)
Charles Dudley Jr October 14, 2008 | 6:33 p.m.

And the people understand and are fed up with big oil,big corporations and so called "government for the people" sponsored by the "fat cat bureaucrats" that only keep cutting needed programs,taking their cuts off the top and making our world worse for their own gains. That John is just not right.

(Report Comment)
Mark Foecking October 14, 2008 | 7:01 p.m.

Actually, those big corporations have given everyone in this country a pretty decent standard of living (if perhaps at the expense of others in the developing world). Sure some live better than others - some are more talented, work harder, or take bigger risks than others.

Contrast our standard of living to that of Russia, or China, or North Korea or Cuba. These are examples of what happens when you take away the profit motive. Wouldn't you rather be here?


(Report Comment)
Charles Dudley Jr October 14, 2008 | 7:10 p.m.

Ya and those big corporations like WalMart have class action law suits in almost every state of the country for the failure in paying back over time and benefits due to it's employees along with a host of other charges relating to labor issues. Also those big corporations only got where they are due to using their employees and shoving them through the meat grinders of employment all the while short changing them on benefits and pay raises.
Ya Mark we should all bow down and worship corporate America as our God and let them shaft us as we say our "hail all mighty dollars" mantras.

(Report Comment)
John Schultz October 14, 2008 | 7:22 p.m.

If Wal-Mart is found to have treated their employees unlawfully, that will be taken care of in court and those employees will be compensated in some manner. I doubt you would find such relief in less-capitalistic countries as Mark mentioned.

I work for a large company, probably a larger one than the vast majority of Columbians do. I don't feel they have put me "through the meat grinder of employment" at all. They pay me a good wage, decent benefits, and provide a good environment to work at. I have worked for both small and large companies and in my experience have been treated well. Maybe Chuck has some past experiences to make him this bitter towards the free market, but I like having food to eat and a house to stay in, something I wouldn't have without a J-O-B that my employers have provided.

(Report Comment)
Mark Foecking October 14, 2008 | 8:11 p.m.

No one says to worship them. If a company is not selling a product that is meeting a need, it will go out of business (and its employees will have to find new jobs). If a company is meeting peoples needs, it will thrive, and its employees along with it.

Walmart had one class action suit against them for pay and benefit issues, to my knowledge. Are there more?

Most successful companies have suits against them for whatever reason. Comes with the territory these days. I wonder who has done more toward the redistribution of wealth in this country - the government or the legal profession?


(Report Comment)
Charles Dudley Jr October 15, 2008 | 4:09 a.m.

Well I bet over 175,000 who have lost their jobs to out sourcing over seas and all of those citizens of this country who have lost their jobs to out sourcing over seas would tend to tell you John Schultz you are full of the proverbial poop in your complimentary attitude about big corporations.
This is not about my experiences in the labor markets by far but this is about a countries experiences in big corporations who have now taken their jobs over seas so they do not have to pay a good wage or benefits to their employees thus taking almost all of the profit to stuff into their own coffers. There is your so called and oh so good big corporations.

(Report Comment)
Charles Dudley Jr October 15, 2008 | 4:12 a.m.

Mark you need to go really study just how many class action law suits are going at this time against WalMart for failure to pay overtime due,back pay,benefits and other various charges of labor disputes.
Here you want to know how some feel about WalMart you can go read here:

(Report Comment)
Mark Foecking October 15, 2008 | 9:04 a.m.

Jobs are going overseas because of labor costs. If the same, or superior labor can be had in Asia for 1/10th of what it can here, of course the jobs will move (even with higher shipping costs). If the unions, and regular employees, would have thought of that before pushing for higher and higher wages, then a lot of them would still have jobs.

This will likely change as energy becomes more expensive. Shipping costs may become so much higher that it is cheaper to make things here again. However, those things will be more expensive than they are now.

A site called "" isn't my idea of an objective source, and simply doesn't support your assertion that Walmart has an unusual number of labor disputes and suits against them. In just the bit of research I've done, I didn't see much out of the ordinary. Do you have a more mainstream source for your information, or is this just another example of your hatred for successful businesses?


(Report Comment)
Charles Dudley Jr October 15, 2008 | 9:41 a.m.

Mark did you read all of that site. It has both good and bad sides to the issues presented. Unless you only look at sites that make WalMart out to be the God of commercialism. I used to work for WalMart and I do know first hand all of the B.S. alot of their employees go through and have been through working for them. They could not ever pay me enough to go back to work in that hell hole of the labor market ever.
Yes jobs are going over seas due to labor costs and those added and saved profits being skimmed by the big corporations are going right into their coffers not to fund the circus that comes to your town yearly.
Only when citizens stand up as a whole to put an end to this treatment by big corporations of their employees is such deplorable ways will then the big corporations get the message.

(Report Comment)
Mark Foecking October 15, 2008 | 10:31 a.m.

If people want to punish a corporation, then they shouldn't buy their products. It's that simple.

Walmart isn't a "god" of commercialism. They simply have a retailing model that is very competitive. It is not a model that will be as competitive in an era of expensive energy.

Corporate profits go into the coffers of their shareholders. Someone that wants some of those profits can buy some of their choice of stock. What's so evil about that?


(Report Comment)

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