I think many journalists and analysts are missing the core story underlying the populist revolt over the Bush administration's proposed Wall Street bailout.
People aren't merely upset with the idea of their tax money going to prop up rich Wall Street businesses and investors. They're disgusted with an American economy that increasingly values gambling over work. Not only that, many of these Americans are perfectly willing, even eager, to watch this gamblers' economy fail.
In many neighborhoods across the country, families can no longer afford to buy a home and anticipate a comfortable retirement on the money that they make working. Salaries and wages just don't provide enough cash.
According to National Association of Realtors, the median home price in the United States in July 2008 was $212,400. (That means half the homes sold in the U.S. that month cost more, half cost less.) However, according to the U.S. Census Bureau, the median family income was just $50,233. Using a traditional (pre-housing bubble) standards, a typical American family, earning that median income, could not afford to buy that median-priced home. And that's after housing prices have dropped 10%-40% from their peak prices, depending on the city. That typical family, earning the median income, likely would qualify only to by a home in the $125,000-$175,000 range.
If you wanted to buy your first home anytime during the past six years, you had to gamble. I know that buying a first home always has required a bit of a leap of faith. Will you keep your job? Will the economy hold up? But even keeping your job in a flush economy wouldn't have given you enough money to get to a home during the bubble, as the above number show. Instead, you had to gamble, borrowing way more than you could ever hope to pay back on your salary alone, hoping that housing prices would rise, so you could borrow against the increasing value of your home in order to pay for it.
Sounds crazy, huh? But that's what millions of Americans did over the past six years.
What about retirement? Smart Americans long have put aside part of their earnings to have enough money to live after they leave their jobs. Maybe you'd invest a little of that in blue-chip companies, ones built for the long-term and that offered slow, but steady, increases in their stocks' value.
Today, there are no blue chip companies anymore. When the Reagan administration slashed tax rates on the rich, no one cared about deferring income anymore. Instead, the Wall Street mantra became, "get it now." So companies started playing to the short-term. In the newspaper industry (where I worked for 15 years), for example, profitable newspapers laid off employees to satisfy investors who demanded ever-greater short-term growth.
Without blue chip stocks to buy, investors gambled. Forget buying a stock and holding on to it for years; which company's stock can I ride up for a few months, weeks, days or even, hours?
For professional investors, even short-term trades weren't enough. They started gambling on others' investments, buy "derivatives," whose value was based upon what would happen to the value of other investments, such as stocks and mortgages.
In a gambler's economy, people who want to play it safe can't play at all. Families that refused to gamble on ever-rising home values couldn't afford to buy any home. Mortgage lenders that wanted to enforce traditional lending standards saw their stock prices tank, forcing managers to "play along" and fuel the bubble. Investors who wanted to buy stock in other companies with a long-term view saw their investments tank, as Wall Street punished any business that didn't sell out its future for immediate gain.
And taxpayers, who played by the rules and sent their money to the IRS, now may be left holding the bag for Wall Street gamblers who bet billions on derivatives based on fraudulent mortgages, short-sighted lenders and fishy investment schemes.
This is sick. Americans want an economy that's based on people getting paid for building things and providing services that people actually need. Not on derivatives, investment schemes and money management that's less stable than walking into a Las Vegas casino.
When you gamble in Vegas, at least you know what the odds are. The house edge, the odds against winning -- they're all public record. Smart gamblers can watch the cards at the poker table, look up the odds on the slots, and make informed decisions about risking their money.
On Wall Street, though, the average American is lost, as Wall Street sharps cook their books to leave customers in the dark, and work Washington to stick taxpayers with the tab for any investments gone wrong.
We're sick off this economy. Let it fail. And let's spend our tax money instead on building a new economy, one that values and rewards real work instead of Wall Street gambling.