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21st Century Conservatism – Morally Hazardous September 8, 2007

Posted by Jim Satterfield in Business & Society, Economics, Politics.

Robert Reich posts on his blog about moral hazard and what it really means to those who consider themselves conservative in these modern times. The long and short of it is that the people with influence, wealth and political clout get bailed out. When’s the last time you heard of a CEO who had failed the stockholders and employees of a company who didn’t leave with a healthy payoff? But now, when there are who knows how many people in danger of losing their homes and what little credit worthiness they had because of their purchase of a home by using a sub-prime mortgage moral hazard is among those things cited as someone who should pay the price because they knew that they couldn’t possibly afford the variable rate mortgage they were signing up for. But did they, really? After all the people signing them up weren’t simply presenting them with paperwork that was clear and understandable. There were salespeople involved. Salespeople who made more money if the people they were selling to spent more and went deeper into debt. Salespeople who are very good at making people feel optimism about their financial future, no matter how misplaced it might be.

And there are of course other arenas in which moral hazard is used to support the desires of modern “conservatives”. We can’t have useful unemployment benefits, can we? After all, those lazy bums that work for the executives who must be bailed out wouldn’t go find another job right away if you actually had an unemployment program that they all qualified for and that would keep them from losing their homes. Then there’s health care. If we don’t make certain that individuals feel some financial pain from it they’d be running off to the doctor at the drop of a hat. Their arguments about health care and how it should be left to the market never ever address the not uncommon enough situation where someone works hard, pays for their health insurance and after becoming seriously ill lose that insurance.

In other words the modern version of moral hazard is morally hazardous for a decent nation.



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