So we are here to solve a basic whodunit and dispel some of these myths along the way.

We’ll start with the Rights theory, which is as follows: The Democrats including but not limited to Bill Clinton, Barney Frank, Jesse Jackson, Barack Obama and many others were responsible for creating and promoting legislation that coerced bankers to give low-income folks home loans for which they were grossly unqualified. This was done in the name of equality and the idea that it is a human right for every US citizen to own a home of his own. After years of doling out mortgages that were repackaged as ever more complex securities /derivatives, the US banking system found itself leveraged to the hilt and rushing headlong towards a tipping point between money lent and money paid back. Once we went crashing through the tipping point a chain reaction of defaults occurred and like dominoes down went banks, investment houses, insurance agencies and the economy in general. When fingers were pointed at the culprit, they went squarely on first the Democrats and then poor folks. This is a great story except that it’s missing a few details…like inconvenient facts.

Now the Left tells a different tale. The left purports that the banks were not coerced but rather more than happy to make ill-advised loans because it was instrumental in creating vast amounts of quick profits with the intent of selling said products before the inherent risk involved could be felt. Wall Street (investment houses) was clamoring for mortgages that the banks were willing to sell to them so that they could create derivatives for them to sell. What the Left blames the Republicans for is blocking regulation of said derivatives. So essentially you have bankers and traders dealing in monopoly money, claiming it’s real money and punting these farces down the line while the GOP watchdogs turned a blind eye to these proceedings. Had the bankers and traders been regulated, the more toxic trades would have been stopped and thus the economy would not have exploded. This certainly follows the narrative that the GOP and Wall Street are in cahoots with one another to screw “the little guy.” The problem with this story is that while it’s not an out and out lie, it too is neglecting a few inconvenient facts.

Now here’s what really happened, complete with all the facts and figures.

First off we have a premise wherein the Democrats have the power of the Gods to promote their agenda while the GOP remained a minority party helplessly watching as the Socialist Democrat Party wrecked the country. Glen Beck may think this is true but it does not correlate with reality. For the last 30 years Republicans controlled Congress and the Senate for 40% of the time. They controlled the presidency for 73% of the time. They controlled all three branches for 20% of the time. If one is to believe that the Democrats were so successful in pushing their agenda, then one must believe that the Republican Party has shown a prodigious display of incompetence, EPIC FAIL, if you will. Then there is the Regan Revolution. His economic policies supposedly transformed both the US’ and the world economy. He even inspired Margaret Thatcher in England to follow his policies. So if the Reagan Revolution happened, why are the Democrats getting blamed for wrecking the global economy? The answer is that when the facts are inconvenient, we replace them with mythology.

Moving on to the specifics, if you are to place blame for the economic meltdown at the feet of the CRA then you must first realize said legislation was a bi-partisan effort and not the single effort of Saul Alinsky and the congressional Democrats. The CRA was passed in 1977 under President Carter’s watch and was a bipartisan attempt to address the issue of housing discrimination based on racial or ethnic heritage otherwise known as redlining. Now if this were really a poison pill foisted on the banks against their will, one would have to assume that in the 12 years of Republican presidents that followed the Carter administration, somebody would have either done away with the CRA or at least weakened it.

That brings us to President GW Bush. President Bush promoted the idea of an “ownership society,” by providing down payment assistance to the tune of two hundred million dollars annually and a tax credit of 2.4 billion dollars to encourage the production of two hundred thousand affordable homes for low and moderate income families. Meanwhile the Bush administration had been weakening CRA enforcement and the law’s reach since the day it took office. In contrast, the CRA was at its strongest in the 1990s, under the Clinton administration, and up to this point those who had received CRA loans had been paying them regularly. It was only after the Bush administration cut back on CRA enforcement while promoting his “ownership society” that problems arose.

Fannie Mae and Freddie Mac, our national lending institutions, were also encouraged to make more loans during the Bush years. In fact, the leadership of Fannie and Freddie were more than eager to get in on a scheme where they could make loans and then sell them incurring no risk of their own. President Bush substantially increased the financial commitment by more than 440 billion dollars. All of these proceeds were to be directed towards the low and moderate-income market. It is intellectually dishonest to blame the housing bubble squarely on the Democrats when it is clear the Republicans were just as involved in the mess.

