As we approach the debt limit deadline, we hold our breaths hoping that Wall Street can talk some sense into the Tea Party fanatics. Democrats in particular seem to believe that only Wall Street can pull us back from the brink. But the brink of what? If there's a debt default who really suffers? Pundits like Andrew Ross Sorkin warned tonight on NBC News that a default would make the 2008 crash "seem like child's play." Those are strong words especially when no one really knows what will happen.
But we do know this: Those who need our social safety net will be the real losers. Because no matter how this Washington farce plays out in the short run, the net result will be some kind of "grand bargain" that chips away at Social Security, Medicare and other social programs, while doing absolutely nothing to rein in Wall Street and the myriad of tax and spend giveaways to Corporate America. The mantra from the media will be all about how such a sensible centrist outcome shows that we're finally facing up to our debt burden and doing what has to be done to repair our economy.
In truth, we're dancing to Wall Street's tune. Note how the conversation has dramatically shifted once again from taming runaway inequality and greed to tightening the belts of those in need. You won't be hearing much about how the 1 percent are gobbling up the entire recovery, as political elites "compromise" on ways to shred the social safety net. Some bargain.
Financial Alzheimer's?
Think about how ironic it is to ask Wall Street to save us from a debt default. It's as if we've forgotten that these very same financiers not so very long ago took down the global economy with their bewildering array of fictitious financial instruments and gambling operations, many of which are still in play. Now we expect them to work in behalf of the common good? Not a chance.
Wall Street banks are the experts at not being able to pay their debts and then needing massive bailouts to survive. In fact, the entire debt scare that so motivates the Tea Party stems in large part from the fact that Wall Street crashed the economy. That crash killed six million jobs in a matter of months, which in turn led to drastic increases in public expenditures to counter unemployment, while revenues collapsed. Before the crash, the ballooning public debt was directly connected to the trumped up war in Iraq and the Bush tax cuts for the rich, most of which went to the same financial barons whom we are asking to save us from the current mess.
The Tea Party is Wall Street's best friend:
Expecting Wall Street to discipline the Tea Party is like expecting Bonnie to turn in Clyde. It's not going to happen because of one salient feature -- both the Tea Party and Wall Street hate government regulations. But wait, doesn't the Tea Party hate the bailouts too? Of course they do, but for the wrong reasons. They hate big government and all forms of government intervention in to the economy. So the bailouts (and Obamacare of course) were emblematic a government run wild, (which is also why the sales of Atlas Shrugged spiked when those two bills passed.)
Regulating Wall Street will never be on the Tea Party's agenda. They are intellectually bankrupt when it comes to controlling Wall Street because they can point to no entity except the government that is powerful enough rein it in. And even the government, so riddled with Wall Street recidivists, is currently engaged in a half-hearted battle to re-regulate high finance. Ergo, Wall Street will not go out of its way to undermine the Tea Party. Why bother?
Listening to the Rating Agencies?
It's even more ironic to hear somber warnings from the rating agencies about how the U.S.'s AAA rating is in jeopardy. These are the very same rating agencies that gave out AAA ratings like candy to thousands of CDOs that crashed and burned. Our pundits and politicians point to these dire warnings without a hint of irony. No one bothers to say how these rating agencies turn tricks for cash and are the ever willing lapdogs of Wall Street. They got paid in the billions to rate trash as if it were gold. And now we're supposed to pay close attention to their warnings about the solvency of America?
Liberals take Cover:
We'd better think twice when tossing in with the Wall Street barons who brought on this mess in the first place. This meltdown may become a colossal political trap for progressives. Ask yourselves this: What happens if the deadline passes and Andrew Ross Sorkin's dire predictions turn out to be bogus? What if it's more like the sequester which is becoming the new normal? Might liberals be blamed for crying wolf? For sure no one will blame Wall Street.
If that's the case, we'll see even more cuts in social spending and more hardship for the poor and working people. And liberal credibility will take the hit.
The odds are that the House will fold in the next day or so, knowing full well that their framework of debt reduction has won, even if they've been bloodied. They took one for the corporate team who, in the end, will see their privileges and tax breaks protected. (You want to bet that the outrageous carried interest loophole that rewards financiers won't even get repealed by the Democratic Senate?)
Of course, liberals are hoping that all of this will lead to a massive reaction against Republicans and sweep Democrats into power. But it's just as possible that the public's disgust with all things Washington elects a new round of "independent" fiscal conservatives (from both parties) who will continue the march to the right.
Wall Street will be laughing all the way to the bank.
Les Leopold is the director of The Labor Institute in New York and author of How to Make a Million Dollars an Hour: How Hedge Funds Siphon away America's Wealth (Wiley, 2013)