Does the Left Really Believe this?

When I see statements like this, I am left to wonder whether folks on the left really believe this, or if it is just throwaway political rhetoric which no one really expects intelligent people to believe (key passage in bold):

But how are people dealing with these drops on their own today?
Mostly by going into debt. As I show in my book, median household debt
as a share of income for married parents was more than 125 percent of
income in 2004. The economist Herb Stein once said, "If something can't
go on, it won't." And the debt hemorrhage of the American family simply
can't go on.

If the returns of rising risk add up to the ability to borrow more
to dig oneself out of short-term holes (thus digging a deeper long-term
hole), then I think we can safely say that most Americans would be
happy to give up the returns to obtain greater security.

But here's the kicker: We can provide security and help our
economy. Just as businessmen and entrepreneurs are protected against
the most severe economic risks they face to encourage economic
investment and growth,
we are most capable of fully participating in
our economy, most capable of taking risks and looking toward our
future, when we have a basic foundation of financial security.

How are businessmen and entrepeneurs protected?  By who?  I own and run my own small business, and I have yet to encounter
anyone who has given me any help or succor in our bad years. Or good
years. I don't even get covered by the minimum safety net type stuff my
employees have (workers comp, unemployment) without paying extra out of
my own pocket, which they don't have to do.

This is exactly the kind of throwaway absurdly false statement that
makes it impossible for me as a small business owner to take anyone on
the left seriously
, however much I am attracted to them for their
position on a variety of social and war issues. I am sure that this is
the type of statement that most of his readers on the left nod their
heads to, sure that all of us business owners are all dialed into the
fat life somehow via the government, when in fact I spend most of my
life dealing with the myriad of government-required wastepaper that
makes it nearly impossible to run a business at all.

  I am certainly willing to believe that there are certain Fortune
100 companies that recieve all sorts of government rents -- Steel
companies, in the form of protectionism; Wal-mart, in tax abatements
and eminent domain handouts; ADM, in the form of ethanol subsidies;
tobacco companies, in the form of government roadblocks to new
entrants.

However, these type of large politically connected corporations make
up about .001% of the total mass of corporations. And, entrepeneurs,
unless they are already rich and powerful from a previous business,
never get any breaks and in fact often face government roadblocks set
in place by powerful incumbents with political pull. I am all for
eliminating these coporate welfare handouts and incumbent protection
schemes. Before you scream aha! remember that 3 of the 4 government
rent recipients I listed as examples are beneficiaries of programs from
the left side of the aisle.

I discussed this risk-shift concept in more depth here.  One thing I didn't mention in the previous article was the author's attempt to tie household debt to income risk.  I skimmed the book and didn't see any
empirical linkage between rising income uncertainty and household debt.
I am willing to believe they both went up at the same time, but
correlation is not equal to causation. Ten years ago, when folks
lamented rising household debt, it was an issue of personal
responsibility and having the discipline to live within one's means.
Are we past that now? Is debt really going to be added to the list of
things nowadays that are-not-my-fault?

Update:  If he is referring to stuff like this, I share his outrage.  But it doesn't justify his general statement.

  • bbartlog

    The increase in household debt may well be due to a long period of low interest rates, which would make carrying such a debt easier. Doesn't necessarily bode well if interest rates increase, but doesn't say anything about risk or personal responsibility.

    As for the 'protected against the most severe economic risks they face' line, maybe they were talking about bankruptcy law (Chapter 11 reorganization, which does allow a business to repudiate certain debts and still stay in business - but you knew that). Or possibly just the protection of personal assets allowed by setting up as a corporation (S-corporation? Dunno, been a while since I was close to this), so that you can set up a business without tying your own fortunes completely to its success or failure.

    Overall I would agree that the left is clueless when it comes to small business, but I'm not sure this is the money quote to demonstrate that...

  • Bob Smith

    If protection from risk is what was needed to "fully participate" (whatever that means), then European countries should be hotbeds of entreprenurial spirit. Instead far fewer people start and run small businesses there; their economies are dominated by corporate behemoths much more than ours is, despite protestations by the left that large corporations are taking over. There are three reasons for that: stifling regulations that small businesses can't afford, the comfortable malaise of guaranteed employment, and very high taxes that make it nearly impossible to save enough money to start a business.

  • I know very few married parents who don't owe more than 125% of their annual income just on their house, let alone any other debts they might have.

    When did this become a problem?

    If these folks had skills marketable enough to start their own businesses, they wouldn't be leftists. Hence the universal ignorance of the realities of business on the left.

  • Noumenon

    "However, these type of large politically connected corporations make up about .001% of the total mass of corporations."

    Large corporations provide about 50% of U.S. private sector employment, despite their small numbers, so I wouldn't minimize them.

    Hacker is obviously incorrect about entrepreneurs, unless he thinks U.S. bankruptcy laws count as special protection.

    Perhaps his mental image of "businessmen" is confused with "Fortune 500 CEO," and he thinks that because they get their stock options backdated and real estate sale prices guaranteed by their employers, the government should do it for everybody. But as far as the government protecting these people, not so much. Loan guarantees, sometimes. I'd say more their political power inside the government allows them to protect themselves, and still not as much as, say, in Japan or South Korea.

    kokblok at the original post frames government regulation as a way for established businessmen to protect themselves from competitors. But entrepreneurs are still unprotected, as you'd expect.

  • I actually agree that "businessmen and entrepreneurs are protected against the most severe economic risks they face to encourage economic investment and growth". It's called limited liability and chapter 11. I'm sure your company is a limited liability company, so if your company does file and has to file chapter 11, you won't lose your house (unless your personally guaranteed any of the debt for the business). That's a pretty serious level of protection that I think is very important to the capitalist system. The quoted author is probably unclear on the concept, but don't take for granted the protection the system gives us. Without it we'd be in bad shape.