Monday, December 22, 2008

Bailout Ruminations

The government has stepped in yet again to extend taxpayer funds to a failing auto industry; and industry that is failing because of government regulation, union strangulation and generally poor and over-compensated management. They make good products that no one can any longer afford to purchase. Perhaps they ought to think about making their product affordable instead of everyone having to go into long term debt for the privilege of having transportation.

There is absolutely zero transparency as to where our money is being spent in the $700 billion dollars worth of TARP bailout money that Congress handed over to the Treasury Secretary "carte blanche". Government control of industries across the country are taking place with taxpayer money being used to buy equity holdings and other measures of control. It seems every sector is looking for a handout now that housing, financial and automotive are being propped up. We are truly mortgaging our children's financial future. It won't be long before we get hit with rampant inflation since the Government printing presses are printing more and more money. Money market yields are near zero. Savings accounts get little interest. There is no incentive to save. There is more incentive to borrow and spend.

But this economic problem that we are facing has deeper meaning and deeper systemic roots. Let me tell you a few stories:

My parents and their parents were children of the depression. They experienced it all first hand. They used to chide me for spending money and not saving more - they had a depression mentality that pushed them to use everything to the fullest and never waste a thing. They saved bags and wrapping paper and cooking grease and soap scraps. They saved aluminum foil and jars. They wrapped their sofa in plastic so it would last long and they didn't open the curtains for fear the carpet would fade. They really cared for all their possessions and they always bought good quality items. Everything they bought was meant to last.

Most of all, they loathed government handouts - which they called "relief". To be on "relief" was shameful. It demonstrated a weakness in not being able to care for yourself and provide for your family. Quite frankly they would rather do without, then live on "relief" or any kind of welfare.

I don't think my grandparents even owned a credit card. They bought their house and cars with cash. And while things admittedly were cheaper then, they were still relatively expensive given the level of wages and cost of living. When my grandparents got older, they did get Social Security, but they accepted it only because they had paid money into the system when they worked. To them, it was their own money that the government was giving back to them. That was in addition to the money they had saved up on their own. They lived very comfortably in their old age; certainly much better then they would have if they stayed in Europe.

My grandmother came here from Eastern Europe when she was 20 years of age, on a steamer ship with pretty much the clothes on her back. She cleaned toilets to make a living until she began cooking for hotels and delicatessens. Her siblings eventually came here to this country too, and those that stayed behind were eventually murdered by Hitler. My grandmother's brother also worked hard after he came to this country and he eventually made millions exporting clothing to Europe and Mexico. His story truly was that of the American Dream. He came here poor and died wealthy.

My grandfather worked in the furrier business in New York and he and my grandmother squirreled every penny away until they saved enough to buy the things that they wanted. They worked hard and they lived well, and for the most part they were happy and raised a decent family. They had no one to meet them with welfare at Ellis Island. They had to have sponsors when they came here and promise not to be a burden to the government or anyone else. They arranged for their own health care. They liked it when government stayed out of their life. They made it in this country by hard work and enduring tough times. They didn't even have a notion that anyone should take care of them except themselves. They expected no entitlements, nor did they want any. They never considered themselves poor. They never had a victim mentality.

That is probably the norm for many immigrants who came here legally in the 20's and 30's and became citizens and followed the laws. To them, coming to America was a chance to escape the fascism and anti-semitism they faced in Europe. This was a land of opportunity. There was anti-semitism here too, but not the kind that got you into a gas chamber or your town burned to the ground. My grandfather's family had a farm that had been taken away from his family by the Communists. His family was "allowed" to stay on the land. My husband's grandfather owned a department store in Essen until the Nazi's took it away from his family, along with the house they lived in. There is more to that story, but the bottom line is that in both instances relatives of mine and my husband's were outright robbed by their respective governments. Unfortunately, it's not much different from what we saw here in this country most recently with Susette Kelo, et al., in New London,and others who are subject to eminent domain abuses, but I digress.

My parents were a bit more "Americanized" in their ways. My dad was a WW2 veteran who had served in the Fiji Islands during the war. He did pretty well raising a family of 3 kids on one salary as a produce manager in a supermarket chain. He only had a high school diploma. Us kids were fortunate to be able to afford to go to college by saving money in summer jobs to pay for tuition. My parents were especially proud when I became the first in my family to graduate college. I was fortunate not to incur college loans. While my parents eventually accrued some consumer debt - they still did pretty well overall and paid it all off. They were able to buy a Florida condo with cash. They did ok in the end, and they never expected anything from the government. All they wanted was to get back what they had paid in. In terms of being able to buy things that were well made and lasted, they certainly had come into the age of "planned obsolescence". Washing machines and other appliances were built to fail in a specific period of time, and it was almost always cheaper to throw the item out and replace it rather than to repair it.

They and their parents were part of a generation that had a different perspective on self reliance, and government reliance. It is a shame that we have lost that along the way. Times have really changed and this country and it's society really have adopted an entitlement mentality. People expect the government to take care of them and "rescue them". They also have no qualms about borrowing money to buy things they really can't afford. We are encouraged to go into debt to consume. On 9/11 we were told to go shopping.

People put their faith in get rich quick schemes rather than persistent hard work and saving. People want to start as a highly paid CEO instead of working up from the mailroom. When they don't get what they want they litigate, and the court is more than happy to dole out a nice settlement. Most people's plan for retirement is Social Security, Lotto, and/or the promise of an IRA whose holdings are currently dwindling in the stock market.

We expect to buy things and throw them away instead of buying well made items that last. We expect the government and unions to be our parents. We as a society seem to be getting accustomed to "cradle to grave" intrusion of government. I think that as long as everyone "gets their stuff" - like cell phones, cable TV, a car, HD flat screen TV, satellite radio, - that they haven't a care what kind of government they live under - nor would they know. Socialist, Communist, Republic, eh... who cares ... as long as we have our "stuff".

What happened to our generation?
It sure doesn't look anything like my grandparent's world, or even my parents world.
Pity that.

Sure times were hard then, but in many respects they are probably just as hard now.

For all of our technology we have certainly lost a measure of value and virtue and common sense living.

I wonder if we will get any of it back. Let's hope so for all of our sakes.