Most investors know about the United States' anti-state political culture: in America it's private sector solution first, public sector solution second. And, most also know that what state that does exist is anti-central government: it dates back to our federalist origination. We're even reluctant to call something 'central' for this reason: we have a central bank, but it's called the Federal Reserve, not the Central Reserve. And it's the Internal Revenue Service, not the Central Revenue Service.
Americans want the private sector to be large and dominant, and view a central government as a source of problems. Still, what Americans believe or preach, they don't always practice, because even though they say they don't like 'central,' 'government,' or socialist institutions, to-date they generally have shown strong support for central government programs that are socialist -- the two best known being Social Security and Medicare.
The largest, and most economically-altering, of course, has been Social Security -- the successful, redistributive partial pension program that lifts tens of millions of American senior citizens out of poverty every year. Medicare, meanwhile, has provided millions of seniors with health care they otherwise would not have.
Further, economist David H. Wang says the U.S. culture's free market ideology has stalled progress in cleaning up toxic assets in American banks and throughout the financial system. Wang argues that, as part of a multi-pronged rescue strategy that includes refinancing home mortgages of at-risk homeowners to decrease foreclosure rates, and recapitalizing banks, the United States government is, slowly, nationalizing the banking system, as well as other institutions that must be nationalized to: 1) prevent the collapse of the U.S. and global financial systems and 2) begin the bottoming process that leads to economic recovery. Had the U.S. culture been more receptive to intervention, the banks would have been nationalized nearly all at once, he said.
Free marketeers takes another hit
More evidence of the Wang's thesis was provided on Friday when the U.S. government upped its stake in Citigroup to 36%. Wang now has no doubt that, over time, gradually, Citigroup, at least temporarily, will become 'U.S. Government Citigroup' (NYSE: C) - - a necessary government action, opposed in ideology by voters ...but accepted in practice ...at least temporarily ...because the alternative would be disastrous. Now that's showing 'em, anti-state advocates!
Further, on to the above add the U.S. Government interventions for AIG (NYSE: AIG), Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), the bank bailout, the bank takeovers by the FDIC, and of course assistance for the Big Three: General Motors (NYSE; GM), Ford (NYSE: F), and Chrysler.
Wang said he didn't want to mention the hundreds of government farm subsidies and government contracts (both civilian and military). For a nation with an anti-state, anti-central government ideology and one that doesn't like government services, it certainly has a lot of central government programs at work in its economy, Wang said.
"The truth is government, and especially the United States government, does so many good things. Why you could make a pretty strong argument that western civilization itself would not exist today without the actions of the United States government," Wang said.
Marshal Zhukov, Hero of the Soviet Union, along with the Russian descendants of those who fought in World War II, would undoubtedly beg to differ with economist Wang on that last point, but we get this overall argument.
The greatest, most benevolent, organized entity for good on a public, or tax-based scale, has been the U.S. government, which as Wang says, "is pretty amazing, when you think about it, given its bosses, taxpaying Americans, don't like it too much."
Financial Editor Joseph Lazzaro is writing a book on the U.S. Presidency and the U.S. economy.
Retailers can't wait for Black Friday, open Thursday
Tiffany's serves up solid quarterly earnings
Cramer on BloggingStocks: This bullish retail story looks like a good fit 
Reader Comments (Page 1 of 1)
3-02-2009 @ 3:59PM
D. Lillie said...
I think the assertion that social security is successful is laughable. My uncle died at 61 after paying into the system from the time he was a teenager. His children are grown. His wife has her own social security. Net result, all of his money is gone......confiscated by the government for redistribution. Lower income people who used to save a little for the future now do not as they asssume SS will take care of them. The system is bankrupt. There is no trust fund. Not what I consider successful. Wang says the government does many good things. I suggest that the government does many things............very few of them does it do well or at even a mediocre level. If a private company needed 10 people to do a job, the government would use 40, take longer, pay 10 times as much, and the results would be questionable. Don't think so? Want to buy a nice levy in New Orleans? How many of you would chose to have the USPS run your affairs instead of UPS? The only thing that the government is good at is spending money and making war. It is time we went back to the constitution, emasculated the federal governement, cut it's size by 75 %, instituted term limits on all politicians, and brought back the term......CIVIL SERVANTS and branded it on their foreheads.
