Champagne bubbles, dot-com bubbles, credit bubbles, and bursting dreams.
After a lecture in Poughkeepsie in mid-November I had take a car down to the White Plains airport at 3 AM in order to meet my class in Atlanta. The driver—let’s call him Don—was a big, burly, solid man around fifty with a New York accent that made me feel right at home.
He turned out to be a retired police officer, pro-Obama, a classic New York Democrat like his father and grandfather before him. Don could care less about Obama’s name or race, but as a struggling entrepreneur with two daughters in college he was very, very worried about the economy.
As we chatted in the dark along the highway, he described driving limos after his twenty years were in, finally saving enough to buy his own car and be his own man. “Normally I wouldn’t have to take a ride at this hour. I would pass it to somebody else. But nobody’s traveling any more. I’m down to half the rides I used to get. Everybody’s 401K is a 201K.”
Obviously he hadn’t lost his sense of humor, but times were bad for him and getting worse. Even mighty IBM, the rock-solid business behemoth of that part of New York, had cut way back on travel, and private customers he used to rely on were canceling long-planned rides. He does have his police department pension, but his dreams are receding, and possibly his daughters’ dreams as well.
Irrational exuberance. Bubbles. Credit swaps. Mortgage-backed securities. Bankruptcies. Bailouts. Toxic assets. Banks and industries too big to fail.
Don the limo driver doesn’t understand it. He served New York for twenty years trying to keep a lid on crime and protecting the wealth of the rich. Then when it was finally his turn to dream big, those guys he drove around were not so rich any more, and the economy he counted on started to crumble under his wheels.
I don’t understand it, and if you’re honest, neither do you. Not even if you’re an economist. How do I know? Because if you understood it you would have predicted it, and almost no one did.
Blame the Republicans? Sure, why not. Ignore the fact that the Clinton administration left a huge dot-com bubble about to pop, taking credit for the swell economy but ignoring the swollen expectations that were already crashing as they left office. Ignore, too, the fact that Congressional Democrats like Barney Frank were encouraging millions of poor people to take out home loans they couldn’t afford, setting them up to lose those homes and much else they had worked for.
This is a bipartisan mess. Does it have a bipartisan fix? It doesn’t have any fix that I can see. It has band-aids maybe that will slow down the bleeding. Obama started lowering expectations in his acceptance speech. Not in the first year, maybe not in the first term… He’s picked some good people, no doubt, but if you think they know much more than the clowns confronting the problem now, I have a nice bridge in Brooklyn that I can sell you very cheap.
Obama says he will create two-and-a-half million jobs in two years. With what money? He’s already laying aside campaign promises. Tax increases for the rich are off the table, because when the rich get hurt they hurt the poor. He now understands that withdrawal from Iraq will be a slow process, or he wouldn’t be making Hillary Clinton Secretary of State, and he wants to send tens of thousands more troops to Afghanistan.
This will be very painful for a very long time. Another million jobs will be lost in the next year, not to mention millions of homes and millions of dreams.
The Obamas, good parents that they are, are sending their girls to the best private school in Washington, while Don struggles to keep his girls in a modest college and scores of millions can’t even dream of a decent education for their children. Republicans and Democrats deregulated capitalism and fostered bubble-blowing until the bubbles blew.
Now Republican socialism is the order of the day, and the commissars at Treasury are issuing decrees, reversing them, bumbling along and breaking promises as clumsily as any Soviet bureaucrat. And on January 21st, Republican socialism will become Democratic socialism, because nobody knows what else to do.
Congress will go on pointing fingers and reading the riot act to captains of industry and the sorry gang of sleazy bankers who backed them, but in the end they fly back in their corporate jets and are bailed out with or without the Treasury’s billions, because they have their own guaranteed golden parachutes. The worst got their winnings years ago, and they’re not giving them back. It’s champagne and caviar before, during, and after.
These guys get theirs in the beginning and the middle of the bubble, and (as in a Ponzi scheme) they get it from little people who come along later and don’t have a prayer of understanding the game. All they understand is that they lose. And someone like Don the limo driver will ferry the bawled-out bankers and industrialists from Congress to the airport, where they stride across the runway with little smiles on their faces.
Because, as one of the wiser financial-news pundits said on TV last week as the market tanked again, the 401Ks are collapsing, but the phone book in the Hamptons will not change very much.