Santelli's Assumptions

Rick Santelli’s recent publicized comments are fertile ground for interesting conversation, if nothing else. In his original “rant” (I use the phrase not disparagingly, but simply because even his supporters are calling it that), Santelli turns to fellow traders and says, “This is America.” The assertion is significant, as is a comment from White House press secretary Robert Gibbs in response… “I think we left a few months ago the adage that if it was good for a derivatives trader that it was good for Main Street.”

Santelli and others of libertarian sensibility offer an important perspective when they discuss something like the mortgage plan in terms of morality, but I frequently sense a lopsided sense of moral imperative in these discussions, which must itself be scrutinized closely. Alongside concerns about encouraging irresponsible behavior (“How about we all stop paying our mortgage?”), Santelli voices a reticence to giving up his just deserts (“How many of you people want to pay for your neighbors’ mortgage that has an extra bathroom and can’t pay their bills?”). Indeed, in an appearance on Hardball on the 20th, he states that “contract law should be sacred.” Moral outrage at the hazard caused by propping up individual vice is accompanied by an equally strong… but distinct… moral outrage at the idea of compulsive assistance on the part of the taxpayer for the sake of communal virtue, especially the sort that might disrupt the fair’s fair mentality that Santelli seems to assume everyone assumes. Because, if you’ll recall, he quite clearly assures us that the Chicago trading pit “is America.” Kind of reminds you of someone, doesn’t it?

When an economic response to moral problems is unveiled, it is often couched in terms of incentive or disincentive. This is neither good nor bad; the system is simply built to work in this way. But such language should clue us in to the possible shortfalls of any moral argument determined by these strictures. For Santelli, the ultimate common good seems to be that of personal property and the consistency of the system within which it is attained. The extent of the moral action he advocates is negative and passive: we must prevent moral vice by refraining from “rewarding” it or “incentivizing” it. The economic language is retained because that is the structure of his moral vision. It also seems to exhaust the scope of his moral concern.

It’s worth noting what Santelli speaks of when he speaks of “moral hazard”. He says sarcastically, “How about we all stop paying our mortgages?” When we hear this sentiment, it’s important to remember that moral hazard actually has nothing directly to do with what is moral. The immoral practices encouraged by lenient consequences are not a problem because they are immoral, but rather because of the instability that they provide to the entire system. When Daniel mentions, then, that many people have latched on to Santelli's rant and "have taken the 'moral' part of 'moral hazard' very seriously," it is important that we question what this means. Santelli and the libertarians do have a strong moral case to make, but we should not let them overstate it by taking for granted their understanding of the individual's place in society as homo economicus or politicus. One's rant should only be as loud as its case warrants, and if the case that Santelli puts forward draws a line at the inviolable nature of contract law, then it cannot expect to be widely accepted as a moral response to economic failure beyond those circles that already conflate the two.