In late 2007 and 2008, the United States and the global economy were devastated by the subprime crisis. That financial calamity was so named due to the hundreds of thousands of foreclosed upon homeowners who were unqualified for the loans they received from mortgage originators around the country. The disaster did not result from the borrowers' deceit or government policy to spur home ownership among lower income Americans, but from an entire financial sector that was incentivized to loan them money whether they could pay it back or not. Banks and private mortgage firms offered the loans because companies like Bear Stearns, Lehman Brothers and Goldman Sachs could "securitize" and sell the bundled mortgages insured by derivatives provided by, among others, AIG. It all worked for everyone, as long as the rating agencies like Fitch and Moody's gave them AAA ratings. And as long as housing prices kept going up. But when the bubble burst, trillions of dollars of wealth were wiped out and millions of Americans were left underwater.
Now, as the country prepares to go the polls, Americans are running the risk of a new--and completely avoidable--subprime crisis of a different kind. On November 8, voters will choose to "loan" the White House and the all the power that goes with it to either Democrat Hillary Clinton or Republican Donald Trump. The tightening polls show a growing possibility that Americans will mortgage their futures to the reality TV star, despite 62 percent of respondents (including 23 percent of Republicans) saying Trump is not "qualified to serve as president."
But the bad risk Trump represents isn't limited to his temperament, intellect and judgment (or lack thereof). It's not just that his serial bankruptcies and dubious business practices can and do get him laughed out of bankers' offices. As it turns out, his repeated promises to pay for expanded defense spending, his maternity leave program, Medicare prescription drugs, Social Security and more by cutting "waste, fraud and abuse" doesn't pass either the giggle test or basic math. Worse still, a growing consensus of economists warn that Trump's mammoth tax cut windfall for the wealthy and balanced budget boasts would necessarily produce the next recession--or much worse.
Continue reading at Daily Kos.