These morally hazardous times

capitolGiving Congress a blank check is like throwing red meat to sharks. Giving Congress a blank check and screaming Fire!, as President Obama has been doing, guarantees the worst sort of knee-jerk Congressional response: just throw money at everything and hope that something works.

The “change we need” turns out, unsurprisingly, to be more Washington gluttony at the expense of future generations of taxpayers.

The 1980’s recession was much worse than this, and I’m sure the fear in the White House is that our current recession could quickly reach those same terrible levels, where unemployment reached 10.8%. Reagan was blamed then; Obama would be blamed now.

Both recessions had some similar triggers. In the 1980’s, beginning in the Carter administration, Congress deregulated banks and savings and loans while increasing the FDIC insurance guarantees to $100,000 per account. With the government standing ready to protect investors from the consequences of risky decisions, banks felt free to finance dubious (but potentially more profitable) real estate ventures. When those ventures failed, a great many banks and S&Ls failed.

Sound familiar?

This practice of protecting risky investments from the consequences of that risk is known as moral hazard, a surprisingly rich economic term. Risk always serves as a disincentive to bad behavior. I would love to earn double-digit returns on my investments, but if there is a good chance that my money will disappear, I’ll settle instead for a CD at my local bank.

But if the government promises to pay me back if my investment goes south, I’ll gladly write a check to the Honorable Kimbu Alantra, Esq. in Nigeria, on the slim chance that there really might be a truckload of money in an abandoned bank account.

Moral hazard has reappeared in this current crisis when Congress once again tinkered with the banking industry, this time strong-arming banks into making housing loans to borrowers with a high potential for defaulting on those loans. Freddie Mac and Fannie Mae, government lending institutions, led the charge, throwing billions into the housing market in an effort to get all Americans into their own homes.

Surprisingly, not all of those borrowers could actually afford the payments, and we now have Lehman Brothers in bankruptcy, Merrill Lynch sold, AIG propped up with billions in taxpayer funds, and the world economy sliding into recession.

This week, Congress is itself engaging in a different sort of moral hazard — it has the power to waste other people’s money with impunity. There is no down side for Congress because it will not have to pay the bill. You will. I will. Our children will. Senators and Congressmen have fully-funded pension plans. They will never experience the pain of unemployment, nor the weight of the huge debt they are putting on the shoulders of future taxpayers.

Rather than rushing to drown us in more debt, Congress would have done well to slow down and debate the causes of this recession, as well as actions that might actually move the American economy back into production. Instead, Democrats have dragged out the same bloated Christmas lists that they trot out every budget year, only this time, they have a green light from the White House to spend, spend, spend.

Though this historic bill is being called a “stimulus package,” it has only managed to stimulate Washington’s gluttony.

Genuinely new ideas have apparently not been considered. For instance, the American auto industry is suffering, perhaps dying. Congress could have declared Michigan a tax-free investment zone for all manufacturing related to transportation, both existing and new. This would not only create incentives for green technology investment, but would give the existing American automobile industry the competitive advantage that it needs to rebuild itself.

Similarly, Congress could have created such enterprise zones in several other large US cities to attract new manufacturing jobs here, jobs that have been fleeing to China.

Instead, Congress is putting your money into computerizing your health records. Didn’t realize there was a health care computer crisis? Neither did I.

Congress could have temporarily halved employee/employer contributions to Social Security, which would have given every working American an instant 6.2% raise. With US median household income at about $50,000, that would mean an extra $3,100 in our pockets.

Instead, they have increased the money available for college Pell grants at a time when university endowment funds are at historic highs.

The US lags behind Japan and Europe in broadband Internet access and data transfer speeds. Since so much of our new economy depends on electronic commerce and rapid, secure access to data, one might think Congress would want to pour money into much-needed broadband infrastructure upgrades.

It did, though drip might be a better metaphor than pour. Infrastructure investment in fiber-optic cable, wireless broadband and the US Internet backbone may end up at less than 1% of the total stimulus package, according to the Wall Street Journal. Al Gore may have invented the Internet, but Barack Obama, our most technologically-savvy presidential candidate in history, apparently doesn’t plan to make much use of the Internet now that he’s in office.

