Before Leveraged Debt Ruins Us, Government Must Rescue Us
If there is any one belief in which most sensible folks would concur, it is this: Greed and lack of reasonable limits are going to undo this fortunate, free and loving land unless our national leaders reasonably conclude that this is a fact. In the name of deregulating markets, we are eating our young.
Witness the wild, unruly ferocity on Wall Street that is uprooting the fiscal sanity of the country. There is no known common-sense rebuttal to the piling on of leveraged debt wherein otherwise sensible and intelligent businessmen are gobbling up enterprises, stuffing them--like engorged geese readied for luxurious palates--with bloated paper and fortifying their lack of long-range foresight with short-term gains of millions of dollars. The pity of it is that pension funds, the life-root of so many American working people, are the forage on which much of this debt feeds.
Moreover, these buyouts or “recapitalizations” add not one penny to the gross national product; indeed, they infect the body of business, dislocate and disemploy working men and women, savage local communities and relentlessly draw sustaining blood from a squeezed public enterprise. Who cares about the human element when there are fees of hundreds of millions of dollars to share and rising equity profits to reap? Who cares how many hundreds of thousands of jobs have been lost when these debt overlays occur? Who cares about families who give their entire working life to an organization and suddenly a faceless thing called “debt” tells them that they are no longer needed, while a tiny little band of “enterprisers” grow mega-rich?
Doesn’t anyone remember John Law and his Mississippi scheme or Sir John Blunt and his “South Sea Bubble?” Millions of innocents were ruined and governments tottered when, as always happens, these Ponzi schemes finally burst. There is nothing in canon law or civil statute that certifies the onward and ever upward rise in today’s economy.
One day, and it will surely come to pass, this mountain of debt, living so close to the edge of ruin, will confront a stutter in the economy and all the debris will fall upon us, much as the savings-and-loan institutional mess is about to collide with our future, costing us up to $100 billion.
The solution to the leveraged buyout, unlike a lot of problems that we have, is astonishingly simple. All that the President and Congress need do is refuse to allow tax deductibility of debt after it leaps beyond a fixed debt/equity ratio. Boom, boom, a home run, ball game’s over and the feeding time is done. Delay, hesitate, and the geese grow fatter and more susceptible to demise.
But isn’t this inviting government intervention, and isn’t that unsuitable in a free society? Yes, it is. Except: Whenever the public has no alternative choice, whenever monopoly or semi-monopoly, or enormous wealth fevered by greed, tilts the market, the market is no longer “free” and the government--our government--is the only source of redemption for those who are put upon by overvaulting power before which they are utterly defenseless. Alexander Hamilton, no democrat he, saw this clearly. Said Hamilton, in the Federalist No. 11: “Why has government been instituted at all? Because the passions of men will not conform to the dictates of reason and justice, without constraint.” Bingo.