However, since the CRA had very little impact on the financial meltdown, all that has been said above is meaningless in a discussion of what went wrong. If you look at the data, not only were there more loans made to higher income buyers but also the bulk of the toxic mortgages belonged to middle and upper class individuals.

From Citizeneconomists.com:

“…while some major retail banks did make subprime loans to minorities in an attempt to satisfy the requirements of the CRA, the problem didn’t become truly cancerous until unregulated financial firms like Argent and American Home Mortgage began to sell “creative financing” to subprime borrowers, many of whom were actually professional people with shaky credit, real estate speculators, and middle class buyers in “bubble” states like California and Florida who were looking to purchase homes priced well beyond their means, egged on by real estate agents who were on a roll.…lending money to poor people and minorities isn’t inherently risky. There’s plenty of evidence that in fact it’s not that risky at all. That’s what we’ve learned from several decades of microlending programs, at home and abroad, with their very high repayment rates. And as the New York Times recently reported, Nehemiah Homes, a long-running initiative to build homes and sell them to the working poor in subprime areas of New York’s outer boroughs, has a repayment rate that lenders in Greenwich, Conn., would envy. In 27 years, there have been fewer than 10 defaults on the project’s 3,900 homes. That’s a rate of 0.25 percent…lending money recklessly to obscenely rich white guys, such as Richard Fuld of Lehman Brothers, or Jimmy Cayne of Bear Stearns, can be really risky. In fact, it’s even more risky, since they have a lot more borrowing capacity. And, here, again, it’s difficult to imagine how Jimmy Carter could be responsible for the supremely poor decision-making seen in the financial system. I await the Krauthammer column in which he points out the specific provision of the Community Reinvestment Act that forced Bear Stearns to run with an absurd leverage ratio of 33:1, that instructed Bear Stearns hedge-fund managers to blow up hundreds of millions of their clients money, and that required its septuagenarian CEO to play bridge while his company ran into trouble.”

More to the point, if you look at the statistics for areas where there were monumental mortgage defaults, the kind that would destroy a multi-trillion dollar economy, you won’t find them in the poor neighborhoods but rather in what were the boom areas of Nevada, California, Arizona and Florida. Specifically, the neighborhoods most to blame for the economic meltdown were more than 80% white and had median incomes of more than $50,000 per year. Again, these folks were not even the target population of the CRA but people who did in fact get suckered into bad financial products by greedy bankers who were being winked at by their friends in Washington. It was like a 1980’s cocaine party that nobody thought would end, until it did.

Now we know it wasn’t the CRA or poor people who killed the economy, and it would also seem like the Republicans, the banks and the Wall Street traders all had a hand in killing the American economy. Where does this leave the Democrats? Just as I said earlier about the Republicans having a great degree of control of the countries political apparatus, so to did the Democrats. In terms of deregulation of derivatives and overall financial regulation, the Democrats had no will to stop any of it. Just as the Republicans were allowing Wall Street to bleed the country dry, so too did the Democrats stand right next to them with little to no objection.

So who really killed the American economy? We did. We the American voters and investors murdered it when we decided to stop doing math, stop paying attention and flushed our collective integrity and common sense right down the drain. Much like the debt and the deficit, you can’t accept what looks like free lunches and then turn around and get angry when the real bill comes due. Also it’s rather silly that pointed examination of an issue gets pushed away in favor of party loyal finger pointing and name calling. Clearly this whole episode is evidence that is almost every case, blame is equally shared between political parties. That’s not intellectually honest, politically literate or emotionally mature. Contrary to popular victim mentality, the US government is not an all-powerful entity that cannot be stopped. If recent elections are any indication, all it takes to stop the government from doing stupid things (like wholesale deregulation of an industry) is to vote the bums out. We murdered our own economy because we didn’t pay attention and we let the good times roll…right out of control.

