Banks Don’t Have to Beg; Why Should the Poor?

Now that welfare has been reformed (or so it has been declared), we turn our attention to other candidates for the dole. Notable on the agenda are savings-and-loan associations and agencies charged with cleaning up industrial pollution and waste from atomic energy produced for defense purposes. And it is still rumored that Third World countries will default on their debt and that our commercial banks will then queue up for a bailout.

Was it Michael Harrington who first described the American system as “socialism for the rich?” It is a peculiar advantage of current welfare for the rich that it need not traverse the congressional budget process in the same way as welfare for the poor. Its costs are presented to Congress as a result of de facto regulatory or industrial decisions or failures to decide. Congress may hold hearings and complain, but it must produce the money in the end. Also, its costs seem to come not in poor peoples’ tens or hundreds of millions of dollars, but in tens of billions.

So far the S&L; foul-ups appear to have cost someone (you and me, ultimately) $38 billion, and the total bill is heading for $100 billion. Estimates for pollution and defense-related atomic energy cleanups also approach $100 billion each. How much is $100 billion? It would pay the nation’s welfare bill for the next 10 years. At $75,000 each, it would provide 1.3 million subsidized housing units, making a considerable dent in homelessness (however one counts it). But who expected socialism for the rich to come as cheap as prenatal care, child welfare or food supplements, anyway?

Just whom do the S&L; rescues rescue? Those who have deposits of more than $100,000. (This has been explained publicly several times, so it is now clear to you --isn’t it?--why these uninsured depositors are being rescued.) And, of course, the stockholders--the very people who played roulette with money that belongs to depositors and is guaranteed by the gov-ernment--are rescued, too.

It is academic or theological and anyway trite to say that such disparities illuminate the American value system. We rescue the poor in small ways and the rich grandly, suiting succor to station. More down-to-earth considerations also operate. The rescued--tick them off in your mind represent powerful political and financial interests. Naturally they are regulated by agencies and people to which and to whom they are closely linked and who are deeply sensitive to the risks to the country of failing to sustain them. I am not charging conflict-of-interest (having no knowledge of that), but only that with respect to these poorly or recklessly managed institutions the regulators and Congress are not simply socialists; they are bleeding hearts.

There was a time when welfare was, in a way, in the position of the S&Ls;, the defense industry and the polluters. Congress took the view that the poor and the parentless could not await congressional appropriations, and so welfare and certain social services were provided under an “open-end” appropriation. States used the provision to expand social services wildly, or so Congress concluded, and the open end for social services was capped in 1972.As for welfare, various Congresses and Administrations found a thousand ways to cut back, even with an open-end appropriation, and the states cooperated.

One may come to two ideas concerning what to do. First, we might have welfare and Medicaid and such programs regu-lated by the friends or associates of recipients. Just as the regulators from industry understand the effects on the country of failed business institutions, former recipients would understand the effects on the country of children with not enough to eat and families with no place to sleep, and they would meet these needs. Alternatively, Congress might enact a law of common sense and proportionality. Because the poor make up 14% of the population, every $10-billion government rescue of business would be charged $1.4 billion to be fed into programs on behalf of the poor and powerless. For popular purposes, the legislation might be known as LPF--the Level Playing Field Act.