The National Catholic Review

Later today, Treasury Secretary Timothy Geithner will announce new regulations for the financial services sector. The regulations are important in themselves but also because they represent the third nail in the coffin of Reaganomics. Whatever else you may think about President Barack Obama (and the Notre Dame controversy has certainly gotten many of you riled up about the President!) we can applaud him for his systematic pulling down of the architecture of unrestricted laissez-faire economics that has served as the nation’s most prominent false god lo these past 30 years.

To be clear, this is not exactly a partisan issue. The worst example of deregulation, the repeal of the Glass-Steagall Act, took place on Bill Clinton’s watch and the first major deregulation of an industry was begun by Jimmy Carter when he deregulated the airline industry. But, it was Ronald Reagan who really re-introduced a devotion to laissez-faire economics. He centered his economic policies on three policy objectives: de-regulation, lower taxes for the wealthy, and union busting.

Readers of this blog know that I am profoundly committed to raising marginal tax rates on the wealthy. I am too young to remember actually, but my imagination remembers fondly, that in the 1950s, under that crazy leftie Dwight Eisenhower, the highest tax rate was 92 percent. That is not a typo. Last week I made the argument for supporting the Employee Free Choice Act which will level the playing field for workers wishing to organize. Pope John Paul II called the right to organize "a fundamental human right" and the Church’s support for labor unions goes back more than one hundred years to Pope Leo XIII’s seminal encyclical "Rerum Novarum."

Deregulation of the financial sector does not strike most people as a moral issue but the events of the past year show why it is. Unlike the airline industry, the financial services industry is working with other people’s money. In this culture, which all too often reduces man to a kind of "homo economicus," it is easy to forget that this particular investment is actually a person’s life savings. Once we forget that, it is easy to turn Wall Street into a casino: chips never feel like money, do they?

The details of the Obama administration’s plans are not easy to read unless you are an economist and I am not. Uniform requirements for risk-taking sound like a good idea to me, but I am sure there is a way to make the regulations more onerous rather than they are protective. Still, the premise of the reforms is sound and deeply moral: We are human beings and are not powerless before the impersonal laws of the market. Franklin Delano Roosevelt said in his first Inaugural Address: "Yes, the money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of that restoration lies in the extent to which we apply social values more noble than mere monetary profit." Indeed and Amen.

 

Comments

Anonymous | 8/9/2009 - 12:01am
I agree with you, Mike M. I worked at a unionized grocery store a couple years back. We were all forced to join if we wanted the job and they took money out of our paychecks each week so that we were actually making less than minimum wage. The union made it impossible for people who were bad at their jobs to get fired, so the competent workers had to pick up the slack. Because people knew that it was difficult to be fired, they didn't work as hard. Unions don't help entry level people like me, they take away our money, freedom, and opportunity.
Oh, and by the way, capitalism has done far more for the poor than any supposedly well-intentioned government regulation. Our freedom of enterprise and exchange is the reason the poor in America live like the middle class of other nations. There is no fixed supply of wealth. Under capitalism, people can become wealthy by creating wealth, not by taking it from someone else like a theif or a politician. The best way to fight poverty is to go out and get rich. Long live freedom!
Anonymous | 3/27/2009 - 2:51am
This idea that the repeal of the GSA caused the current financial mess is pure nonsense. None of the activities that caused the collapse would have been prevented had we stuck with Glass-Steagall. In fact, the only investment banks that have remained stable are those that are part of the i-bank/commercial bank conglomerates that were permitted by the Gramm-Leach-Bliley Act (the act that repealed Glass-Steagall.) Government regulation tends to result in lower growth rates and, Mr. Winters, you should remember that growth rates are not mere chips, but are someone's child getting a better education, or an elderly person affording their prescription medications. Your assessment of the EFCA is also faulty. I entirely support workers' right to organize. But isn't a secret ballot an essential part of this? Surely Leo XIII didn't support intimidation tactics in our unions when he wrote Rerum Novarum. When polled, even most union workers know enough to oppose EFCA. Unfortunately, the Democratic Party will shove it down their throats because it protects corrupt union leadership which skims money off of workers' wages and donates them to Democratic Party politicians and left wing activist groups (who then use it to support the Democrats.) Whenever either party claims to support "working Americans," look hard for how they're planning to profit from it. Finally, the regulations, while necessary, will almost certainly have an adverse effect on America's working poor and lower-middle-class. They're the ones who relied upon loose credit to make ends meet, to get a house, etc. These regulations will tighten that credit. Completely necessary, but hardly a boon to those in need. We're going to have to look after each other now as much much or more than ever. But, as Rerum Novarum tells us, it will be the virtue of Charity that sees us through, not state coercion.
Anonymous | 3/26/2009 - 3:09pm
"Readers of this blog know that I am profoundly committed to raising marginal tax rates on the wealthy. I am too young to remember actually, but my imagination remembers fondly, that in the 1950s, under that crazy leftie Dwight Eisenhower, the highest tax rate was 92 percent". And the country was in recession, until John Kennedy lowered taxes. As you note you are not an economist. You could go further and say you don't understand economics, at all, at all.
Anonymous | 3/26/2009 - 8:55am
I look forward to going back to the regulated airline industry:) When flights were few, tickets were expensive and only rich men in suits flew!
Anonymous | 3/26/2009 - 12:02pm
I wonder if, if ever, the sneak attack in late 1979 or 1981 by the Great Class''B'' Actor will be erased? At one point the COLA was at 14% and going to 17%. Never got there. The Reagan boy, by a stroke of his pen erased fuel and heating oil for the Cost Price Index. By doing that, the working class lost 10% of COLA, and that''s not all; just day's before ''Ole'' Man Bush left office, he took his pen and with a stroke, he erased one' that's 1% from the COLA. The Republicans gave to the rich, and took from the poor. Proof of what Bush did is sin the Washington Post Archive, that last month of his office when this letter went to BLS. Believe me, this is true.
Anonymous | 3/26/2009 - 11:28am
Joe, no one is talking about re-regulating airlines. By the way, you are mistaken. I was old enough to fly in that era. Because of discounts designed to fill plains, my father was able to take us to Minnesota for thanksgiving from Texas. During those days, they would offer spousal flights at half price with children flying free. All five of us. You won't see that today, consequently I drive when I take my family to see the in-laws on holidays.