Liberal Self-Dealing And Financial Crises

As you know, from time to time I publish worthy articles from other sources.  This is two days old but I thought was definitely worthy:
--------

By LEWIS M. ANDREWS

Investor Business Daily


As Americans struggle to make sense of a devastating succession of financial crises — from teetering banks to a collapsed stock market to bankrupt car companies to underfunded public employee pensions and now exploding state deficits — we can see in each the malignant expression of a decades-old failing within the Democrat Party.

It was during the late 1970s when a group of prominent intellectuals, including New York Sen. Daniel Moynihan, Commentary editor Norman Podhoretz and Harvard professor Daniel Bell, began to identify flaws in Great Society legislation passed a decade earlier to help the poor and minorities.

Welfare programs that intended to break the cycle of poverty were instead promoting the breakup of black and Hispanic families. Increased spending on failing urban schools just made them worse.

And the only people who seemed to benefit from social programs were the people administering them.

In the eyes of these disillusioned liberal thinkers, the economic interests of the two great pillars of the Democrat Party, the underprivileged and the rising class of government-funded professionals, had begun to diverge. It was like the split Republicans had experienced within their party at the turn of the last century, when the interests of farmers and small businessmen collided with the monopolistic practices of some wealthy industrialists.

But whereas those earlier Republicans had a Teddy Roosevelt willing to risk the displeasure of deep pockets to take a stand for free markets, Democrat leaders like President Jimmy Carter showed little inclination to challenge their own party's dysfunctional paternalism.

Academics and nonprofits with a vested interest in government intervention continued to measure social justice in terms of taxpayer-funded welfare services.

As American Interest editor Walter Russell Mead observed in a recent blog, liberal policymakers became uncritically comfortable with "the bureaucratic, redistributionist, administrative state."

At the same time, blue state legislatures established scores of commissions and advisory groups that advocated only those policies that benefitted public employee unions. In my home state of Connecticut, none of the six Regional Education Service Centers, whose mission was supposedly to help local boards of education improve schools, ever recommended merit pay for teachers, competition to improve quality, surveying graduates to identify needed public school improvements, using outside tutors to better help special needs students, or any other substantive reform.

Most depressingly of all, many civil rights leaders made a Faustian bargain with public worker unions, tacitly agreeing to endorse state-run approaches to integration in exchange for guaranteed labor and government support.

As a result, there has never been a major urban movement to directly empower minorities with vouchers or tax credits for schooling, job training, housing and health care.

It would be shameful enough if the self-dealing of liberal elites were confined to exploiting the groups they pretended to serve. But the theory and practice of state paternalism now threatens the entire economy.

Consider the subprime mortgage mess.

No investment house would have collapsed, no TARP would have been required, the real estate and stock markets would not have collapsed, had not congressional Democrats forced banks to break with common sense and make loans to unqualified borrowers in the name of "social justice."

Similarly, the unsupportable explosion of city and state budget deficits has occurred primarily in blue regions of the country, where liberal interest groups have funneled campaign contributions to Democrat politicians willing to ignore the long-term consequences of budgetary profligacy. At least three states — California, Illinois and New York — have delayed payments to vendors, with Illinois' fiscal 2011 spending projected to exceed revenues by $140 billion.

One very specific local expenditure, the financing of public employee pensions and benefits, has become a crisis all its own due in part to secretive, off-the-books accounting practices — again in predominantly blue cities and states. Northwestern University associate professor Joshua Rauh and Robert Novy-Marx at the University of Rochester have calculated the true state and local pension liability to be $3.5 trillion.

Recent comments on government budget problems by bank analyst Meredith Whitney on CBS' "60 Minutes" have precipitated a heated debate over the credit worthiness of municipal bonds. But no one doubts that the coming cuts needed to keep states and localities afloat will cause widespread suffering among the very disadvantaged groups Democrats have always claimed to be making their first priority.

As Teddy Roosevelt knew when he met the challenge of Republican robber barons, the greatest failing of a political party is not defeat by the nominal opposition, but the internal inability to be true to its own ideals.

The most vulnerable are punished, the party elites become cynically corrupt, and a bewildered citizenry is led off a financial cliff.