Fury of the "Winners"
There was a lot of self-delusional and semi-fascistic talk among conservatives during the late stages of the presidential campaign blaming the entire economic calamity on poor people and minorities who supposedly blew up the Boom Times by taking out mortgages they couldn't afford to pay. As an exercise in right-wing populist "wedge politics," it didn't work. But it didn't go away, as witnessed by yesterday's now-infamous on-air tirade by CNBC business reporter Rick Santelli from the floor of the Chicago Board of Trade.
You should watch the video itself, but the main thrust of Santelli's jeremiad was aimed at Obama's new foreclosure relief proposal, which rewarded "losers," and will place the United States on a trajectory to become just like Cuba. The sheer self-righteousness of Santelli's rant--inflated by attaboy cries (genuine or facetious) from the prosperous white men on the trading floor around him--was what was remakable about it. As Ezra Klein brilliantly observed:
[W]atching the traders bray and cheer as Santelli calls for the streets to run green with the equity of the working class is an astonishing insight in the psychology of the crisis. These guys feel betrayed. America let them down! After all, they didn't buy the mortgages and default. They just bought the packages that then defaulted. They trusted Americans to be responsible and they were burned for it. And so you know what? Screw 'em. This is their problem. Let them default. They should lose their houses. Wall Street is tired of being ground under the thumb of the lower middle class. This country has coddled those losers long enough, and see where it's gotten us.
But I think something a bit deeper is going on here as well. Santelli's argument is not much more than a crude and boorish version of a lot of the sober "moral hazard" criticism of Obama's housing plan. You probably know the idea: when government helps people who have suffered from bad behavior in the past, it encourages bad behavior in the future. Better to make them object lessons of the consequences of bad behavior. What are a few million ruined lives as compared to the advantages of a country with improved moral muscle tone?
The problem with this "analysis," of course, is that there really weren't a whole lot of people who sat down one fine day and decided: "I think I'll buy a house I really can't afford and then default on the mortgage!" Put aside the blandishments of lenders, the national ideology of homeownership as a sign of middle-class status (and as a rare source of working-class capital), and the widespread expectation that housing values would continue to more-or-less improve for the foreseeable future. More fundamentally, it's difficult to wax angry at homebuyers who somehow did not anticipate losing jobs, health insurance, savings, home equity, and most of all the ability to sell homes at a break-even price. And you also have to wonder how many people who are upset at government help for housing "losers" were the completely accidental beneficiaries of more fortunate trends in the housing market in the past (e.g., those millions who bought at a price slough, built up equity without lifting a finger, and then used government-subisidized home equity credit to retire debt, boost savings, and acquire many nice things).
What may be at the bottom of some of the angrier "moral hazard" talk is even deeper than the habit of blaming victims, with the oft-accompanying strains of self-righteousness and sometimes racism. Big economic downturns challenge one of the most abiding myths that well-off Americans venerate: that economic success is a sign of personal virtue. The corrollary, of course, is that economic failures tend to deserve it. That obviously wasn't true in the depths of the Great Depression, when a fourth of the population couldn't get jobs. But the myth lived on, and precisely at times when it seems to be endangered by empirical evidence, it sometimes emerges in a nasty and vengeful manner, as when Rick Santelli indulged himself yesterday in sneering at Barack Obama for caring about "losers."