Moral Hazard: Giuliani?

From Left to Right, from almost every of the many commentaries I’ve read this morning on our economic travails, the term “moral hazard” is exclaimed.

Those accustomed to thinking this refers to loosened social morals are not far wrong. But, there’s a wider issue involved, the breakdown of personal and mutual responsibility and consequences.

The term “moral hazard” stems from insurance and economics: Engaging in risky behavior because of the lack of incentive or punishment to guard against a risk, due to being protected against it or relatively immune to consequences.

What better explains the behavior of Wall Street and giant investors, seeking huge bonuses from short-term profits on security creations that no one – including themselves – understand? What better explains the behavior of multinational corporations and investment funds – mostly or heavily dependent on foreign revenues – selling out key technology and management influence to sovereign investment funds controlled by unfriendly governments? What better explains the behavior of most of Congress’ spending excesses, with presidential complicity, divvying up our hard-earned tax dollars for personal enrichment and electoral longevity?

Here we return to the social aspects of “moral hazard.” Ultimately, only the voters harmed by such fat-cat profiteering will have an incentive to demand accountability. That happens once in a generation or two, when the pain becomes unendurable and personal, usually at times of deep recession. Until now, stockholders, homeowners, taxpayers have benefited more than feeling harmed.

That may change dramatically, if some’s more dire economic predictions come to pass. Unless it happens in a hurry – and I by no means look forward to that – 2008 will likely set us up for such severe trials, and reactions, during the next administration.

Such reactions may be salutary, as in electing representatives who actually exhibit a track-record of responsibility, or swing too far or off pivot, as in imposing stifling regulations ultimately harmful to all.

All of the leading presidential contenders, from both Parties, are either part of the creation of this “moral hazard” problem via their own economic dealings or are inclined toward promising short-term fiscal relief without longer range reforms – including setting a moral tone of leadership in their arguments.

The root of the difficulty that most Republicans feel in settling on a nominee choice is unease with the front-runners’ “moral hazard.” Most Democrats don’t feel this unease, having long ago settled into a statist mentality, now buttressed by the Democrats’ own fat-cat leadership cozy with government-fed largesse.

It surprises me, as it may some others who think they know me, that this stream of thought is leaning me – still undecided – toward Giuliani. As a lesser of evils, he’s exhibited the most adaptability to sea changes in national circumstances, with a decisive bent toward the interests of America and everyday Americans’ primary requirement for sane security, firmly rooted in understanding how the legal and legislative process works and can be managed for change.

I'm sure to hear many reactions, and look forward to the discussion.

Comments:
From someone I respect, paraphrased: Guiliani's personal life is a mess, and he's a social libertarian, a mixed bag for some conservatives, but we're voting for a Commander-in-Chief and chief executive. He's solid, sincere, reassuring, gritty, and forward-looking.