Despite polls showing growing doubts among voters that Congress is taking the right approach with this historic spending bill, it will pass. This bill is a runaway freight train and can’t be stopped by human intervention.

It’s interesting to think about the moral challenges of modern government, with its god-like powers to create and spend money, push the economy this way or that, and affect the lives of us all by both direct and unintended consequences.

Modern government is a mine field of moral hazards, and while many of our leaders are men and women of good judgment and good heart, too many, clearly, have neither.

The Apostle Paul lived in a much worse time than this, when leaders in both government and the church sought to suppress the fledgling Christian faith that he was spreading throughout the Roman world. His remedy was prayer:

I urge you [Timothy], first of all, to pray for all people. Ask God to help them; intercede on their behalf, and give thanks for them. Pray this way for kings and all who are in authority so that we can live peaceful and quiet lives marked by godliness and dignity. This is good and pleases God our Savior, who wants everyone to be saved and to understand the truth. — 1 Timothy 2:1-4, NLT

Paul’s goal was two-fold: 1) that we should be allowed to live our lives in peace, free from interference by leaders of dubious judgment and moral character, and 2) that these leaders should come to understand the truth.

And what is that truth? Paul continues:

For there is only one God and one Mediator who can reconcile God and humanity — the man Christ Jesus. He gave his life to purchase freedom for everyone. This is the message God gave to the world at just the right time. — 1 Timothy 2:5-6, NLT

In other words, the greatest moral hazard we face is not that we will lose our jobs and be thrown out of our homes, but that we will fail to put ourselves under the redemptive grace of Jesus Christ, which Paul, the economist, says was purchased for us with something far more valuable than US dollars: the blood of Christ shed on the cross.

We only get to vote every few years, but we can pray every day. Pray and intercede for your neighbors and friends who can’t find jobs. Pray and intercede for our leaders, that they might allow us to live our lives in peace, and that in this time of great unknowns they might humbly admit their ignorance and seek God’s wisdom.

Times are tough, but God is still on his throne, still welcoming sinners into the grace of Jesus Christ. Like every time and every age, this is a time for prayer.

Photo credit: Storm Crypt, Flickr

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  1. I saw Steve Forbes interviewed a week or two ago. He said the law averages implies the government will do something right in the next three months.

    Don’t know what will happen. It’a hard time to be young, I think.

    Take care.

  2. When that last Democrat Senator cast the final 60th Senate vote for that awful StimuWASTE bill, I sat down and cried. In fact, I had been praying and crying most of the day. I didn’t sleep well last night, either.

    I really think that our nation is under condemnation. It is going to take some real suffering to get people back to God.

    Those who have placed so much faith and hope in an ordinary man (who has supported a LOT of evil) are going to be sorely disappointed. Perhaps, it is when they finally realize their mistake, they will turn back (or, turn to Him for the first time in their lives) to Jesus Christ – the true Messiah, Savior and Lord of the universe.

    I recently changed the heading of my blog to this:

    Talk Wisdom’s goal is to defend the tenets and values of Biblical Christian faith. We defend our Constitutional Republic and Charters of Freedom, especially when speaking out against destructive social and political issues. As followers of our Savior and Lord, we should boldly stand up for Jesus Christ in our present circumstances. He is our Savior, Lord, and King, and His love needs to be shed abroad in our hearts and in our world – now.

    Those who voted for Obama and now regret their votes probably aren’t ready to admit it yet. Some have publicly stated regret (like the mother of the USS Cole victim); but most are holding to a “wait and see” attitude right now.

    Even Mike Huckabee, who didn’t vote for Obama but was willing to give him a “chance” now states that he was wrong about giving Obama the benefit of the doubt.

    Many pro-Obama supporters who came to my blog over the past year – while I tried to warn them of Obama’s past and terribly evil intentions for our nation – hated me for sharing the truth about him. Some day, perhaps one or two will come back to my blog and admit that the dire warnings shared at Talk Wisdom (and at thousands of other conservative and/or Christian blogs) were correct about such warnings.

    Sorry this comment is so long!

    I will close with telling you that your post here has helped me – a lot. Thanks Charlie.

    God bless you!

    Sincerely and In Christ,