Calling something one thing when it’s the exact opposite also might be an example of Orwellian Newspeak, like calling a bill full of spending on liberal social programs an economic stimulus plan. When one thinks of economic stimulus, most people generally think low taxes and incentives toward investments. One might even consider loosening lending standards to encourage people to start small business’. Typically the way one might stimulate the economy is to encourage growth in the marketplace rather than giving money to needy people who don’t grow the economy. They will buy stuff, that is true, but a pittance in sales tax (if that) is no match for exponential growth industries.

However, the House passed the very Orwellian named “American Recovery and Reinvestment Act of 2009” and this very same Act will probably pass in the Senate as well in some form or another. Now most of my brethren are crying out against this (as they should) and are encouraging Senate Republicans to vote against this bill in whatever form it takes. Now, I’m taking things from a more pragmatic approach. This is going to pass unfortunately. It will fail to stimulate the economy because most of the growth that we’ve had has been fraudulent and without actual “real dollar” support. This is of course the terrible downside to bubbles (dot.com, housing, etc.) But just because it won’t do what it intended doesn’t mean there isn’t some good in there despite the fact that it won’t pull us out of this correction.

Since I refuse to call a huge liberal spending program on the scale of the New Deal and The Great Society (both failures) by it’s Orwellian name, let’s just call it the Fiscal Suicide Act. As I stated earlier, the bill itself is not terrible when you see it for what it is, a bone being thrown at the most needy amongst us.

Rep. David Obey of Wisconsin, who chairs the House Appropriations Committee posted a summary of the Fiscal Suicide Act on US News and World Report. One of the areas that will benefit from an increase in spending is Education. Now I know many conservatives don’t support anymore increases in spending for education because many kids are still dumber than mops despite the increases but, as always, there is a middle ground here. What competent, non-union educators want is competitive salaries to attract real professional teachers to the field as well as having resources actually ending up in the hands of students rather than disappearing in ether. The provisions of the Fiscal Suicide Act theoretically should do just that:

· $41 billion to local school districts through Title I ($13 billion), IDEA ($13 billion), a new School Modernization and Repair Program ($14 billion), and the Education Technology program ($1 billion).

· $79 billion in state fiscal relief to prevent cutbacks to key services, including $39 billion to local school districts and public colleges and universities distributed through existing state and federal formulas, $15 billion to states as bonus grants as a reward for meeting key performance measures, and $25 billion to states for other high priority needs such as public safety and other critical services, which may include education.

· $15.6 billion to increase the Pell grant by $500.

· $6 billion for higher education modernization.

Government healthcare is pretty atrocious and seemingly arbitrary in how they select recipients. From what many of my clients tell me, everyone that applies for Medicaid gets turned down the first time, then they get a lawyer who gets them accepted the second or third time around. When they finally do get Medicaid they awarded back pay from when they first applied, usually to the tune of several thousands of dollars. I personally would rather see all means tested social services and government programs for the needy done away with in favor of a Basic Income Guarantee but we seem to have a problem with basic math and reading in this country to understand a concept like the BIG so that will probably never happen. Since we are stuck with means tested government healthcare like Medicaid and Medicare, there has to be a better way to run a railroad. The Fiscal Suicide Act includes various provisions for “better” healthcare in this country such as:

· Health Information Technology: $20 billion to jumpstart efforts to computerize health records to cut costs and reduce medical errors.

· Prevention and Wellness Fund: $3 billion to fight preventable chronic diseases, the leading cause of deaths in the U.S., and infectious diseases. Preventing disease rather than treating illnesses is the most effective way to reduce healthcare costs. This includes hospital infection prevention, Preventive Health and Health Services Block Grants for state and local public health departments, immunization programs, and evidence-based disease prevention.

· Healthcare Effectiveness Research: $1.1 billion for Healthcare Research and Quality programs to compare the effectiveness of different medical treatments funded by Medicare, Medicaid, and SCHIP. Finding out what works best and educating patients and doctors will improve treatment and save taxpayers money.

· Community Health Centers: $1.5 billion, including $500 million to increase the number of uninsured Americans who receive quality healthcare and $1 billion to renovate clinics and make health information technology improvements. More than 400 applications submitted earlier this year for new or expanded CHC sites remain unfunded.

