On American Financial Disenfranchisement: No Gift of Moral Hazard for the People

When will the American people enjoy the moral hazards conferred upon wealthy individuals and corporations?

It is so common to hear self-righteous commentary about the dangers of moral hazards that we scarcely notice it. A moral hazard occurs when someone is protected against risk, typically by the imposition of negative externalities. Typically we hear about unemployment benefits and other welfare payments imposing a moral hazard on society by enabling and encouraging freeloaders who are stealing your tax dollars. The evidence undergirding such rhetoric is dubious at best, and yet these purported moral hazards receive infinitely greater attention than enormous aid and safety nets provided to those who need and deserve them the least.

Due to the COVID-19 pandemic, many American corporations came close to insolvency in March 2020, before being propped up by an unlimited firehose of aid from the Federal Reserve. Our central bank began to do something unprecedented, even during the Great Depression: To directly purchase corporate debt. This program is being conducted in addition to many other gifts that serve corporate interests and our nation’s arrogant, parasitic elites. The present disconnect between the American stock markets and Americans’ lived economic experiences is a product of this regime.

Typical, hard-working Americans have no mechanism by which to secure interest-free loans. They don’t have access to virtually unlimited credit lines that can be paid back whenever, with no imposition of interest or penalties. Their feet are held to the fire, if they are lucky enough to be issued credit at all.

In March, when the Federal Reserve stepped in, corporations that would otherwise have had to take loans at 15% interest, if they were lucky enough to be offered a loan at all, suddenly could secure much larger credit lines at half the interest or less. Nationwide, the value of this gift soared into the trillions, as can be seen in corporate valuations and the increase in wealth for the top 1% of Americans, the top 0.1% in particular, and the top 0.01% especially.

This gift is barely recognized. Most Americans do not even understand it. We don’t have laws to tax or regulate it. It’s a quintessential moral hazard, allowing firms to operate in a sandbox where profits are privatized but risk and losses are borne by the people. Similar, smaller moral hazards are conferred regularly upon wealthy and privileged Americans.

One is left asking: When will we confer a gift of moral hazard to the people at large?

The oppression of people of color in the United States of America is as much encapsulated by a knee on George Floyd’s neck as it is explicated in our regime of economic oppression and financial disenfranchisement. The mechanisms and tautologies of these deprivations are sweeping and manifold. One manifestation of this is the proliferation of alternative financial services—payday lenders, check cashing fees, and more. There are many others, and they affect the vast majority of Americans to varying degrees. Student loans and credit cards come to mind. Credit reports and their ramifications are part of this oppression. Bankruptcy is socioeconomically stigmatized and harshly penalized for individuals, but celebrated and rewarded for big business and American elites.

During my congressional campaign, I came to support a universal basic income of $1,000 per month to each American adult, universal healthcare (Medicare for All) for all Americans guaranteed and paid by the federal government, and assumption and forgiveness of all student loan debts public and private. Even these proposals do not nearly approach parity with the value of the benefits, gifts, and privileges afforded to those at or near the top of our economy. The American people are being economically murdered. We are being killed, put in danger, marginalized and derided, having to suffer for no just cause, and having our lives shortened by inequality, inequity, disenfranchisement, and oppression. Meanwhile, those who reap the rewards of this unjust regime have the gumption and obliviousness to believe they earned it in full.

What is the #1 predictor of entrepreneurial success? Not ingenuity, grit, or tenacity. It’s access to pre-existing wealth, such as your family’s money and connections. The United States of America isn’t a meritocracy. In fact, it is similar to aristocratic regimes we overthrew and rebuked.

American financial disenfranchisement is only getting worse, and nothing has been solved. To add insult to injury, the climate crisis has been disproportionately caused by plutocrats—and yet the brunt of the ramifications are borne by disadvantaged people. In 2020, this has become clearer than ever before. We must speak up, speak out, march, lobby, protest—and yes, run for elected office and win.

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