What unites the midterm election results, the Federal Reserve's decision to spend another $600 billion to keep interest rates down, the failure to address the foreclosure crisis, and America's worsening relations with its G-20 partners? And, more generally, what explains the Obama Administration's toothless response to the financial crisis, in particular its reversion to status quo regulatory and economic policies, over the past two years?
In making my documentary on the financial crisis, Inside Job, I obsessed over these questions. Some argue that President Obama, as a matter of individual personality, is averse to confrontation; others say that, lacking financial experience while being forced to confront the most severe crisis since the Great Depression, he was hostage to his campaign advisers, who happened to be Clinton-era insiders who had helped cause the crisis. Gradually, however, I have come to a different conclusion, one based on a more fundamental, structural problem in American politics.
My answer is this: far from being in an era of brutal partisan warfare, as conventional wisdom holds and as watching the nightly television news might suggest, the United States is now in the grip of a political duopoly in which both parties are thoroughly complicit. They play a game: they agree to fight viciously over certain things to retain the allegiance of their respective bases, while agreeing not to fight about anything that seriously endangers the privileges of America's new financial elites. Whether this duopoly will endure, and what to do about it, are perhaps the most important questions facing Americans. The current arrangement all but guarantees the continuing decline of the United States as a nation, and of the welfare of the bottom 90% of its citizens.
First, consider Obama Administration policy. The Federal Reserve is keeping interest rates down, which greatly enriches the financial services industry. And while, to its rare credit, the Obama Administration has sought to repeal some of the Bush tax cuts for the wealthy, it has avoided any serious attempt to tax or control financial sector compensation, to recover any of the massive amounts taken by bankers during the bubble, to penalize or prosecute those who caused it, or to reverse the extraordinary rise in inequality that has transformed America over the last generation. The Republicans go even further in catering to the wealthy and the financial sector, but the differences are relatively minor.
The financial services industry and the most successful American multinational firms now obtain rapidly increasing fractions, often already the majority, of their investment, employees, and revenues from (a) other wealthy individuals and corporations and/or (b) outside the United States. Over the last two decades their political interests, contributions, and lobbying have gradually followed these larger trends. As a result, the political duopoly has overseen a massive disinvestment in the future of the United States and the American people, and a massive transfer of wealth from the bottom 90% of the population to the top 1%. Taxes on dividends, high incomes, capital gains, and estates have sharply declined, while tuition at public universities, hours worked per family, household debt, and government deficits have all increased.
And yet there is, obviously, real political fighting out there. Of what, therefore, do these vicious partisan fights consist? The two parties and their supporters attack each other on vague ideological grounds (big government, being a Washington insider, socialism, whatever), issues of personnel and power (holding up Obama appointments, redistricting, earmarks), or, more excitingly, with regard to social values issues dear to their bases: abortion; gay rights; don't ask - don't tell; sex education versus religion in schools; guaranteed-health-insurance-as-socialism; gun control; welfare; global warming. On these issues, each side can credibly tell its base that defeat would mean real losses. People do care about abortion and gay rights, for excellent reasons, and so many people on both sides grudgingly continue to participate in the charade.
The losers, of course, are the American people, and particularly America's younger generation. For at least the bottom half of the population, America's educational system is a disaster, with our high school graduation rate at 78 percent and declining (versus, for example, 96 percent for South Korea and over 90 percent for most developed nations); broadband infrastructure generally rated at about 20th in the world; and gradually deteriorating physical infrastructure. Quietly, as inequality has grown and the financial sector rose to political power, the wealthy in America have constructed increasingly separate, parallel, and private infrastructure systems for themselves - elite private schools and universities, gated communities, private planes, the hedge fund universe.
The political duopoly arrangement, with its emphasis on intense fighting over values issues, serves to divert attention from the financial sector's "quiet coup," to use the economist Simon Johnson's phrase, and to divide potential opposition to it. People who should be aligned in calling for fairer taxes, campaign finance reform, stricter financial regulation, better public education, and investment in America's infrastructure are instead divided by their opposing views on gun control, abortion, and gay marriage. It is a strategy that has worked remarkably well for both parties.
Even so, the American people have begun to sense that the system is rigged, and the recent election results are partially a consequence of this. Fewer people are voting, more people are registering as independents, and voters are more willing to switch parties. Of course, as long as the duopoly holds, there is very little that they can do. The big question is: can it hold?
Forming third parties and social movements in this kind of situation is difficult. The financial sector and the wealthiest 0.1% of the country have the twin advantages of great wealth and great cohesion. America's election districts, campaign finance arrangements, and voting rules discourage populist third parties whose base would be dispersed and, individually, not at all wealthy. At the same time, however, there are many precedents in American history for such a rebellion - the Progressive movement, FDR's post-Depression reforms, and more recently the nonpartisan civil rights, feminist, and environmental movements. In my personal conversations, I sense an emerging consensus based on nothing more complicated than a sense of basic honesty, fairness, and common sense, qualities which the American people still have in abundance. Let us hope that this can be translated into some organized force that can put an end to the present political cartel.
Charles Ferguson is the director the documentary Inside Job, a documentary film about the financial crisis now playing in theaters nationwide. He holds a Ph.D. in political science from MIT.
Author Note: The above is a corrected version of an earlier post. I would like to apologize to the bipartisan deficit reduction commission, and to the readers of the Huffington Post, for misrepresenting the commission's draft recommendations, which are in fact largely progressive in their tax and income effects. The error derived from relying upon an inaccurate secondary source, something I rarely do. Otherwise, the article was factually accurate and represents my views.
