Are the Poor the Source of our Economic Plight?

It is somewhat hard to believe that there are those who actually think that the poor were the source of our national fiscal problems. If it were not for their getting involved in housing market, if the government did not bend its policies toward the poor, if lending was not loosened up to compensate for the loss of earning power, we would have avoided the disaster that occurred.

Simon Johnson, referencing now data by Daron Acemoglu (a confrere of his at MIT), debunks this notion, as he done elsewhere.

Johnson, here and elsewhere, fears that our government is becoming an oligarchy, controlled by money. Rather than policies bending towards the poor, there is evidence that the rich segment of our nation is the major beneficiary. Just think of the interchange between the White House and White House as an indication of how policies are weighted. We still notice that our "financial reform" legislation is still bending as much as possible to support the megabanks.

The level of economic inequities has been increasing since the 70's. By the time of 2000, the level of disparities were no worse than the previous years. There is no reason that the housing problems were directly connected to the ease of obtaining loans.

Rather, we should focus on the private sector's drive to garnish as much revenue through the securization of mortgages that were declining. There was a need to create a new market, viz., the subprime.

We need to identify the source of our problems correctly in order to avoid more in the future. In fact, one can fear that similar problems will arise since we have not addressed the critical need to ensure that no bank is too big to fail.