By Andy Ostmeyer
Globe Metro Editor
The only reason the middle class in America isn’t dead is because the wives went to work.
How that came about and whether it was ever in their best interest would make for lively debate, but here we are, nevertheless, and the bottom line is that it takes two incomes for a lot of families to get by these days. One reason for that is this public/private duality that exists in our nation.
You and your employer (or you alone if you own your own business) pay 12.4 percent of your income into a public retirement program — Social Security — that will offer, at best, limited income when you retire. So, in order to prepare for retirement, you sock more into private investments such as a 401(k), effectively doubling up.
The same goes for health care. You pay a combined 2.9 percent for Medicare and the country pays billions more for Medicaid out of income taxes. But most of us aren’t eligible for either, so we buy private insurance, doubling up, and pray that that insurance won’t balk, forcing us to dig again into our own pockets for a triple whammy.
Then there’s higher education, with taxpayers kicking in hundreds of millions for public colleges such as the University of Missouri, which now charges $20,000 a year for tuition and fees. Again, twice paid.
The latest expansion of this private/public double-up is one of private profit but public risk, meaning that when companies make money, shareholders reap the rewards. But when they run into trouble, taxpayers are expected to bail them out. Case in point: Bear Stearns. Case in point: Fannie Mae and Freddie Mac. Case in point: AIG.
By some estimates, the bailout of Wall Street will cost taxpayers a trillion dollars.
Behind all this is grease.
It is grease that turns heads while these companies merge, acquire and grow “too big too fail.” It is grease that allows these companies to slip through with little regulatory and legislative oversight as they take unreasonable risks. And it is grease that gets insiders appointed to positions where they will decide whether taxpayers can carry the load.
That grease is the millions these companies contribute to political campaigns, but even more than that, it is the money spent lobbying politicians.
I’ve noted before that Freddie Mac and Fannie Mae, AIG and others who were at risk are among the largest donors to candidates, having given tens of millions to politicians during the past 20 years, but what I failed to note is that is not where the real money was spent.
Those millions pale compared to the $175 million Fannie Mae and Freddie Mac, for example, spent in the last decade lobbying those same politicians for the perks, privileges and exemptions that helped them get into trouble, according to the Christian Science Monitor.
The newspaper noted that between them, the two mortgage giants have hired so many lobbyists that other industries and interests have had difficulty finding lobbyists who hadn’t already been locked up by them.
Some financial experts think we’re near the end of this run of financial collapse, but I’d bet we’re at the beginning. All we’ve done is encourage a climate where risk is taken out of the basic business model in the United States, and recklessness and greed will be more readily moved from the private to the public domain next time.
And there will be a next time.
Bailouts make that certain.
Address correspondence to Andy Ostmeyer, c/o The Joplin Globe, P.O. Box 7, Joplin, Mo. 64802 or e-mail aostmeyer@joplinglobe.com.
Campaigns and Politics
Andy Ostmeyer: Private profit/public risk follows large donations, corporate lobbying
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