3-02-2009 @ 4:37PM
thedude said...
BRAVO !! D. Lillie
Well put. I almost feel that elected officials should be replaced with selected officials (like jury duty) except for the fact there are so many morons floating about. Still, somedays anything would be better than another Harvard Grad prepared to borrow a trillion $$'s from China to bail out the idiots who borrowed too much to begin with.
If we began phasing out Social Security today it would only take a generation or two to pay it off ( that's two generations who would not actually receive benefits - just to provide the benefits that are already being paid)
Liberal media reports that B Maddoff's 50 billion was the largest pyramid scheme ever , apparently they overlooked Social Security and the Democrats insatiable desire to borrow money from China.
3-02-2009 @ 4:34PM
lou said...
D. Lillie :
The SSI cannot guarantee how long you will live. It is a government run insurance program that you pay premiums into, and once you reach retirement age you begin to collect. I have car insurance I pay premiums on, and I don't expect to get my money back if I remain accident free. I am simply covered in case I ever need it . Same principle for Social Security Insurance or SSI. It is there if I need it, if and when I reach retirement age or I am too ill to work. If I had taken the money and never paid into SSI, I might have lost it all in the stock market this year, or in the devaluation of my home. This way, no matter what life hands me, as long as I am employed and pay into the system, I will have something in my old age. I am thankful for this program, and I am thankful it will help me from being a burden to my children. They have enough weight to carry.
3-02-2009 @ 7:48PM
steve bourg said...
To Mr. Lazzaro, cheerleader for big-govt liberal pgms: D.Lillie's exactly right. Lazzaro, you should study the benefit formula for the social security PIA -- the approx $20,000/year pension with COLA for someone making the SSWB. It's incredibly progressive because of the two bend points. It's an absolute rip-off.....but of course with HI, it's 15.3%. Add that to federal income taxes, state taxes of all sorts due to bloated state budgets.....and you have over 40% taxes, where higher-W-2 earners pay around 50% and lower perhaps 30% or less. We can't survive like this with bloated govt, unless of course we drilled the hell out of our resources (as we should) like Norway does. But NOOO....Senate Dems have prevented this for decades.....another action by the govt that's killed us. Along with requiring huge fractions of loans to poor people (Clinton's Treas Regs) and Freddie and Fannie to "buy" many of them up. And next will be health-care for all, and cap & trade, and.....where will it all end? Lazzaro, go ahead and pour your accolades over our fabulous govt....but the truth's that the fed and state govts have now just about ruined us, and Obama/Pelosi are pulling out the swords to finish off the job. Sad state of affairs we're in. But go ahead and write your book, if it makes you feel better. I've invested differently since Dec 15th, so I feel a bit better. But that's a whole 'nother story....."Obama-proof" investing.
3-03-2009 @ 12:15PM
matt said...
On the matter of socialism v. free market, it seems that its not a matter of "Free marketeers tak[ing] another hit", to me it seems that CRIMINALS have gone unpunished and completely unsupervised. Bankers giving out loans they knew (it IS their job and area of expertise, is it not?) would fail, then packaging them into securities they knew were essentially fraudulent should be considered criminal.
This is not a fault of the system but a defect of morality. Throughout history the undoing of great societies has come often by the machinations of decrepit moral values of those who not only govern the nation but are part of its overall makeup.
Regardless of the economic system and structure, this problem has come because the people who had a stake in deciding the fate of billions of dollars (and those who were in charge of overseeing and sanctioning them) failed to care about the ramifications of the blatant atrocities being performed one loan at a time.
The free-market has always had limits based on fairness and basic human values -- after all, where does one draw the line? I don't blame capitalism. I blame the failure of the SEC to reign in the horrible moral failings of the banking and trading system.