Bushonomics 2
Making the rich, richer; the poor, poorer.
Robert Reich on “Moral Hazard”:
CEOs get away with stupid mistakes all the time. Some, like Robert Nardelli, the former CEO of Home Depot, drive their company’s stock low that their boards eventually oust them. But they leave with eye-popping going-away presents nonetheless. (Nardelli got several hundrd million dollars on his departure.) If you’re an average American who gets canned from his job, even through no fault of your own, you probably won’t even get unemployment insurance (only 40 percent of job-losers qualify these days). Conservatives tell us that unemployment insurance reduces their incentive to find a new job quickly. In other words, moral hazard.
Some CEOs use bankruptcy as a means of getting out from under pesky labor contracts they might have “known they could not afford” when they agreed to them (Northwest Airlines most recently, for example). Others use it as a cushion against bad bets. Donald (“you’re fired!”) Trump’s casino empire has gone into bankruptcy twice — most recently, last November, when it listed $1.3 billion of liabilities and $1.5 million of assets — with no apparent diminution of the Donald’s passion for risky, if not foolish, endeavor. After all, his personal fortune is protected behind a wall of limited liability, and he collects a nice salary from his casinos regardless. But if you’re an ordinary person who has fallen on hard times, just try declaring bankruptcy to wipe the slate clean. A new law governing personal bankruptcy makes that route harder than ever. Its sponsors argued — you guessed it — moral hazard.
Bush’s “ownership society” has proven a cruel farce for poor people who tried to become home owners, and his minuscule response to their plight just another example of how conservatives use moral hazard to push their social-Darwinist morality. The little guys get tough love. The big guys get forgiveness.
March 21, 2008 at 3:28 pm
The irony of Reich complaining about conservatives being for corporate bailouts and citing Lee Iococca’s Chrysler situation as an example is too rich to pass up.
It’s true that pure capitalism is a sink-or-swim philosophy, and these bailouts are not pure capitalism for sure. What I don’t understand is why someone like Reich cares all that much when in a world he designed, we’d all have to constantly bail out all industry failures, since they’d be government owned.
March 22, 2008 at 4:36 am
And of course it would be rude not to remember another champion of the Chrysler bailout, the well-known arch-conservative John Dingell.