So Let it be Written, So Let it be Done!

April 17, 2009

On Teaparties and the Problem with Perspective

Filed under: kamakula — kamakula @ 9:36 pm

So, April 15th was the big national day for tea parties around the country. The average American protesting the unjust tax policies of the Obama administration. There was also some (likely confused and misdirected) unrest towards Wall street. Well, actually, the tea parties weren’t all about that (or I can argue, taxes were the least of the issues that the tea parties were concerned with, but for arguments sake, I will only address the financial angle organizers and participants extolled).

First, let’s address tax. The argument is that it is unfair for Obama to take MY money and give it to some no good lazy slob who can’t afford to take care of themselves or even has the gumption to work three jobs like he should. Of course, I only have to work one job because I got a good education, connections, or something. Here’s the problem with that argument. Obama’s actually LOWERING taxes for over 90% of Americans. Those who do see a tax increase, only see their taxes grow to what they were under Clinton.

So, what exactly is the argument here? That Obama should actually tax me MORE? Perhaps the argument is that it’s unfair to raise taxes on the rich, that we should all pay taxes equally. That the rich are the ones who stimulate the economy? Hmm. Here is the problem with that argument. Let’s take two people. Person A rents an apartment, works 40-50 hours a week to barely make ends meet. He lives month to month. Person B is paying a mortgage on his house. Has a job that pays him pretty well so that he can contribute to savings, retirement accounts, etc. Now, if I were to hand $1000 to both of these men, where would it go?

Person A would likely spend it on food, rent, clothes, transportation, something – this something stimulates the economy. Person B could likely spend it on similar things, but he is also likely just to put it in savings. Let me bring up another situation. Person A is at the poverty line, let’s say 12k/yr for some state. Person B makes 100k a year. While having a flat tax seems to be equal and fair to all, think about what a flat tax of say 20% does to Person A versus Person B. That $2400 could mean someone goes hungry one week a month, gets substandard clothing, food. That could mean a child doesn’t get health insurance, access to good nutrition or after school programs – things which AFFECT school performance and deliquency. On the other hand, $20k to the other person may mean they can’t afford to buy a new car this year, or take the entire family to Europe on vacation.

The point of these exercises is to demonstrate that a fixed amount of money or fixed tax rate has different implications when you are poor, when you are doing ok, and when you are wealthy. What’s even more insidious though is the prevailing mindset that “if I can work hard and make it, so can you”. NO. THAT IS NOT THE CASE. Growing up without one parent can make a huge differnce when there aren’t other family members who can fill that void. Growing up malnourished, seeing your parents spend most of their waking hours working to never advance in their lives, growing up where crime is a way of life, all of that affects a person. Their outlook, their decisions. But even more devastating, the opportunities available to them and their ability to take advantage of them.

So, while there is that aspect, there’s then the “anger” over those homeowners who got bad mortgages. This problem is very complex and I’m not going to attempt to fully deconstruct it now. Instead, I will just make many points, and hope you start to get the gist of what’s going on:

  • It is the “American Dream” to own a home.
  • The whole point of a mortage is to amortize the actual cost of the house. While amortize tends to mean “spread the cost out”, it’s real meaning is “hide”. Seriously, unless you’re getting the best rates, you could end up over the life of your mortgage paying 1.5 or more the value of your home. Nobody wants that. That’s partly why we lull oursevles with monthly payments that look very similar to what we’ve been paying in rent.
  • Bankers SOLD people they KNEW could not afford the ACTUAL terms of the mortage those mortages.
  • Many people were finessed into buying more home than they could afford.
  • We live in a debt driving society. Look at the savings rate up through 2007. I believe by 2007, the average was NEGATIVE. That means our society has gotten to the point where on average, we spend more money than we save.
  • We are bailing out the banks and other financial institutions because if they fail, they take everything down with them and then we’re truely fucked. Think about it this way. You’ve  had a steady job, gotten several credit cards and nearly maxed them out, but able to make the payments. Suddenly, you find out that your job is shipped overseas and you have to work for less. You have major bills due. You can pay rent and food, but that means missing a payment on a couple credit cards. What happens if after a couple months of missing a payment here and there while you attempt to fix your life, your credit card company decides to just close your account and ask you to pay in full? Let us assume you pay them in full – now you’re fucked. Because now, instead of being behind on one or two cards, you’re now behind on ALL. And you owe rent, need to buy food, pay for car insurance, all with money you no longer have. That’s where our financial industry pretty much got to be, only on a much bigger scale. They owed each other money, and at some point found out that cushy mortgage they were holding was no longer so great. With their source of income cut off, other creditors feeling the crunch of having their income cut off and calling in their debts in full instead of letting things ride, our economy took a turn for the worse.
  • Just how ethically or morally bankrupt is it to be angry at other people for getting screwed for engaging in pretty much the same behavior that we were? Their only problem, for some reason, they got the bad end of the stick

Anyway, that’s it for now.

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