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Posted on 11/10/2009 8:05:27 AM PST by E. Pluribus Unum
Forget AIG for a moment. Forget Freddie and Fannie, Merrill Lynch, Bear Stearns, and Lehman Brothers. Imagine a company much bigger. Imagine a company that at the end of this year will have spent $400 billion more than it has taken in. Worse, imagine that the company's accounting is so bad, the $400 billion doesn't even begin to cover the whole of this company's liabilities.
In fact, the company deliberately chooses to use what's known as "cash accounting" rather than the more accurate accrual accounting. Cash accounting looks at how much cash the company has on hand, regardless of future liabilities. It's like saying if you have $75 dollars in your checking account right now, you're $75 in the black, never mind that you've deferred your car payment, quit your job, and have a rent check due at the end of the month.
The company also practices dirty accounting tricks like "forward funding," "advance funding," and "delayed obligations," deceptive tricks that hide its precipitous finances from auditors and its investors.
This company routinely borrows from its workers' pension plan to pay off its debt. Its accountants then claim that because the company owes the borrowed money to its own pensioners and not to outside creditors, the resulting hole in the pension plan doesn't really count as a liability. Sometimes, the company's executives neglect to pass a budget at all. When that happens, they keep the company running with "emergency expenditures," which its accountants don't consider real expenditures for records-keeping purposes, even though they're paid with real money.
By now, you've probably guessed where I'm headed. I'm not really talking about any private company. I'm talking about your federal government. If any private corporation employed the same accounting tricks Congress and the White House use to hide the government's massive debt and financial liabilities, its board and executive officers would all be in prison. In the government, it's common practice. And that's not even considering the funding of our two ongoing wars, which somehow emanates from outside the normal budget process.
If the government were required to abide by the same accounting standards as private industry, its debt would be in the trillions, not billions. Last May, Dallas Fed President Richard Fisher said that the government's unfunded liability for Social Security and Medicare alone comes to a staggering $99.2 trillion, or $330,000 for every man, woman, and child in the United States. It's an impossible figure.
So when congressional leaders and presidential candidates Sen. Barack Obama (D-Ill.) and Sen. John McCain (R-Ariz.) call for more government oversight of our struggling financial institutions, go ahead and laugh. You know you want to. The idea that the private sector would be in better shape today if only we demanded more oversight from our politicians is preposterous. Our politicians wouldn't recognize "fiscal responsibility" if it spat in their ears.
Wall Street moguls may be "greedy," as both John McCain and Barack Obama have described them, but at least there are real consequences when their greed becomes excessive. They go out of business.
Except, that is, when the government bails them out. Thus far, in addition to being on the hook for the federal government's own massive debt, taxpayers are also putting up $85 billion to back insurance giant AIG and up to $100 billion each to back Freddie Mac and Fannie Mae, and we're funding the Bear Stearns backstop. Congress is also expected to approve at least $25 billion in corporate welfare for the big three automakers. You can probably expect more handouts down the road. All of this has some analysts now questioning the U.S. government's bond rating, and worse, wondering whether the government itself may soon collapse under the weight of its own debt.
When you, Joe Citizen, spend frivolously and default on your loans, the bank takes your house. When the government spends your tax dollars frivolously, it simply cooks the books to cover its excesses. When the books are left in ashes, the government just takes more of your money, or it prints more money, leaving the money it hasn't already taken from you devalued. Over the last few weeks, we've learned that you now face the prospect of an additional indignity: When your neighbor's bank spends frivolously and defaults on its loans, the government's going to take your money then too, to keep the bank in business.
Many commenters have blamed all of this on capitalism. This isn't capitalism. It's a peculiar kind of corporatist socialism, where good risks and the resulting profits remain private, but bad risks and the resulting losses are passed on to taxpayers. There's nothing free-market about it.
Neither Barack Obama nor John McCain, nor either party's leadership in Congress, has proposed a reasonable plan to deal with the government's unfunded Social Security and Medicare liabilities. In fact, all have proposed expensive new government programs that can't possibly be funded over the long term. All seem both oblivious to the federal government's impending financial peril and intent on making it worse.
Perversely, all are then simultaneously demanding that they be given greater control over the private sector—because, they gallingly explain, corporations have shown that they can't be left alone to behave in a manner that's fiscally responsible.
Governments have been screwing over taxpayers for about as long as there have been governments and taxpayers. Capitalism, on the other hand, is a fairly recent development, and has spurred an explosion of wealth and the greatest standard of living in human history. What's happening now isn't capitalism, but capitalism is certainly taking the brunt of the blame.
Unfortunately, the end result may be that our politicians make capitalism more accountable to them—the same people who have shown that when it comes to the government's finances, they're accountable to no one.
The term is correct, but not widely known. Why not use the term Fascism? It's also correct, and really the same as "corporatist socialism".
Who’s this McCain guy repeatedly referred to?
Ahh...this should be repeated loudly and often.
This country's economy is for the most part a joint venture of Government and Big Business.
National sovereignty? Patriotism? Pshaw...those are outdated notions that only get in the way of making money, silly citizen.
I think by using "corporatist socialism", it requires the reader to think about what is being said, instead of the knee-jerk thought that the author is trying to compare the current situation to Mussolini or Hitler, and reject the article as over-the-top.
Ever wonder why large corporations are overwhelmingly in the socialist column? They have a partnership with the ruling elites. They get monopoly power & protection, small businesses are stifled by the government, government enforces anti-competitive arrangements, price fixing, market turf agreements,crippling technical barriers to innivation. Environmental fraud is one of the key tools for government to reward corporate benefactors.
Lets be honest.
Modern conservatives, and many on this site, are more so corporatist rather then capitalist
The Republican party, and MANY people on the right are economically illiterate and only know the language and jargon of a free market, but have no clue what it really means
I think he might have been Sarah Palin's running mate, but I'm not sure.
If using the term "corporatist socialism" helps people understand what's really going on, then I would support that. But I would have a lingering worry -- what if people really, really LIKE this new political philosophy of corporatist socialism and start to think it's a great new way to think about politics? Such a shame that no one ever thought of it before ...
Just take a look at Europe, massive conglomerates and tiny mom-pop operations, very few mid sized businesses.
Exactly. The "free market" did not fail because there is no free market to fail. Having banks and other business on welfare is about as anti-free market as you can get.
Letting businesses which made poor business decisions fail is the best way to watch the free market work. If there is truly a demand for a product or service offered by a failed company, another company will step in or go into business to provide the product or service.
All with no government help, either.
Well, that's exactly what Democrats have done since the Seventies - which is why they are now so pro-Big Business and hold so many political offices in areas where they don't come close to representing the views of the average voter. Co-opting Big Business as a "partner in the search for Socialism" was the smartest tactic they ever came up with.
What we really need is for the federal government to be strong enough to defend us for foreign threats, but otherwise so weak and limited that having the government as a "partner" conveys no special benefit to any corporation or special interest group.
Today, the government is the best friend you could possibly have -- if you play the game correctly. We need to change that by weakening government.
I tend to agree, but calling something "fascist" just results in accusations of name-calling. "Fascism" has lost its meaning -- just as "racism" has. "Corporatism" will gain some leftists' attention.
Exactly. Everyone complains about lobbyists. But the fact is we have lobbyists because the Federal Government has become the primary decision-maker for business policy.
The government should act as a referee. But now in addition to being a referee, they get to call the plays.
Very true.
Concentrations of power are the problem, whether they are private or "social."
Ahh...this should be repeated loudly and often.
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