Socialism for Wall Street, Capitalism for Main Street
For twenty-eight years, since the beginning of Ronald Reagan's first term, we have been subjected to a steady stream of Republican propaganda claiming that if we just got government out of the way and "off our backs," deregulate the economy, and let the market work its magic, prosperity would "trickle down" to the average American citizen. In the mid-1980s, corporate lobbyists descended on Washington, threw huge amounts of campaign cash around, and told us that deregulating the Savings and Loan industry would be a great idea. John McCain and his good friend Charles Keating from Arizona were big advocates of this scheme that turned out to be a disaster that cost taxpayers $160 billion. Phil Gramm, when he was Senator from Texas (and John McCain's choice for president in 1996), worked up another "deregulation" bill that President Bill Clinton signed into law in 1999 that repealed the Glass-Steagall Act of 1933, thereby destroying a key firewall between commercial and investment banks.
We witness the same over-confident, smug market fundamentalists and laissez-faire devotees, businessmen and women who hate "government" when it provides aid to families with dependent children, or food stamps, or health coverage for poor people -- businessmen and women who denounce as creeping "Socialism" any attempt by the government to redistribute some of the nation's wealth to the working middle class or to the poor -- now come to Washington, hat in hand, begging the federal government to fix their self-created problems brought on by their own unbridled greed and recklessness and demanding massive infusions of tax-payer dollars in the form of bail out after bail out.
It's Socialism for the rich and laissez-faire capitalism for everybody else.
What Bear Stearns, Lehman Brothers, Merrill Lynch, and now American International Group Corporation have in common is that they all hired Washington lobbyists and lavished campaign donations on politicians to push through with no public support the radical deregulation of the financial sector. Then they proceeded to create entire new categories of "financial products," derivatives and the like, that amounted to nothing but a giant Ponzi scheme. And when it all collapsed due to their Wild West, shoot 'em up, freebooting, 19th Century-style rapacious business practices, they turn to the government for a hand out to keep the whole goddamned system from descending into another Great Depression.
For historians like myself, and for people like Kevin Phillips, William Greider, and other observers, this collapse of our financial sector was like watching a slow motion train wreck. The laissez-faire proponents for the past thirty years have perpetrated the biggest lie ever told to the American people. And George W. Bush, as with everything else, took this lie to its extreme. He gave the financial industry everything it wanted, and he appointed their lackeys and puppets to run the regulatory agencies that were set up in the wake of the Great Depression to avert exactly the kind of catastrophe that we're witnessing on Wall Street today.
George W. Bush spent the first months of his second term on a 60-city tour where he answered prefabricated questions in phony "town hall" meetings claiming that privatizing Social Security -- taking $1 trillion out of the trust fund and throwing it to his backers on Wall Street -- would be a great idea. And even though the Republicans ran the House of Representatives with Denny Hastert and Tom DeLay, and the Senate with Bill Frist, and the presidency, the American people did not fall for this legalized form of grand larceny. And it's a good thing they didn't. Had Bush been able to get his way and throw a third of the Social Security trust fund at these same damaged, greedy firms we would be witnessing with the current financial meltdown the demise of Social Security.
The libertarians like Ron Paul, Bob Barr and others tell us that the government should not bail out these Wall Street hucksters and gangsters and should let them go down and pay the price for their own mismanagement and bad investments. I agree philosophically with this point of view. But I don't think it's realistic unless one is willing to see the nation enter an economic collapse that would probably look a lot like what Japan and Argentina endured in the late 1990s only worse. The fact is these giant firms, with their billionaire owners and their army of pin-striped men driving Jaguars and flying in private jets to their summer homes to visit their mistresses, have a stranglehold on the nation. They are too big to fail because it would bring on another Great Depression.
Everybody knows that what is needed is exactly the opposite from what we've had for the past three decades. Instead of a government that is asleep at the switch and filled with cronies and hacks from the industries that are supposed to be subject to oversight, we need an activist state that rebuilds the firewalls between the commercial and investment banks; we need a "re-regulation" of the economy, especially key sectors that the entire nation depends on -- finance, energy, health care, food, etc. In short, what we need is a "New" New Deal in this country. We need an IRS and a Justice Department that can strike fear in the hearts of these captains of industry.
Ronald Reagan is often looked upon as the Republicans' Franklin Roosevelt. But Reagan sold the nation a bag of goods. We can finally see clearly the failed results of this three-decade experiment in laissez faire capitalism. It has nearly destroyed the middle class in this country, greatly widened the gap between the super rich and everybody else, destabilized vital sectors of our society, and made the United States a laughing stock abroad.
