The Housing Bubble

According to a Wall Street Journal analysis released last week, 23 publicly traded Wall Street banks and securities firms are on track to pay out record employee retention bonuses for 2009.

Only the timely intervention of Balloon Boy saved America’s overtaxed punditry from having to rationalize this latest round of financial shenanigans. After all, what’s 140billiondollars compared to a Hapless Six-Year-Old Careening Over the Colorado Badlands in a Giant JiffyPop Bag!?

Who cares that the average Goldman Sachs employee compensation package was cough, $743,000.55? Quick, look over here! A family of greedy publicity-hounds has tried to make a quick buck off our naïve trust. We have all been betrayed! Especially here in the press. And the kid barfed on national TV. Twice!

It’s more fun to gawk and jeer over the public misdeeds of minor players, than to confront the boring-but-important outrages of the major ones. This year alone, we taxpayers will essentially transfer a sum 10% larger than the gross national product of New Zealand directly into the bespoke silk pockets of some of some of the most greedy, inept, and incompetent individuals in the history of the planet. But other than a few bleats in the business media, the public has completely ignored this story. Ho hum, another 140 Billion to another special interest.

We know there is no way these Lamborghini-driving douches deserve the obscene amounts of our hard-earned money they seem to think they’re entitled to, but somehow we give them a pass because they seem so removed, so exotic, so alien to us. Four hundred dollar lunches and six hundred dollar haircuts are as foreign to most of us as living in a cardboard and chicken wire hut feeding our kids out of a Friskies can. We can maybe imagine what it might be like to live in a world where daycare costs $70,000 a year, but it’s hard to relate—especially when we’re struggling to make ends meet down here in the real world. More to the point, these elevated souls are so barricaded behind their wrought iron gates and maitre d’s that we couldn’t give them a piece of our mind even if we could track them down to do so.

Still, the apologists are rife. “We need these bonuses to attract and retain the best executives,” I heard on one AM radio personality intone recently. “It’s the community standard they’ve come to expect. I winced. Yeah, and “community standards” say my house is worth a half a million bucks…. “It’s complicated,” the guy continued. “And what about all the illegal aliens? They get taxpayer-subsidized bonuses every day.”

I was a bit taken aback by this one; blatant pandering even by talk radio’s well-honed deflect and divert standards. “Well, yeah,” I thought , “what about them?”

I know from personal experience that the stereotype of 10 Mexicans in a doublewide is not necessarily hyperbole. Having been subjected to the noise, the pollution and the rampant social services fraud of some of these households, I’m not so quick to cry “racist” when someone makes a snide remark about my neighbors. And there is no way you can tell me that one minimum wage taxpayer is going to make up for the cost of feeding, educating, housing, and caring for his wheelchair-bound wife, his six ESL kids, and his four at-risk “nephews from Norwalk.”

But in light of the huge welfare handout we’re about to give a group of people who have arguably never done an honest day’s labor in their lives; folks who only sweat on the racquetball court or with their MMA trainer, whose manicured hands have never so much as carried a brick, or stacked a cafeteria tray, or changed a grunty diaper; it seemed only fair that I go statistic hunting. After all, illegal aliens have been our go-to hobgoblin for so long, we kind of take their negative impact for granted. California is bankrupt, and the rest of the country is not far behind. Everyone knows that “illegals” have ruined California’s economy. They even have their own niche on this nifty national debt clock.

Given what’s at stake and the political biases of those doing the reporting, getting reliable information about the number of illegal immigrants in the US and their financial impact is a notoriously tricky task. For the sake of argument, I decided to take the most conservative think-tank figures I could find—which would tend toward higher costs and negative impact than say, the figures advanced by La Raza.

FAIR, (fairus.org) the Federation for American Immigration Reform, is self-described as a conservative “national media watch group that has been offering well-documented criticism of media bias and censorship since 1986.” That seemed like a good place to start.

According to FAIR’s upper end estimates, the total cost of housing, feeding, educating, providing health care and social services for the 15+ million illegal immigrants in the US in 2008 was… 32 billion dollars.

That’s a lot of money. In California alone the figure approaches 9 billion dollars annually—roughly the amount of deficit being added to the state budget every year.

Note: I purposely exclude the ‘job opportunity’ costs —estimated by some radical anti-immigrant groups to be as high as $200B —because the figure implies that US businesses also saved that same $200 billion in labor costs.

But compare this cost to taxpayers with the $140 freaking billion, that’s BILLION, we are giving, in bonuses alone, to the already handsomely-paid laborers on Wall Street. The estimated average, bonus, is between $140-160K —and that includes handouts to the low-level worker bees; the Swingin’ Dix will rake in millions. But we just shrug and go about our business, because these guys ruined our economy legally.

Is Wall Street’s labor really all that much more valuable to Americans than that of grape pickers and dishwashers? Is what they’ve created, drained, and dumped on us as helpful as a clean bathroom or a well-trimmed oak tree? I’d argue that at least illegal labor does something useful for society and is not in and of itself counter-productive to the survival of the very system that employs it.

Illegal labor may suppress “our” wages, it may even alter the political balance of our legislatures, but it doesn’t crash our retirement funds, or take away our houses, or necessitate selling off our grandkids’ future to pay for it. It is by its very nature a fee-for-service free market economic system. Yes, the model gets skewered when that labor gets sick or decides to import its family, but in essence, employer goes to Home Depot, employer picks up a couple of day workers, employer pays them cash when the day is done. If said day laborer were to take a sledgehammer to the wrong house and knock out all of some unsuspecting homeowner’s windows, the contractor probably would NOT give him a cash bonus and tell him to come back tomorrow to rework the blueprints. If the busboy contaminates the guacamole with typhoid, the public health service would mostly likely NOT give him an extra year’s pay and an office with a view window. And if the chambermaid gets caught stealing guests’ credit card numbers and selling them to her brother-in-law, she would likely go to prison, not get a retention bonus and stock options in the hotel chain.

Goldman Sachs, JPMorgan Chase, et al may argue that they are no longer beholden to the taxpayers because they’ve paid back the TARP funds we lent them to keep their system afloat. But their record profit— realized from those funds— doesn’t mean they’re not still sucking on the public teat. Without our tax money, they would no longer even exist. Nor would their outrageous bonuses.

Calling what they do “a free market economy” is Orwellian.

This is not to belittle the incredible stress under which the average money marketeer or hedge fund director must labor. When you’re gambling with OPM, the stakes are huge—if not life threatening. If you lose, you don’t just lose money, you lose your friends’ money, your associates’ money, often your family, your reputation and your livelihood. The number of failed stockbrokers who return, broken, to Toledo is legion. And IT/mathematicians are a dime a dozen now that NASA has severely downsized its space program. The lifestyle alone is enough to kill you—as anyone forced to date soopermodels night after night can tell you.

But guess what? It’s pretty hard in the middle class, too. And those of us stuck subsidizing both ends of the socio-economic spectrum are tapped out. So why again are we allowing these bonuses to be disbursed? Because they earned them?! Please. Give me 140K and a pencil, and I’ll turn a $15 billion bailout into a $3B profit too. For this year, anyway….

Why we as a society choose to value the creation of nothing over the production of something is a never-ending mystery to me, but at least we could try calling a spade a spade. “Illegal” labor is market capitalism in its purest form, and taxpayer-funded bonuses for Wall Street is socialism bordering on forced confiscation of assets. In the interests of ideological consistency, maybe we should think twice about whom we scapegoat?

by ahansen