1. tfk
  2. Shorter conservative take on Obama's response to the imminent financial collapse

Shorter conservative take on Obama's response to the imminent financial collapse

By tfk on September 17, 2008.

I don't know, but I suspect that Republicans think we Obama-voters are thinking this about the collapse of AIG and Lehman brothers:

I can't wait until President-for-life Hussein Obama X puts these people all up against the wall and expropriates their funds to pay for slave reparations.

As Atrios explains, we're heading towards a drastic financial situation. John McCain's response to the imminent collapse of the 18th largest corporation in the world is to claim that the fundamentals of the economy are strong. Obama knows that they aren't and haven't been for some time now. George Bush juiced the system to win reelection in 2004, and prolonged the housing bubble to try to retain his congressional majorities. Allowing the bubble to deflate earlier would've been more responsible, since it could've been done in a controlled way, but that would've meant accepting that the Bush economic policy had failed.

So instead, Republicans propped up a collapsing bubble with unwise policies, aided and abetted by financial industry lobbyists. Interestingly, those lobbyists compose most of John McCain's senior campaign staff, as well as his economic advisors.

There are a few Republicans who see how this could backfire on McCain, but I don't think they get the depths of the problem. It isn't just that McCain is inextricably linked to the very people who got us into this mess, nor that he denies that there's a mess (heck, he's still got 11-14 houses, so how bad can it be?). No the problem comes from Social Security.

In the wake of the roaring economic growth of the Clinton years, a lot of conservatives thought they could destroy FDR's legacy by privatizing Social Security. Let people invest their own money, and you divert funds away from the fund which pays current retirees, so that people would be afraid that the system wouldn't exist any more, and would therefore invest as much as possible in stocks, until there was no Social Security fund left, and retirees could go back to the salad days of the Great Depression, when retirement doomed you to poverty and starvation.

Fortunately, Democrats in Congress stood firm against efforts by John McCain to divert the nation's retirement fund into risky investments back in 2000, and did so again when Bush and McCain rolled out the same idea in 2005. Then the economy collapsed, and it became obvious why we need to keep Social Security safe.

John McCain wants to gamble away your retirement security net on the stock market. That may have sounded smart during the tech bubble or the housing bubble, but it was a stupid idea then, and an even worse one now.

(note: Most of this was written several days ago, then sat in my hopper while events moved ahead. Links are now outdated, but nothing that's happened changes this very basic point.)

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Policy and Politics

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Note that the US government is bailing out AIG, which is not even an American corporation. It's a multinational. We taxpayers are rescuing the big investors on six continents.

Shouldn't the question of bailout or not be taken up by the United Nations rather than US government bureacrats?

Instead our government will borrow from the Chinese, buying on credit.

By Gilipollas Caraculo (not verified) on 17 Sep 2008 #permalink

As I understand it, this is not a "bail out." The US government controls AIG, and gets the proceeds of sales of assets.

It's important not to confuse a) the privatization of social security accounts, with each individual taking on their own investment risk, with b) investing some portion of the social security trust fund in equities. There are strong political and moral reasons that we don't want each individual's social security to be dependent on their own investment acumen or the timing of their need with investment cycles. On the other hand, and despite the current downturn in the stock market, there is a very strong argument for b), given the long-term and collective perspective of social security. Every institutional investment fund, from university endowments to company pensions, invest some portion of their assets in equities. And will continue to do so, despite the inevitable downturns. And will do better for that diversification.