As a historian I always wondered what evidence of the free market utopia people like David Brooks (with his "ownership society") and the army of ideologues and market fundamentalists marching in lockstep out of the Cato Institute and the Heritage Foundation and the American Enterprise Institute and Gover Norquist's Americans for Tax Reform, and all the other shills and hucksters who sold this tripe to a naive public like a greasy used car salesman selling a lemon -- I always wondered where is their laissez-faire utopia? Are they referring to what America looked like in 1880? A time with nearly zero federal government regulations? With no child labor laws, no limits on the hours worked, no weekend or paid overtime, no minimum wages, no workers' safety regulations, no Securities and Exchange Commission, no Federal Deposit Insurance Corporation, no worker pensions or Social Security, no right to form independent labor unions, and no vote for women. Is this their laissez faire utopia that deregulation was supposed to produce?
Today, we have the worst of both worlds. Government bailouts for the rich -- naked capitalism for everybody else. This whole mess could have been avoided if the generation that followed the New Deal had the common sense and decency to understand that you cannot turn over capitalism to the capitalists. Greedy individuals will always figure out clever new ways to make their own piles of money at the expense of their fellow citizens and at the expense of their nation's wellbeing. Whether it's the Savings and Loan scandal of the 1980s or the Dot.Com bubble of the 1990s or the Enron collapse or the mortgage meltdown -- it's always the same old story. They pass on the wreckage to the taxpayer as they always do. It's time to put to rest once and for all the Big Lie that deregulation and privatization of government institutions will bring the nation anything other than calamity after calamity.
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Hear, hear, Mr Palermo! We are constantly being scolded by the GOP and other corporatists for any and all attempts to "interfere" with market forces. They always remind us that the "free market" is THE panacea, always good for whatever ails ya. But when the forces of the market produce significant enough failures, do they want the natural consequences of those failures to play out? Oh no...
If you or I invested our life savings in highly speculative, risky financial instruments and subsequently incurred heavy losses, would there be an ear for our pleas for help from the American taxpayer? I rather doubt it, yet here we are, the taxpayers, being saddled with these potential downsides:
Bear Stearns - $29 billion
Fannie Mae & Freddie Mac - $100 billion
AIG - $85 billion
More corporate welfare to come? WaMu? Lehman?
Mr. Palermo, This is a great post.
If only we could past reliving the past. and into a future when we could simply remember it.
--
"We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.
"They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.
"Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.
"I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master."
The Real FDR.
Wonderful quote . . . and that's FDR?
Yup.
From the man who brought you:
"The only thing we have to fear is fear itself."
If he were around today he would be the NeoCons worst nightmare. Capable of fighting a war, fixing an economy, and beating the "Old boys network" into a coma.
These quotes are from:
Speech at Madison Square Garden (October 31, 1936)
Franklin Delano Roosevelt
Here is a link to a transcript and audio. Worth a listen.
http://millercenter.org/scripps/archive/speeches/detail/3307
Wow thanks for posting that link! No wonder they kept electing him.The parallels between then and now gave me chills.
I talk to people that vote Republican and they tell me its because the Democrats will raise their taxes,and I ask them what makes you think you shouldn't have to pay taxes? Your kids go to public schools,they play in the park.
You drive on paved roads and set your garbage out twice a week,knowing it will be picked up.You know if you lose your job tomorrow that you can draw unemployment while you find a new job,and when you become unable to work any longer,if nothing else,you will have Social Security to fall back on.
Now tell me again Why shouldn't you pay taxes?
And they wanted to privatize Social Security and give it to Lehman Bros, AIG, Citigroup, and others because Social Security is in trouble! If these financial corporations were in as good as shape as Social Security they would the epitome of financial health in today's world of slice, dice and tumble 'securities'. I hope we don't hear again any talk of privatization of Social Security ever again! Apparently there is always money to save failed deregulated financial institutions but there is no money to save anything that helps people. What does that tell us?
It tells me it's awfully funny strange how the govt coffers get drained just as the majority of Americans start to see the need for some kind of universal health care.
This analysis is spot on!
Social Security is safe. If more funds or needed down the road, they only need lift the cap on FICA taxes that allow the super wealthy to pay a pittance in percentage of Social Security taxes than the working and middle classes.
Conservatives are just upset that their grand dream of killing off Social Security through privitizing it has been thwarted, probably for good.
The saddest thing of all is the talk radio morons are blaming the people who have lost their homes in foreclosure for this mess......What will it take for them to REALLY care about this Country and not just Republican power??
Sometimes I object to the Huffposters who say "We deserve it..." but in this area I have some sympathy with that theme. It's not like the first time deregulation has backfired. They always promise that competition will lower your bills (sucker!). And my Asinine Dittohead relatives go for it every time. So some of us "deserve it," I guess.
I am currently doing work for a Congressional candidate and when I encounter someone in a middle class neighborhood with a baby in his arms and he tells me he's a Republican, I have to bite my lip to keep from asking "Why?!". I want to ask him what the Royalist Righties have ever done for him or what he thinks they will do? I want to ask him if he expects the food and formula he feeds his baby not to kill his child? I want to ask him if he expects the clothes he puts on that baby not to be cancerous or flammable. I want to ask him if he expects the playpen he puts that baby into or the toys he buys for it not to kill his child. I want to ask him if he expects the car seat or the car he has that car seat in to be safe. I want to ask him if he expects the water his family drinks to be safe. I want to ask him if he expects the food he eats to be safe. I want to ask him why he thinks government is the problem. Of course, I can't do that because it's not what I'm supposed to do. But, it sure is hard to smile and say "Thank you for your time." when I think he's a complete idiot!
