The Forgotten Man
Amity Shlaes has a new book titled The Forgotten Man: A New History of The Great Depression. The "forgotten man" turns out to be the completely innocent third-party who actually ended up paying for other's mistakes; the term comes from this essay by William Graham Sumner
It turns out that the current sub prime crisis also has a forgotten man that parallels the one of the great depression. He's the one that didn't want house prices to inflate out of proportion to wages. He's the one who didn't take out home equity lines of credit. He's the one who saved money so he wouldn't ever be on the public dole.
And he's the one--the only one--that the Government has decided to punish.
NPR's All Things Considered ran a story last night about the sub prime mess, in the context of Wall Street. You can listen to it here.
In it, they try to describe the players in the sub prime mess with a cutesy lead about "Betty", "Claudio" and "Derwood". But they left out one important person.
Our friend Reuven heard the story, and followed up with this letter.
Dear “All Things Considered:”
There was a serious omission in the Davidson / Siegel story about the market going up and the housing market going down (or returning to normal, as I see it.)
You talked about “Betty”, “Derwood”, and “Claudio” but you forgot one person: Reuven. Reuven is the only real victim here.
Reuven did what he thought responsible Americans should do: save money. But our government has declared War on Savings.
In order to prop up homeowners who think their houses are ATMs, our lawmakers lower the interest rates and pour money into the economy, an inflationary tactic.
Reuven wasn’t pleased with house prices rising faster than wages. He knew it was an unsustainable bubble. It just caused his property taxes to rise making it harder for him to retire. Reuven doesn’t care what some phony appraiser says his house is worth.
Reuven’s losing money left and right. He can’t barely keep ahead with inflation with CDs, and has to worry about banks going bust.
Nancy Pelosi thinks Reuven’s too rich to qualify for the stimulus handout, so Reuven will get nothing. It’s clear to Reuven that he’s directly paying for other people’s spending sprees simply because he was responsible and saved money.
While Reuven pays a lot of taxes, he gets no deductions because of AMT. Reuven’s mortgage is now paid off, but when he had it he received no mortgage interest deduction because of a phase-out. However Deadbeat Betty who walked away from her mortgage got all sorts of tax breaks and is able to escape the tax on forgiven debt thanks to a law that our President just signed. (Isn’t paying yourself with forgiven debt one of the tactics the Enron execs used?)
There’s only one bright spot for Reuven! He saves $360 this year by not contributing to National Public Radio. Maybe then they won’t forget about Reuven next year.
Sincerely,
Reuven S******
Sunnyvale, CA / Windermere FL