Recessions: Who Are the Real Casualties?

The thing about recessions with the attendant stock market decline, such as the one we are now experiencing, is that they don't treat us all equally. The super rich, for example, are virtually immune. If an individual has a portfolio worth, let's say, $100 million which suffers a negative jolt of 50%, the poor soul is left with only half that amount. Similarly, for the wretched poor who have a portfolio worth zero, 50% of zero is still zero - no loss or serious damage there either. Pensioners, i.e., those who receive a pension check each month, will still receive their check and might even benefit from the falling prices of goods they buy. The same is true for those who have secure jobs. These folks might worry about the economy, but the reality is they are not hurting.

So who does get hurt? Those in the middle, the working class individual who loses his or her job, the small business owner who is forced to close his enterprise, and older people who are living on Social Security supplemented by income from modest savings or 401k type retirement accounts. For the older folks, who probably worked hard all their lives and put some money aside for the so-called golden years, a portfolio worth perhaps $500,000 before may be worth only half that now. That's a serious situation, especially when one considers that older people have no practical way to earn enough money to replenish what is left.

No doubt the great majority of both of these groups - those who get hurt and those who seem immune - are good people who worked hard within the system and did all the right things to ensure their own livelihood, albeit some more successfully than others. It is curious, then, that the efforts of the federal government in the TARP and the recent trillion dollar stimulus legislation is tilted toward helping -or "bailing out", if you prefer - companies that have been mismanaged for years, the incompetent executives of said companies, and people who bought homes on which they never could afford the mortgage payments. It is all the more curious that the bailing out of these groups is falling to the folks in the other groups, by an act of congress. Certainly the folks who are not able to pay the mortgage they should never have agreed to are nice people, but they are not victims of the recession. They are to a large extent the cause of it.

But, consider this - the plan to subsidize people who assumed mortgages they could not afford so they can remain their homes denies the opportunity for responsible folks to acquire those homes at prices they can afford. It's yet another example of responsible people forced by the government to step aside in favor of the irresponsible

Here's some advice for the powers that be in Washington - tone down the rhetoric. The president and his advisors spend all their energy and their media access fear mongering about how bad the economy is and how much worse it is likely to be if his stimulus package is not passed, or in some of his speeches, even if it is. Note to President Obama, that's not helpful.

At the same time the Republicans are equally shrill in telling us and the rest of the world that the president's plan simply will not work. Note to the Republicans, that's not helpful. There are tax cuts in the legislation, and although not as much as the Republicans wanted, they will help at least to some degree.

It would be much more useful if both sides stopped the political posturing, at least concerning the economy. After all, how bad do they really think the economy is? The president decided to fly to Chicago for a long Valentine's Day weekend in place of staying in Washington to sign this vitally important legislation, and Speaker Pelosi flew off to Rome!