One of my heroes, Ronald Reagan, once said, â€œThe 9 worst words in the English language are: I’m from the government and I’m here to help.â€� Well we’re about to have what might be described as the greatest test of those words in the history of America. I was in New York over the last few days, being interviewed by the New York Times, which put me at Ground Zero for the cataclysmic events on Wall Street over the past 4 days. This is the worst financial crisis since the Great Depression- and, to be on the streets of New York, and around my friends on Wall Street, was to see, feel, smell and experience the fear up close and personal. I have never before seen such smart and confident people in such panic.
But there is also a big story about political corruption going on in New York at this moment- one that has not hit the national radar yet. But I believe these two big stories go hand-in-hand to prove just how out of control our government truly is. They prove the folly of government caring about â€œthe little guy.â€� They prove what I call â€œThe Big Lie:â€� the idea that our politicians serve the people, or for that matter even care about the people. The government may be here to help- but it sure isn’t here to help the taxpayers.
Neither Republican nor Democrats care about anything but themselves, big donors, big corporations, and of course preserving the current system that preserves their power. The big national news story was the disintegration of Wall Street behemoths like Lehman Brothers, Merrill Lynch, AIG and many other household names rumored to be on the financial precipice (such as Wachovia). We are witnessing the worst financial meltdown of my lifetime- and perhaps any lifetime. And in response, politicians at all levels of government and the infamous Fed are giving away our money. Yes, I said our money- yours and mine. It is the greatest corporate welfare giveaway in the history of the world. The billion-dollar taxpayer giveaway started with Bear Stearns, then grew potentially to trillions of dollars with the federal takeover of mortgage giants Fannie Mae and Freddie Mac.
Now, AIG is the next lucky recipient of the government-giveaway game. No sooner had the Fed decided to draw a line in the sand and allow Lehman Brothers to fail, than the politicians re-started the giveaway game for AIG. The Democratic Governor of New York David Patterson literally begged the Fed to intervene on behalf of New York-based AIG, only hours after the Fed stood firm against a Lehman bailout. Could that theatrical and hysterical plea by the honorable Governor of New York have had something to do with political donations from AIG to Governor Patterson or Democrat politicians in New York? Wouldn’t that be a big surprise?
In any case, just as I predicted, the Fed has already broken its own Lehman Brothers precedent to intervene on behalf of AIG. After bravely holding steady and drawing a line in the sand, the political winds blew that line to bits in a matter of hours. Undoubtedly Gov. Patterson was the first of many political insiders to call the Fed begging for help on behalf of AIG. I’ll bet that every politician who has ever taken a donation from AIG was instructed by their bosses (at AIG) to get on the line with the Fed to demand a bailout. So much for the idea of â€œgovernment backbone.â€� Who is next in line? Automakers in Detroit? Wachovia? The list goes on and on. The tab for AIG alone is $85 Billion (with a B). But hey, what’s $85 Billion among friends? After all, it’s only the taxpayers’ money.
The excuse for all this federal government intervention is that these companies were all deemed â€œtoo big to failâ€� and would induce â€œcatastrophic systemic failure.â€� The reality is Lehman was no different than the rest of the group, and its failure- while unsettling and frightening to investors- was actually absorbed quite well by Wall Street. I’m ashamed of my fellow capitalist warriors. The Kings of Wall Street play with other people’s money; take gigantic risks; ignore the worst-case perils; crow about capitalism while they are making huge profits; but at the first hint of failure, they run to government demanding that taxpayers on Main Street pay for their mistakes with government handouts, loans and easy money from the Fed.
My question as a small businessman is, who is bailing out Americans like me when I’m in financial trouble? Who in the federal government or Federal Reserve hands money out to millions of my fellow small business owners when we’re suffering a financial crisis? Small business is the economic engine of America- creating the majority of non-government jobs (and 75% of new jobs). Where are the late night emergency meetings on behalf of small business owners in distress? Where is the expansion of Fed Funds for the owners of small businesses on Main Street? Where are the government guarantees when we fail?
So let me get this straight. The government takes 50% of our profits (as small business owners), and when we’re in financial trouble, they give us back ZERO. But when a big corporation with expensive, connected lawyers or lobbyists is in trouble, that same federal government takes billions of our tax dollars to handout to them. Now, that’s a great deal if you can get it.
So it’s a double whammy to small business (and a double slap in the face)- when we’re in trouble there is no one to bail us out; we have to keep paying taxes into the system; and our monies are used to bail out others with political connections; all the while, these billion dollar bailouts devalue our buying power with the dollars we have left. Something is just not right here.
Worse, small business owners are merely in trouble because of a slowing economy. It’s not our fault that sales are down. But these big billion dollar companies like Lehman, Bear Stearns, Merrill Lynch and AIG are in trouble of their own making. They are run by big-shot CEO’s, who’ve made reckless decisions and bad bets. Why reward them for reckless behavior? Doesn’t bailing them out merely encourage them to take those same reckless risks again and again? Isn’t the point of capitalism and unfettered free markets to allow the smart and successful to rise to the top, and to punish those who make dumb mistakes or irresponsible bets? When did we change the rules of the game? When did CEO’s of the biggest firms in America become welfare queens?
