The nagging financial crisis has been an impetus for relentless populist backlash against affluent Americans. Since the birth of our nation, Americans have prided themselves as hard workers who aspired to improve their lives and pass on their wealth to the next generation. In 2008, everything changed as wealthy people were unjustly incriminated for the country’s economic woes. And now, President Barack Obama has kicked off an unprecedented, nationwide effort to redistribute America’s wealth.
Liberal media outlets, lawmakers who represent poor regions of the country, and union workers have jumped on the president’s bandwagon. Left-leaning talking heads have conducted a campaign to extract more from the affluent, as if their wealth is an unlimited resource that can be tapped when the country needs more money for social reform. Congressmembers serving lower socioeconomic areas and unionized districts have to sound the socialistic clarion; otherwise they run the risk of not being reelected. They say the rich do not pay their fair share, and affluent people are living off the hard work of the middle class, and a number of other rebel-rousing mantras.
And yet, these same talking heads and lawmakers are never receptive to the possibility that there are billions of dollars of over-spending and wasteful projects funded by the government. And maybe, a combination of spending cuts and tax increases is the best approach to solve our nation’s financial problems. Before affluent citizens are asked to give more, our elected officials should do their job and ensure that our tax money is being well spent.
At first, the venom of the populists was directed principally at bankers, best exhibited by the financial crisis congressional hearings. Informed observers stipulated that Congress urged lax standards for new home buyers, country banks abandoned credit standards for new mortgages, borrowers lied to get money that they gambled away on over-priced houses, and the rating agencies “forgot” how to properly analyze risk. But, this did not matter because bankers made “big money.” Even though mortgage bankers who violated the rules (and should be cited) represent a tiny number of commercial and investment bank employees, all bankers are being chastised. It is a wonder that Congress did not enact legislation to require bankers to wear a “B” on their chests.
Then we had to listen to the ranting of Senator Carl Levin, who cursed and called bankers liars without giving them a chance to testify or even respond to his charges. Instead, Levin and his cronies ridiculed financial executives for political purposes. It was a modern day Salem Witch Trial sans the execution by fire.
Representative Barney Frank touted the ills of Wall Street, even though he is most responsible for lax lending standards at Fannie Mae and Freddie Mac. Franks’ legislation was directly responsible for loans made without salary verification, loans above the market value of homes, and loans that effectively trapped many borrowers in unfair covenants. Congress spent weeks analyzing if one particular mortgage backed transaction was improper, while Fannie and Freddie equity came crashing down to mere pennies.
Regarding the transaction (Abacus 2007) mentioned above, very few people seem to grasp the fact that the principal issue was whether an investment bank had misled investors. The truth is that the investors involved were multibillion-dollar banks that had been buying mortgage securities for years, and they went largely unreported. The market turned against them, and they cried foul, allowing Levin and Frank to spin a misleading and deceitful web to implicate others. No widows or orphans lost money in this deal; widows and orphans that owned the equity of Fannie Mae and Freddie Mac, on the other hand, lost a fortune.
Class warfare has become a crusade to increase taxes on one group, and make it difficult for its members to pass on their wealth to the next generation. For some strange reason, many populists think it is morally wrong for affluent people to give their children money at death, unless it is taxed once again, even though the money was taxed at nearly 35% by the federal government when originally earned.
It is time to enact prudent regulations to protect our economy and close abusive tax loopholes for both corporations and individuals. However, increasing taxes on the wealthy without first eliminating unnecessary and wasteful government spending is bad policy.
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