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Les Leopold

Les Leopold

Posted: November 3, 2009 10:30 AM

Sparking a Populist Revolt Against the Billionaire Bailout Society

What's Your Reaction?

It's just sitting out there.

Talk to your neighbors and you can sense how angry they are about the rich gaining ever more wealth during the Great Recession. They understand that the bailout money -- our tax dollars -- went to the largest financial institutions in the world which had caused the crisis in the first place. They sense that the middle class is getting screwed yet again.

What a teachable moment! But what are we teaching?

It looks as if this resentment may reinforce a conservative resurgence. The tea party storm troopers are but the tip of the renewed revulsion against big government that is likely to send many a Democrat to defeat. People will blame the government for its failure to reign in Wall Street. If they government won't punish Wall Street, then the public will punish the government.

If progressives don't intervene decisively, we'll soon return to the faith-based ideology that got us here in the first place. But what can we do in the face of so much wealth, so much lobbying power and so much weakness on the part of so many political leaders?

We can do the basics that every other movement in our nation's history has done. We need to work on three fronts:

1. We need a clear cut analysis and narrative that explains the problem in ways that everyone can understand.

2. We need a concise set of solutions that captures and directs the anger toward bold reforms.

3. We need a broad movement that takes the agenda door to door to build an organized, sustained response.

What's our Narrative?
This crisis is the direct result of a two-pronged, failed experiment starting in the late 1970s that supposedly was intended to lift all boats. The first part of the experiment was to set "free" the financial sector by taking away most of the strong controls put in place during the Great Depression. This was supposed to unleash financial innovation that would make our system stronger and richer.

The second part was to demolish the progressive tax system so that money would concentrate in the upper income brackets - the investor class. They supposedly would invest in new goods and services that in turn would create more jobs and increase incomes.

This experiment in deregulated finance and redistribution of income to the super-rich failed spectacularly.

Instead of an investment boom in the real economy, the super rich poured their money into Wall Street's deregulated fantasy finance casino. They got much richer. We didn't.

The last time our income distribution was this bad was 1929-28 when a similar fantasy finance casino exploded. One factoid tells it all: In 1970 the ratio of the top 100 CEOs compensation to that of the average workers was 45 to 1. By 2006 it was 1,723 to 1! (The Looting of America p.167)

The casino was betting on risky debt and pawning it off by claiming that the risk had been engineered away. When housing prices stopped climbing, the risk was revealed and the investments turned toxic. The financial sector froze up and pushed the real economy off a cliff. Unemployment rose rapidly and is continuing to rise.

To prevent another Great Depression, we poured trillions into the financial sector. Unfortunately we asked for and got little in return. The billionaire bailout society is still intact and we're paying for it.

What's our Agenda?
It's time for Wall Street and the billionaires at the public trough to pay their fair share:

a.) The President's Wage Cap: Until unemployment returns to below 5 percent, no one in the financial sector should earn more than the President of the United States: $400,000 a year. Why? Because the entire sector is on welfare to the tune of $13 trillion in TARP funds, liquidity programs, and various bond/asset guarantees. (See Nomi Prins ) This proposal calls for shared sacrifice. The super-rich can afford it more than the 29 million who are unemployed or stuck in part-time work because they can't find full time jobs.

b.) Windfall Profits Tax on Wall Street Profits: Until unemployment returns to below 5 percent, profitable Wall Street firms should return 90 percent to the US Treasury rather than to their shareholders and bonus pools. To make record profits during the deepest recession since the Great Depression is both obscene and impossible without tax payer support. It's time to pay us back.

c.) Wealth Tax of 5 percent a year on those with a net worth of over $500 million. Again, until unemployment goes below 5 percent, the super rich should pay their fair share. They benefited mightily from the billionaire bailout society that has unemployed so many and gutted the middle class. They can easily pay without suffering.

d.) Break up all institutions that are too big too fail so that they are small enough to fail. This is a no-brainer. Unless we do so, we'll always be bailing them out, making the billionaire bailout society permanent.

There's no need to be defensive about this kind of agenda. It's about as radical as the policies of Republicans like Teddy Roosevelt, who busted the trusts, and Dwight D. Eisenhower, who presided over an era where the marginal tax rate on those earning more that $3 million (in today's dollars) was 91 percent. These Republicans actually believed that a fairer income distribution was better for our country. These Republicans actually believed that concentrated power was a threat to liberty.

Obviously this agenda is not set in stone. Rather it could be a starting point for a discussion with our neighbors and other agenda creators. Only through a robust dialogue will we learn enough to formulate a final program that truly strikes a common cord.

How do we mobilize?
Ah, this is the hard part. We seem to have forgotten how to mobilize ourselves outside of elections that then disappoint us. But the civil rights and anti-war movements of a generation ago show that it can be done. However, it requires hard work and leadership by labor and church organizations that have sufficient resources to support a giant educational effort.

Somehow we have to get to a point where many progressive organizations are working in common to conduct a mass door to door canvassing campaign. The key is talking with our neighbors. I think you'd be surprised at how many people want to talk about how to end the billionaire bailout society and who currently are only hearing the voices of the Neanderthal talk shows. They know the system is messed up, and they know that Palin and Beck have some screws loose. But if those are the only critical voices they hear, then eventually those voices start sounding sensible. It's been a long, long time since we've had a door to door dialogue about the common good. (If we need devices to facilitate those encounters, it would be easy to come up petitions to deliver to congress and the media.)

I know, I know, many of us thought that by electing Obama, it would all change (and what, Paul Krugman would be economic Czar?). But it's never that easy. Nothing much of substance will happen unless we organize a mass debate around a common agenda and a definition of the common good.

Two things are certain: If we actually talk with our neighbors all over the country, our alternative agenda will become much, much stronger. And if we don't, we'll be stuck inside of the billionaire bailout society for decades to come.

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.

 
 
 

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