If you happen to have some financial problem in your life, the Federal Reserve doesn’t care. At all. No matter how bad the problem is. Your personal desires and interests will have absolutely no bearing on the Fed’s thinking about interest rates or anything else. If you’re an extremely rich executive at a financial services firm, however, things look different. Even in circumstances where a taxpayer funded bailout isn’t undertaken — as with Lehman Brothers — the Fed still steps in in a variety of ways to ease the pain. Lehman will be given some time to unwind its assets in a patient way so as to try to minimize the extent to which it needs to sell at firesale prices in a way that undermines the portfolios of other firms. Needless to say, if bad economic times strike your town a very similar type of problem could emerge — it’s hard to sell your house for anything if half your neighbors are also selling — but Ben Bernanke’s not going to step in and save you.
And here we see a fundamental difference between the progressive worldview and the conservative worldview. Progressives believe in a robust safety net for everyone. It’s very possible, as we’re seeing, that you’ll experience financial hard times for reasons that have nothing to do with you. A lot of the people doing unskilled service work in the Lehman Brothers office may lose their jobs as a result of this unwinding even though they didn’t do anything wrong. And that sort of thing happens all the time — people get laid off because adverse things happen to the companies they work for. Or people are struck by other kinds of misfortune — they get hit by buses, hurricanes destroy their houses, all kinds of stuff. Misfortune strikes ordinary people, and not just billionaires. And in the case of ordinary people, just as in the case of billionaires, you can offer improve social welfare by helping people out when they wind up in trouble.
But conservatives don’t believe in that kind of safety net for regular people — just for the billionaires. Guaranteed health care? Forget it. Guaranteed retirement income? No way. Just let the market work, and when it stops working the executives will be okay and the rest of us will, oh, something or other.
It’s just something to keep in mind when you hear John McCain ranting about the horrors of government waste. Obviously, there is some waste in there, and certainly some stuff that sounds funny like Sarah Palin’s seal DNA earmark. But in McCain’s mind, it’s all waste. Nobody paid attention at the time, but back in the spring he came out with an extraordinarily stingy housing plan that would have done essentially nothing to help ordinary people hit by the foreclosure crisis. McCain, after all, managed to acquire eight homes through
good old fashioned hard work marrying an heiresses, so why shouldn’t hard work and prudence be good enough to see any family through tough times?