Why should average American taxpayers be put on the hook for all the losses from reckless CEO’s wagering on exotic financial instruments like derivatives? Few of my small business owner friends even know what derivatives are, or how they work. I only know that they were a way for greedy Wall Street egomaniacs to leverage investor money by a factor of 20 to 1 (or higher), to produce massive profits on investments that no one (including the Wall Street analysts, experts or CEO’s) even understood. The risks blew up in their faces and now they want the American taxpayer to bail them out.
Well, who is looking out for our interests as taxpayers? Certainly not powerful politicians who are wined and dined by lawyers and lobbyists on behalf of corporate giants- then are handed a big fat campaign contribution at the end of dinner. Small business owners- that economic engine that creates the majority of jobs- cannot afford big-shot lawyers, lobbyists or consultants. We can’t afford to wine and dine politicians. We can’t afford to pay for Congressmen’s vacations. Nor can we afford to legally bribe politicians with big fat donations. We’re too busy working and trying to earn a living. So it should come as no surprise or coincidence that taxpayers on Main Street get the short end of the shaft.
That brings up the second big story in New York while I was there. It turns out that powerful Democratic Congressman Charles Rangel- who is CHAIRMAN of the Ways and Means Committee of the United States Congress (the group that determines tax policy for all of us) doesn’t like to pay taxes himself. It turns out that he’s owned a fancy home in a fancy Dominican Republic resort for years- allegedly without disclosing his rental income to either the IRS, or to Congress (on required Congressional disclosure forms).
If you or I did that it would be called â€œtax evasionâ€� and we’d be sent straight to prison. But Charlie Rangel appears to be different than your typical taxpayer. He simply confessed (after being caught red-handed by the New York Post), agreed to pay a small fine, and now refuses to give up his powerful Committee Chairmanship deciding tax policy for the rest of the country. Can you imagine? He allegedly cheats on his taxes- commits a FELONIOUS CRIME- and he thinks that he deserves to keep his job deciding our tax laws.
How do these two controversies tie together? Anyone who now wants government to create more regulations and take more control over Wall Street has learned the wrong lesson from this crisis. Government is incompetent. Government knows nothing about economics or finance. Government doesn’t care about taxpayers. When government needs money, they simply create more money by raising our taxes and printing more money (which dilutes the value of the American dollar). When government wants to create jobs, they simply raise taxes on some of us, to create unnecessary jobs for others.
And then there are the people who run the government- the Charlie Rangels of the world. These arrogant politicians create the tax laws to pilfer money from our pockets as taxpayers- then they break the very same laws themselves. They believe they are above the law. They believe that tax laws are for the rest of us mere mortals- the little people.
Why would we want the same government that has produced a $400 Billion budget deficit, and a $9.5 Trillion dollar national debt, to take more control of our financial system? Why would we want the people, who have managed Social Security and Medicare to the brink of financial ruin, to take more control of our financial system? Why would we want the same people who already oversee and regulate Wall Street, and have therefore presided over this catastrophe, to now create more rules and regulations? What would make you think that the very people who presided over the first mess, can now prevent the next one? Why would we want the Charlie Rangels of the world to take more power and control over our lives? Why would we want to elect politicians who promise to increase taxes again- so that they can use the additional money they’ve taken from us to bail out the next Bear Stearns, Fannie Mae, Freddie Mac or AIG?
The only lesson to be learned from this financial crisis and Charlie Rangel’s little â€œtax problemâ€� is to take the power away from government. We must make government smaller. We must give politicians less power and control over our lives and finances. We must de-regulate, not add more regulations. We must lower spending and taxes dramatically to allow our economy to recover from this crisis. More taxes and regulations will only deepen the crisis. We must ask government to get out of the way. We must leave free markets free to profit and to fail. And if we want to avoid the next financial crisis, we must stop rewarding those who caused this crisis with their irresponsible decisions. We must stop bailing out and handing out taxpayer’s money to those with the most powerful and expensive lobbyists and lawyers. Handing AIG more of the taxpayers’ money when they fail is not the solution. Handing more power to Charlie Rangel is certainly not the solution. The only real lesson in this tragic story is that government doesn’t have the solution. Government is the problem.
Both Republicans and Democrats are on record as supporting bigger government, more regulation, more power, more control over private markets and the American economy. Only the Libertarian Presidential ticket of Barr/Root supports smaller government, lower taxes, free markets, and more power to the people.
Wayne Root is the Libertarian Vice Presidential nominee on the Libertarian Presidential ticket of Bob Barr/Wayne Root. His web site is: www.ROOTforAmerica.com.