Moral Hazard: Our Responsibility Crisis

When I read of the unwed 33-year-old California welfare recipient who just gave birth to a litter of eight children,in addition to the six she already had, I thought many unkind thoughts. Absolutely vile thoughts, really; the first sentence out of my mouth in reaction was really, really nasty: somebody shoot that damn woman. Now, that is a really vicious thing to think, and I would never actually do a thing like that. But I don't for one minute apologize for the sentiment that inspired it and I was somehow not surprised to learn that this same woman had bankrupted out of $1 million in house debt.

So far, this lady is into the taxpayers of not only California, but the whole country, for about $4 million, including the house debt and the estimated $4 million her delivery, which entailed a team of 46 medical professionals, and the ongoing care of the seriously underweight infants of about $400,000 each.

To most people, welfare recipients who breed like rats and the medical practitioners who supply them with the means to give birth to a litter of 8 kids at once; and the trillions of dollars of house loans and derivatives based on them that will never be repaid, or, for that matter, the ongoing problems with crime in our neighborhood, are separate issues.. Most people don't see a connection between the irresponsibility of the folks who spend their lives living and breeding incontinently on the back of our welfare system; the reckless foolishness of the millions of middle-class folk who borrowed against their houses to 5X their income, and, in spite of spending up to six, or even eight years warming seats on college campuses, can't figure out that $798 a month doesn't pay down a $700,000 mortgage or that you should actually read and understand a contract before you sign it and are responsible for what you sign; or the flaming criminality and malfeasance of our policy makers and financial executives who built the towers of leverage 100 stories high,of unrepayable loans and instruments based on them knowing full well, quite early on, that the entire structure was tricked to collapse, for they felt safe in the knowledge that the taxpayers would be the guarantors of the last resort and step in to assure their multi-million dollar bonuses and prop up their tottering institutions.

What we have managed to do in this country in the past 65 years is create a massive moral hazard, a system that encourages and rewards stupidity, irresponsibility, extravagance, and criminality, while punishing prudence, restraint, and hard work. If you are one of the millions of people who waited out the housing bubble so that prices would back off to put a decent place within the range of an honest mortgage you could actually afford, you are rewarded for your prudence by watching your neighbor walk free and clear after borrowing hundreds of thousands of dollars against her house to buy $80,000 cars, and live-rent free for months in the expensive place she could never afford to begin with, while she goes delinquent on her loan and begs the government for assistance staying in her home. And if you are a single mom or family of modest means struggling to stay afloat on a stagnating salary while wondering when your head will go on the block at your company and wondering where you're going to find the money to take your kids to the dentist, you have to help pay the $3 million in medical bills that a multiple birth of seven or eight infants now costs, by a woman who can't even support herself and has never worked in her life, or for the in vitro fertilization of a 55-year old unemployed homeless woman. And we all are paying for the massive bonuses and 40-room houses of financial maniacs and criminals while we lose our jobs, or take reduced hours and pay, or watch our own small businesses spiral down into failure as this bubble-induced recession deepens into depression,with little hope of bettering ourselves and the real likelihood that the day we have to default on our own debts will come soon, because we've been rendered stone broke supporting the recklessness and criminality of the 5% of the population that incurs the costs that nobody can pay.

We need badly to restore accountability, and knowledge of causality,or the connection between what you do and the consequences you bear, to a large portion of the population of this country. This is not a class or race issue, either, for the childishness, whimsicality,wish-based reasoning; and refusal to accept responsibility and sense of entitlement to unearned benefits to be paid for by someone else who will receive no rewards, runs from the top of our society clear to the bottom. Maybe we've just had it too easy here for the past 65 years, but now our incredible luck is running out, because we're now stone bankrupt, over-populated, and in resource depletion. We can no longer afford people like the California mother of 14, or Casey Serin, or Hank Paulson and his buddies on Wall Street, or the millions of other people out here, of every degree, who think that the rest of us exist to walk behind them mopping up their messes while our own incomes and lives deteriorate, our jobs vanish and our businesses fail, and our costs escalate.