James Kwak: Dear Mr. President, Please Don't Extend the Bush Tax Cuts for the Wealthiest Americans
Senator floats possible compromise on Bush-era tax cuts
Pelosi signals No on Bush tax cuts for the wealthy
Factbox: Congress in 'lame-duck' session after election
Pelosi, AFL-CIO: Don't Extend the Bush Tax Cuts
Warner Proposes Compromise on Extension of Bush Tax Cuts: Video
The deficit commission and tax reform
John Boehner signals no compromise with Obama on Bush tax cuts
AFL-CIO: Compromise On Bush Tax Cuts For The Wealthy Is 'Insane'
Small Business Owners Bust Myths on Bush Tax Cuts
Senator floats possible compromise on Bush-era tax cuts
Pelosi signals No on Bush tax cuts for the wealthy
Factbox: Congress in 'lame-duck' session after election
Pelosi, AFL-CIO: Don't Extend the Bush Tax Cuts
Warner Proposes Compromise on Extension of Bush Tax Cuts: Video
The deficit commission and tax reform
John Boehner signals no compromise with Obama on Bush tax cuts
AFL-CIO: Compromise On Bush Tax Cuts For The Wealthy Is 'Insane'
http://groups.google.com/group/finding-our-way-back
"Everything the right wing does is designed to accomplish one of two things, either:
(a) transfer wealth from everyone else to the rich, or,
(b) distract everyone else from the fact that (a) is occurring."
Jack Clark said that.
"Maybe the Democrats are playing the same game."
I said that.
Even ivory towers have foundations at their base...and that's what the ultra-rich forget. An unsustainable budget plan, and millions of angry, unemployed citizens is not a solid foothold--and hence, ivory towers will topple.
The Debt Commission Report draft is a symptom of the system we have set up over the past few decades, I call that system, the "US Corporatocracy":
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9560962
The Debt Commission report only derives about 5% of the savings coming from increased general revenue...
First, the Bush tax cuts need to expire, period.
Then, the Debt Commission (or someone else) needs to start at square one, and provide the steps they skipped; the first of which is tables and graphs of projected revenues, based on existing (without Bush cuts) federal marginal tax brackets plus a set of new brackets and rates for the ultra-rich, well beyond the current highest tax bracket--including the assumption of capital gains being treated as ordinary income.
power corrupts absolutely.."
John Acton
"Power does not give up power voluntarily,
the power has to be taken from them...."
Malcom X
will be the level that they are willing to accept.."
Thomas Jefferson
All The Best,
Quinny
To quote Paul Street: "I support (We need) a Democracy Amendment to the U.S. Constitution to fundamentally overhaul American elections in ways that would permit third and fourth parties to become relevant political and policy players. Election reforms required include proportional representation, full public financing (all private money out of public elections), a significantly shortened election season, the end of paid campaign ads, a totally different debate structure, etc."
At last the Centrists in our Government have found a solution. Drop the Right wing AND the Left Wing critics and, because the Republican Party is now a regional shell, and sweep the remainder into a very controllable remaining party we can call the Incumbent Party. Essentially, this is a redux of late 19th century Italian Transformism.
http://en.wikipedia.org/wiki/Trasformismo
Our economic border is now like the sides of a bucket with holes punched in it. Investment capital or new jobs placed in this bucket will, like sand, run out unless the holes are fixed first. Fair, not Free Trade, and Fair Taxation, not a Free Ride, are the only answers.
Clausewitz observed that war is politics being carried out by other means. A corollary mighty be that trade may sometimes be war carried out by other means. Flat Earth Free Trade is unilateral disarmament, a policy leading to National suicide if unchecked. Why does this administration not even discuss a return to Fair Trade policies? Because both major parties and our military are now dominated by corporate money.
If 4.6% of the world population uses 33% of the world resources in what percentile of wealth sharing is each individual in that 4.6%?
Having a continue incesting interventions from the Federal Reserve [supported by the Elite] and the majority holding empty bags. That's not democracy. Is pure and simple Kleptocracy.
The GOP had tried to be the "fiscally responsible / no deficit spending party" and stop social investment by arguing poverty. However the robust economy and the progressive tax structure kept the nation humming along with a strong middle class - arguing poverty was impossible.
So it is that they came up with the "starve the beast" strategy, named by Grover Norquist the strategy consisted in breaking the US treasury by reducing taxes on the wealthy and massive military spending, Reagan tripled the national debt with the strategy and the rest of the presidents continued the strategy except for Clinton who instituted pay-go for all programs.
W/Cheney took up where the last GOP president left off and they doubled the debt, just between Reagan and W over 9 trillion dollars of debt was amassed by the federal government, all by cutting taxes and starving the government.
Now we are here, and the GOP continues with the crazed idea of starving the state and transferring wealth and power to the top .2% of the population while ruining the economy and making America a third world nation.
Any one can Google "starve the beast" and the whole strategy is there to see, why is it that the Dems don't talk about it?
But there is one point that must not be forgotten - the corrupt policies that serve corporations and the super-rich - are the policies of the right. The Democrats serve these policies when the "compromise" or "trianguate", serving up mildly softened versions of right wing policies.
One can identify a politician who is off the reservation, and refusing to go along: they espouse and fight for progressive (that is, normal, mainstream, centrist policies).
Few these days enough, eh?