It's time SOMEONE started asking those questions, politely, gently, but firmly. If nothing ever shakes these people out of their ignorance and complacency, then the chances of developing anything like a TRUE consensus in this country are greatly diminished, and that hurts all of us.
Oh, I suspect losing their mortgaged home, not being able to buy food because they lost their job, and not being able to take that baby to a hospital because they have no money just might shake them up a little. And doubt it not - those things are coming to those ignorant and complacent people. In fact in has already come or will come soon enough to so many of them that Obama is going to win this election with ease.
Very well said. Thanks.
I'm willing to bet that a lot of people said the same thing when the US govt. "bailed out" Chrysler. Which, apperently, turned into a profit for the govt, because Chrysler paid back its loans and interest. I think it's a bit early to go off on the deep end regarding this one. You have home insurance? Car insurance? If AIG goes under, you're no longer insured. You've lost what you paid, and you'd better hurry up and get new insurance. My mother, a retired person living on fixed income, has an annuity with AIG; if she loses it, that represents a large part of her savings.
I'm not saying the rich aren't getting more than their share; but I'm saying that, in this case, the company may just be too big to fail.
This said, many of your other criticisms of the capitalist financial system are valid. But this one should be more nuanced.
As posted in another opinion piece here, no company should be too big to fail. If they're that big and that important, there needs to be closer oversight and complete transparency so disasters like this can be averted.
I'm with you that this might not be the disaster everyone's saying but it should be an enormous wake-up call and could just be the tip of the iceberg... only time will tell.
Only problem is that the government doesn't have any money to lend, so I guess whether it might eventually make a profit on its "investment" would depend on what the differential is between the interest rate the government pays out to its creditors and the rate to be paid by these bailed-out companies to the government. Could be a loss.
Like the victim of the telemarketing scheme said: "Oh well, I've already given them thousands of my hard earned life savings, I might as well give a little more, after all, there's still a chance in a trillion this thing might be legit!"
you are missing the point.
Well, you are right. Economic terrorism will work every time. That's what it is, you know, when a company is "too big to fail" so we must save ourselves from them by paying their ransom demands. Socialism for the rich, and a stale piece of debt-ridden capitalism cake for the rest of us. Sorry, but I do not believe economic terrorists should not be rewarded any more than any other terrorist, no matter how much it will hurt your grandmother if you don't ride to her rescue. The U.S. doesn't negotiate with terrorists, remember? Or was that just tough-talking American pomposity we've been hearing all these years?
Spot on analysis. And as long as U.S. political system retains its two-party system, ( in a reality a one party system) the economic power will remain in the hands of the financial oligarchy. Republicans made a sharp veer to the right during Reagan the Democratic party followed in the same direction. Democrats quickly followed. Current Democratic party nominee would be considered economically and socially an arch-conservative in many European countries.Whereas McCain's platform is somewhat to the right of Mussolini.
I was reading about Social Security and did you know that in 20 years, every penny the gov't receives in revenue (taxes, of course) will be required to pay for that and Medicare? There will be nothing left for things like defense, justice, education, etc. I'm wondering why the People have not been given the opportunity to vote on the issue of privatizing SS? Any ideas on why we are not given the chance to vote on things like that? Obviously, Congress does not accurately represent the people or things would be quite different. Why does Nancy Pelosi get to decide not to allow a vote on things like offshore drilling or ANWR? The house passed a bill last night that is supposed to pacify voters i guess. It allows for drilling outside of 50 miles. Yet experts tell us that 90% of the offshore oil is within 50 miles so we really have gained nothing.
Wow, where did you read that about Social Security and Medicare? It is utterly false. You should consider carefully whether to believe anything published by that particular source in the future.
Why don't we get to vote on privatizing Social Security? Because we're a representative democracy, and as such, we don't hold general elections to decide matters of public policy.
Regarding offshore drilling, you should know that (a) there are millions of acres of drilling leases that are not being used; (b) it would take many, many years for any new leases, or new exploration (which has to take place before drilling can even begin), to result in the production of additional oil; and (c) there are not enough unexplored and/or drilled fields in existence to have any significant impact on the world's supply of oil were they to be explored and drilled. The calls you hear for new drilling from the right wing are nothing more than yet another wedge to drive apart the electorate. We need to focus on the transition to renewable and clean energy sources, which is inevitable and needs to happen sooner rather than later.
THIS is the big lie. Did you know a person who makes around $92,000 pays the same social securiity as Bill Gates? The big guys don't want to pay into the system so they cap the income that is taxed.
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