May 15, 2005 by lonbud

America’s One True God

There’s a religious revolution going on in this country, all right.

Cocktail party conversations and mainstream media outlets would have one believe it’s got something to do with red states and blue states, Bob Jones or James Dobson, Tim LaHaye, Tom Delay, David Hager, Terry Schiavo, pharmacists, preachers, the new pope, or possibly (though not likely) the pissed off flock of Mohammed who are killing the sons and daughters of the United States (not to mention dozens more of their own godforsaken brothers and sisters) every day in Iraq.

The real revolution, the one likely to define the quality of life in these United States for a long time to come, is brewing now in the temple of the one true god this nation has ever lived to serve -money.

Currency values ebb and flow, to be sure.

The value of the US dollar, the currency of first and last resort for the past half century, is today two thirds what it was but three and a half years ago. Not only have soccer moms and security dads had their spending power sliced by a third, the diminishing resources allocated to public health and private subsidy both have had serious effects on the lives of millions who will never be chosen an American Idol, who are, in effect, being voted off the island in the real-life game of Survivor.

Personal and corporate bankruptcies are at all time highs and the U.S. Senate passed in March a new Bankruptcy law that indentures borrowers to lenders like never before. The credit industry in the United States made over $60 million in political contributions between 1987 and 1998; between 1999 and 2004 MBNA alone (the nation’s largest credit card issuer) gave almost $2 million to America’s lawmakers, 71% of which went to members of the Republican party.

In Federal Bankruptcy Court, United Airlines was permitted this week to walk away from a 6 billion dollar pension obligation, and dozens, if not hundreds, even tens of thousands of American corporations may be looking to do the same.

The supply of corporate, municipal, state, federal, international, and plain old junk bonds is unprecedented.

The credit paper of two of America’s most venerable corporations, Ford and General Motors, was recently downgraded to junk status by the Standard & Poor’s credit rating agency, a move that rocked the stock market and will have major repercussions throughout the broader financial universe.

Those two icons of American industry have over $450 billion in combined debt, much of which is owed to retirees and for health care costs. With GM losing over $1 billion in the first quarter of this year, that company’s pension obligations could soon be considered an untenable obstacle to the orderly restructuring of its corporate affairs.

And how is the President dealing with these fissures in the country’s economic firmament?

He presented Congress a budget for the 2006 fiscal year asking for six major government reorganizations and an unprecedented five year freeze in domestic spending.

Highlights of the President’s priorities include cuts in farm subsidies, student loans, and health care for the poor; reductions in federal insurance for private pension plans (which will make United Airlines’ and GM’s and the defaults of companies like them hurt all the more), cuts to community development and job training programs, elimination of federal child care and nutrition programs, cuts in occupational safety and health programs, and a major reduction in funding for environmental protection.

His plans include a $427 billion deficit (a new record!) coming on the heels of his burning through the $5.6 trillion surplus with which he began his first term in office. Off the books completely are the costs of the ongoing crusade to remake the middle east into a Christian democracy, the costs of making permanent his tax cuts for the wealthiest among us, and his plan to save Social Security by giving $4.5 trillion to Wall Street.

Yes, there is a revolution going on and it’s all about money.

But what about the real estate market, you say. Aren’t real estate values going through the roof and aren’t more people than ever before able to achieve the American dream of owning a home? Haven’t mortgage applications been setting records?

Home prices in the United States, adjusted for inflation, have soared approximately 50% nationwide in the last five years, the biggest increase in history. In some areas, prices have more than doubled.

But a look behind the curtain reveals the shaky ground we stand on.

Historically, there is a strong correlation between median household income and home prices. The relationship moves in cycles above and below an equilibrium level: at market bottoms some 47% of households have been able to afford the median priced home in a given market; historical tops have seen as few as 17% able to afford the median priced home.

Today in many markets barely 11% of households can afford what is often a 3 or 4 bedroom, 2 bath, 1500 square foot house with no basement or useable attic on a small lot with neighbors in spitting distance on three sides. In San Diego, for example, that’s what $580,000 will buy.

It gets better, or worse, depending on your perspective. Low interest rates and a wildly aggressive mortgage industry have been making loans available to people for inflated real estate purchases with little money down. Interest-only adjustable rate mortgages have been the vehicle of choice for many of America’s proud new homeowners.

But when the teaser rates expire, that $1900 mortgage payment jumps to $3100, and unless interest rates remain at their 30 year lows for the next 30 years, well, it’s not hard to imagine what may happen to both home prices and many homeowners.

Of course, an explosion in household income levels would negate this dire scenario, but there’s that money revolution going on that makes a big jump in personal incomes very unlikely any time soon.

Not that it will do much good in a nation where books and reading are fast becoming quaint relics of a forgotten past, but there is a book by Jared Diamond called Collapse: How Societies Choose To Fail Or Succeed that could be very instructive to anyone concerned with getting and preserving wealth in this life.

And as to the rise of the religious element, specifically the moralistic, punitive ilk based in fundamentalist Christianity that seems suddenly prominent in every sphere of our society, I’ll end with something from Lewis Lapham’s editorial in the May issue of Harper’s Magazine, wherein he quotes the 19th century writer Robert Green Ingersoll’s essay, “God and the Constitution”:

When the Theologian governed the world, it was covered with huts and hovels for the many, palaces and cathedrals for the few …. The poor were clad in rags and skins — they devoured crusts and gnawed bones. The day of Science dawned and, … There is more of value in the brain of the average man of today — of a master-mechanic, of a chemist, of a naturalist, of an inventor, than there was in the brain of the world four hundred years ago.

These blessings did not fall from the skies. They did not drop from the outstretched hands of priests. They were not found in cathedrals or behind altars — neither were they searched for with holy candles. They were not discovered by the closed eyes of prayer nor did they come in answer to superstitious supplication. They are the children of freedom, the gifts of reason, observation, and experience — and for them all, man is indebted to man.