· Training Primary Care Providers: $600 million to address shortages and prepare our country for universal healthcare by training primary healthcare providers including doctors, dentists, and nurses as well as helping pay medical school expenses for students who agree to practice in underserved communities through the National Health Service Corps.

· Indian Health Service Facilities: $550 million to modernize aging hospitals and health clinics and make healthcare technology upgrades to improve healthcare for underserved rural populations.

COBRA Healthcare for the Unemployed: $30.3 billion to extend health insurance coverage to the unemployed, extending the period of COBRA coverage for older and tenured workers beyond the 18 months provided under current law. Specifically, workers 55 and older, and workers who have worked for an employer for 10 or more years will be able to retain their COBRA coverage until they become Medicare eligible or secure coverage through a subsequent employer. In addition, subsidizing the first 12 months of COBRA coverage for eligible persons who have lost their jobs on or after September 1, 2008 at a 65 percent subsidy rate, the same rate provided under the Health Care Tax Credit for unemployed workers under the Trade Adjustment Assistance program. [Ways and Means]

Medicaid Coverage for the Unemployed: $8.6 billion to provide 100 percent Federal funding through 2010 for optional State Medicaid coverage of individuals (and their dependents) who are involuntarily unemployed and whose family income does not exceed a State-determined level, but is no higher than 200 percent of poverty, or who are receiving food stamps.

Universal healthcare scares the pants off most rational people but if this trains coming one hopes that $600 million is enough to fund it (one hopes).

The last item I want to focus is Environmental clean-up. Unfortunately there’s not a lot of profit in waste clean-up or refurbishing brownfields and superfund sites. That’s an area that really does have to be funded by the government, at least in the immediate future. When someone learns how to make money off of environmental clean-up we hopefully won’t need government programs but until then, not living in cancerous toxic waste is probably a good thing (even if we are paying through the nose for it).

· Superfund Hazardous Waste Cleanup: $800 million to clean up hazardous and toxic waste sites that threaten health and the environment. EPA has 1,255 sites on its National Priority List, selected based on a hazard ranking system. There are many Superfund sites ready for construction, but not funded due to budget shortfalls and over 600 sites with ongoing construction that could be accelerated.

· Leaking Underground Storage Tanks: $200 million for enforcement and cleanup of petroleum leaks from underground storage tanks at approximately 1,600 additional sites. There are an estimated 116,000 sites with the potential to contaminate important water supplies.

· Nuclear Waste Cleanup: $500 million for nuclear waste cleanup at sites contaminated as a result of the nation’s past nuclear activities. Accelerating the completion of projects will reduce long-term costs.

· Closed Military Bases: $300 million for cleanup activities at closed military installations allowing local communities to redevelop these properties for productive use. The Department estimates that there is a $3.5 billion environmental cleanup backlog at bases closed during previous BRAC rounds.

· NOAA Habitat Restoration: $400 million for ready-to-go habitat restoration projects.

· Brownfields: $100 million for competitive grants for evaluation and cleanup of former industrial and commercial sites – turning them from problem properties to productive community use. Last year EPA was only able to fund 37% of Brownfields applications.

Reducing Wildfires Threats: $850 million for hazardous fuels removal and other efforts to prevent wildfires on public lands. Making these investments today will create jobs in the short run, but also save long term costs of fighting fires in the future.

· State and Private Forest Service Wildfire: $550 million for state and local volunteer programs and hazardous fuels reduction efforts which states and communities have determined are of the highest priority.

· Federal Forest Service Wildfire: $300 million for urgently needed hazard reduction on federal lands.

Bureau of Indian Affairs: $500 million to address maintenance backlogs at schools, dams, detention and law enforcement facilities, and over 24,000 miles of roads. BIA schools alone have an over $1 billion construction and maintenance backlog including shamefully unsafe conditions.

The Fiscal Suicide Act will be a reality and will probably cause more overall harm to the economy than not but there will also be pockets of society that will benefit from it. You can’t really argue against educated children, providing modern healthcare and cleaning up toxic waste. So to paraphrase Monty Python, always look on the bright side of Fiscal Suicide.