Will Rogers said that this would be the only country to ride to the poorhouse in a limousine. While his remark came in the midst of the Great Depression, it is once again relevant with one exception. It is becoming more and more difficult to gas up for the journey.
With the price of fuel making it difficult to fill up even an average sedan for less than $50, the average citizen is having to make difficult decisions about how to manage his money often at the expense of the nation’s retailers, many of whom are either cutting back or facing bankruptcy from declining sales.
The anomalies of this economic downturn — it is probably more accurate now to call it a recession — are somewhat larger than usual. While drivers dependent on their cars are struggling to keep them on the road, the oil companies have never wallowed in so much money. While millions of stressed-out homeowners face foreclosure and eviction in the subprime-mortgage crash and financial institutions need government help to survive their own greed, their officers still earn unprecedented compensation.
While banks are offering customers almost nothing in interest on safe investments like certificates of deposit thanks to the Federal Reserve, the gap between what they will pay and what they charge for home equity loans and fixed-term mortgages is often four to five points higher.
While the median income of Americans is now $60,500, hedge-fund managers are personally earning amounts that dwarf the tax revenues of some states. Even for Wall Street, where pay in a good year is often obscene, the income of hedge-fund operators successful enough to make Alpha Magazine’s top 25 is an embarrassment. The low end of the compensation was $360 million and the high $3.7 billion. Some person named John Paulson earned that much, followed closely by the more familiar super-rich George Soros, who collected almost $3 billion. Oh, yes. Another manager, James Simon, was listed as having taken in about the same.
Most Americans, including this one, don’t have a clue about how hedge funds work nor can they even imagine that much income, particularly when nothing tangible is being produced. Most of us do understand that Bill Gates and others of the computer/Internet age made billions by inventing stuff and making us dependent on using it. We might begrudge their success some, but at least we benefit from using their products. But what in the world do hedge-fund managers do but merely move around money in what has become the biggest traveling crap game in history?
Although the hedge-fund bookies are stimulating serious questions about the lack of government oversight, the oil barons are fast becoming the most despised exploiters in recent memory. As they glibly try to explain away horrendous profits as the result of everything imaginable except their own unmitigated greed, they are facing unprecedented public animosity. A sort of chain-mail scheme now being circulated on the Internet urges a boycott of the world’s largest producer, Exxon. The theory is that if millions upon millions of drivers buy their fuel elsewhere, the company will lower its prices dramatically, bringing about a classic gas war. Good luck.
Meanwhile, congressional dithering over the bailout package for hard-pressed mortgage holders has led states to take over much of the relief effort. The bill passed by the Senate last week actually provides as much help in the form of tax breaks for struggling industries from airlines to alternative-energy producers as it does to homebuilders. Fuel costs have driven four airlines out of business in the last month. One of those, ATA, walked away completely from its obligations, stranding passengers who were forced to pay full fares at other airlines to get to their destinations.
The economy has become the leading issue of the presidential campaign, certifying the long-held axiom that, in the last analysis, Americans always vote their pocketbooks. So the Democrats can be counted on to call for taxing the rich to give money to the less fortunate. The Republicans will offer a long list of tax help for business on the trickle-down theory. The presumptive GOP nominee, Sen. John McCain, has proposed eliminating the alternative minimum tax and suspending the federal gas tax for this summer.
Probably very little will happen as most of us struggle to buy the fuel to get to the poorhouse.
(Dan K. Thomasson is former editor of the Scripps Howard News Service.)