Sunday, May 20, 2012

My Sunday Feeling

As some of you may recall, financial matters interest me. It's not that I have any money to speak of.  I am not a wealthy man by any stretch of the imagination.  But I can meet the bankruptcy code's definition of solvency.  It's not much.  But I can do it. 

Like many people, I just kinda fell into what became my life's work.  I got hired right before the bankruptcy lawyer left.  Hence, I became the bankruptcy lawyer.  And I practiced bankruptcy law for many years.  I have litigated with and against various lending institutions.  Over time, I came to develop a keen interest in how individuals and institutions make decisions about money and finance.  This is partially why a local consumer group with a highly alliterative name hired me as a consultant. 

As the line in the song by Adele goes, "People are crazy.  People say crazy things."  They especially say crazy things about money and taxes.  Especially during an election year.  Just a couple of weeks ago my friend Jennifer felt led to render a disquisition on Facebook about tax policy, of all goddamn things, for lack of a better title.  While it is not known what set her off specifically, she was in high dudgeon against the nutbar notion that "Taxation is Theft."

And she rightly pointed out that while we are all entitled to our opinion in this regard, the government has to pay for police, and filling potholes and raising armies etc somehow.  These things have to be done.  Most of the police powers of the states and towns cannot be privatized.  The good and useful things that are necessary for our security and for domestic tranquility are paid for by our taxes.  Indeed, I started to join her discussion by quoting Oliver Wendell Holmes's (I think it was) famous dictum that "Taxes are the price we pay for civilization."  But she was on a roll and I have learned to stay out of her way at these times.

In his column Thursday about the Euro crisis, particularly as it pertains to Greece. the New York Times's Paul Krugman made an observation about the difference between the Euro crisis and the financial meltdown of our own.  (By the way, the chapter on Greece in Michael Lewis's excellent book about about the global financial crisis called "Boomerang" is entitled "They Invented Math.")It's pretty simple.  A retiree in Florida was still getting her Social Security checks and still had access to Medicare despite the fact that our economy had gone to hell in a bucket.  Her Greek counterpart has no such  assurance from her government.  Here's the column here:

I hadn't really thought about it precisely in those terms.  But he is correct.  Most people in this country still believe that there is some sort of social contract between the government and you and me.  When I call 911, I expect somebody to answer.  I expect the police or the fire department to come.  I expect to have my garbage picked up.  Pick your favorite service. That's because I pay taxes so that government can provide these services.

Here's another angle.  Greeks are starting to withdraw their money from the banks.  It's not a full blown run on the banks yet.  Krugman refers to it as more of a "jog" on the banks. A jog on the banks would not even happen in this country.  A run on a bank is the nightmare scenario.  That is why the FDIC tries to take a over failing bank long before folks start showing up with suitcases and pillowcases seeking to withdraw all the cash they have on deposit.  The FDIC takes it over.  Sends the Officers packing and opens the bank the day after it is put into receivership.  Representatives are there to reassure the depositors that their money is safe.  And thus the crisis is typically averted.

Although the banks pay a fee for FDIC insurance, when it comes down to it the depositors' money is backed by the Full Faith and Credit of the United States Government.  I wouldn't trust the government, such as it is, of Italy with a wet match.  Isn't guaranteeing the stability of the banking system a cultural good in and of itself?  And let's leave the latest debacle with JP Morgan out of it.  JP Morgan can handle a 5 billion dollar hickey.  Indeed, its stock will probably head South which will create what is referred to in the investment game as a "buying opportunity."  Ironic, non?

My larger point is this.  We are going to hear lots of crazy things about money and taxes in the months to come.  Arguments concerning government programs and the what constitutes the wisest use of tax proceeds have been around since Alexander Hamilton floated debt obligations to fund the Revolutionary Army.  Twas ever thus. 

But taxation isn't theft.  It's the price we pay to keep the Social Security checks going through hell and high water.  It's the price we pay to take banks away from idiots.  It is the price we pay for democracy.  It's the price we pay for not being Greece, Italy and Spain. 

And to you stalwarts that spout what the Internet informs you was written by Ayn Rand, you recipients of regularly delivered mail who evidently expect water to magically appear when you turn the tap, to you I ask, "This is a bad thing, how?"

No comments: