President Obama may be joining the populist crusade against Wall Street. In the span of one week he opened up a three front war: a tax on big banks, full support for a new Consumer Financial Protection Agency, and the embrace of Paul Volcker's plan to break up the big banks.
It's about time. Or has the time already passed?
Yes, there is enormous popular anger against Wall Street and the bailouts. However, the deepest anger is rooted in the enormous fears and hardships caused by the lack of jobs.
Obama is responding with a call for another stimulus in the form tax breaks for small businesses and for the weatherization of homes. Not good enough. The scale and scope of his proposals are unlikely to alleviate enough of the pain and suffering experienced by jobless Americans. Unfortunately, the Administration does not realize how deeply the crisis of employment is built into our billionaire bailout society.
So what should Obama do?
Declare a national jobs emergency. Then tie taxes on Wall Street's bonuses directly to job creation on Main Street. Make it simple. Make it fair. Make it fast.
Instead of taxing the banks through his proposed complex asset liability tax which most Americans really don't understand (and which will be lobbied into Swiss cheese), he should slap a windfall profits tax on the $150 billion record bonus pool, which every American can grasp. (Rep. Dennis Kucinich's bill for a 75 percent bonus tax is waiting for Obama's support.)
It's not hard to connect the dots: That bonus money comes directly and indirectly from taxpayer bailouts to Wall Street. That's our money. Take it back and create jobs with it.
At the same time, President Obama should announce the creation of a million-person weatherization corps to insulate every American home, business and public building. The energy efficiency benefits would be wonderful to reduce carbon emissions, global warming, and oil imports. (Do the math: 75 percent windfall profits tax on $150 billion bonus pool equals $112.5 billion. At $100,000 per job including benefits, administration and supplies, you could create more than one million green weatherization jobs.)
But the key is putting one million people to work on this vital national security task before November - that is before corporate donations unleashed by the Supreme Court make a mockery of elections.
Let's keep in mind how we got here. For thirty years the financial lobbyists and their willing partners in Congress and the White House engaged in an orgy of deregulation and tax reform, resulting in wealth accumulation in the hands of a few. So much money accumulated with the wealthy, that they literally ran out of investments in tangible assets in the real economy. Wall Street solved that problem by creating a menagerie of deregulated fantasy finance instruments that sucked up the surplus wealth and earned Wall Street more profits that ever before. (Summers and Geithner were avid cheerleaders for this process.)
The process of securitization and derivatives was creating an upside down pyramid of synthetic instruments leveraged on top of risky assets like subprime loans, which in turn created an enormous housing bubble. (And before that the dot.com bubble, the savings and loan crisis, and so on--it should be clear by now that we're dealing with a distended financial sector that inherently builds bubbles.)
The one clear plus was that the artificial housing bubble also created jobs in the housing supplies, construction, and financial industries, even as our manufacturing sector was dismantled piece by piece and moved to low-wage areas around the world. Average wages stagnated and declined, but Americans, overall, were working.
It's now clear that that these jobs and faux prosperity were built on financial rot. As soon as housing prices stopped rising, the entire upside down pyramid of leveraged assets came crashing down. The financial sector froze and threw the world economy to the brink of another Great Depression. The real economy, starved for credit, went into an immediate tailspin and unemployment shot through the roof. There are now nearly 30 million Americans without jobs or forced into part-time work.
The theory of recovery adopted both by the Bush and the Obama administrations was this: stabilize the financial sector with enormous bailouts to stop the financial implosion and provide stimulus bills to kick-start the real economy. This combination was supposed to lead to a rapid recovery both for financial assets (including our 401ks and pensions) and for the creation of real jobs.
It didn't quite work out that way. The financial sector, which is still living off an array of hidden government guarantees, asset purchases, and cheap money, is making enormous profits again. (If you want to see clearly how TARP is just a small part of the Wall Street bailout package, take your blood pressure pills and go look at Nomi Prins's excellent accounting). Meanwhile the real jobless rate is well over 17 percent.
And just to rub it so it really stings, Wall Street has the chutzpah to award itself a record bonus pool of $150 billion during the worst economic year since the Great Depression. This pool would be a negative number were it not for trillions of dollars of taxpayer welfare for Wall Street.
In our new billionaire bailout society, Wall Street's elites have the ability to restart its speculative money-making games without loaning money to Main Street's businesses. They have a slew of ways to game the system so that the federal money and support flows into their bonus pools. Loan making is still declining even as their profits rise, making a mockery of their role as distributors of capital to the real economy. It is highly questionable if these non-lending financial firms are producing any economic worth at all for our economy.
So Obama is stuck with a bailout and stimulus package that only half worked. At an enormous long-term cost, it may have succeeded to stabilize the financial system and to avoid another Great Depression, at least for now. But it failed to create sufficient jobs to make up for the crater in our economy created by Wall Street's speculative crash.
So he needs to directly put Americans to work unless he and the Democrats want to lose their jobs as well. Although the most efficient means to create one million weatherization jobs would be through direct public employment (like a new WPA), the anti-government mood requires that we use as many private contractors as possible. That kind of government funded/private contractor partnership should be able to cut through the ideological barriers because Americans will understand that employing people in useful jobs is fundamentally worthwhile. We need to save energy. We need work. And, we need to make the bankers, who so recently wrecked our economy, pay for it.
This will never happen unless the President stays on message every day. He also needs to act as if we were in a dire national jobs emergency, which we are.
It was telling to watch the President at his recent town hall meeting in Elyria, Ohio. Although the session was billed as a jobs event, he revealed his real concerns when he concluded with a call for health care reform and energy legislation. As important as those issues are to all of us, he'll never get there unless he focuses on jobs, jobs and more jobs until we are working again.
At the same time, the President should challenge the "do nothing" Republicans and their blue-dog Democratic cousins to put up or shut up on jobs. If they refuse to pass the needed legislation, the President should redirect unspent funds from other programs to combat the jobs emergency. No one will blame him for playing hard ball on jobs creation.
Is it realistic to create a million jobs in a short period of time? We'll never know unless someone tries. But if we limit ourselves to advocating only what seems realistic, here's the sickening reality that awaits us: bankers walking off with record bonuses during a year in which they nearly destroyed our economy, and during a year in which we bailed them out with trillions of dollars of taxpayer welfare.
It would be an important morale booster for the country to create green jobs - one million of them -by November.
Isn't that change we can believe in?
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.
Follow Les Leopold on Twitter: www.twitter.com/les_leopold
Playing defense on national security can quickly turn into a huge political liability for presidents.
similar spending occurred under stimulus #1 and exactly how many jobs were created or "saved"? i mean besides the ones in the 99th district of aruba, or where ever those fake districts were located. how about issuing the tax back to small businesses as tax credits?
how naive do you have to be to believe that the banks won't find another way to compensate their executives? they have to devise a way to reward their executives or those executives will find jobs where they can be compensated according to what they feel they are entitled to. these executives are in it for one thing, make themselves rich. if they can't do that in america they will go elsewhere and our top corporations and banks won't be able to compete with foreign entities and there will be a brain-drain.
Using "bankers" and "brain drain" in the same sentence makes no sense unless we're talking oxymoron.
Let's focus on green jobs. I now lets build a wind farm. But first you need to maek sure no rare animal lives there, that no animal would be migrating through there and it would not ruin anyones view from the family compound.
They hiring at the WH now?
By all means, get out in front of the problem by calling it one.
Can you please go after the Federal Reserve for their multi billion dollar profit this year. Yes, more than that nasty oil company Exxon. At least we get a product from Exxon that allows us to get to work ! What has the FED done for you/us lately? They made more profit in 2009 than any private or public company. Where does that profit go?
They certainly can.
Let's say Joe Aardvark, the investment genius at SilverGal Boxes investing gets a 1 million $ bonus for 2009.
After the various government entities take their respective slices through taxes, Joe winds up with a half million left.
Say Mrs. Aardvark really wanted to use that money to spruce up the house inside and out and do some renovations. Well, being Mrs. Aardvark and not wanting to be outdone by Mrs. Hedgehog down the street, she engages the same building architect, landscape designer, and contractor that Mrs. Hedgehog used on her remodel to make sure they do a larger scale project than Mrs. Hedgehog. New kitchen, new bathrooms, Japanese garden in the back with some changes to the pool, an upgraded media room for Mr. Aardvark's man-cave, and who knows what else. Not only has Mrs. Aardvark hired and will be paying Mr. Architect, Mr. Landscape Designer, and Ms. General Contractor, but all of their employees, all the subcontractors and their employees, the suppliers and their employees, the suppliers to the suppliers and their employees, the raw material providers and their employees, the material transport providers and their employees, and well, you see where this is going. And since all these people are gainfully employed, they'll be paying income taxes too.
The green part? Color of money.
also, be careful cause a lot of people 'round here don't believe trickle-down economics doesn't work even though it's gotten us this far.
The absolute absurdity of this statement is incredible. I DON'T mean that Les is being absurd at all. I mean that it is obscene that anyone could "have it all" to such an extent that there's literally nothing else to buy because they really DO have it ALL. If that doesn't illustrate just how out of balance the distribution of wealth is, I don't know what will.
So now that they literally have it all, they live on Mount Olympus playing games of Risk with whole countries and populations on their boards, to be won or lost indifferently for the sake of titillation.
And even if our mad-as-hell populace chose the French Solution, we'd have to wade through wave after wave of private defenders of the gods. They learned their lesson well after Marie Antoinette and others lost their heads. . . that won't happen again.
What do we do then? Just asking?
Why can't we subsidize the creation of new jobs to fix the state of housing in "the wealthiest nation" in the world?
Maybe there is hope if this realization is coming from the left. Take this a step further and you will find that these same dots connect to ALL government spending – that’s our money!
Here are a few more dots: by not cutting spending or taxes, they’re still directly and indirectly spending our money. Maybe you can use accounting tricks to claim that those particular tax dollars will go to that particular program, but our taxes are supporting all other spending which enables you to spend “those†dollars on “that†program.
It’s like giving a homeless person money for food which frees up the money he found on the sidewalk to buy booze. You can claim you helped feed him, but you also enabled him to buy booze.
“Do the math: … you could create more than one million green weatherization jobs.â€
Here is some more math: in order for the government to have money to “create†a job, they had to take (tax) it from someone else, who in turn was unable to create a job. Factor in government inefficiency and those million + jobs cost the economy more than a million + jobs resulting in a net LOSS of jobs.
We could offset it by borrowing more money, which is akin to a reverse mortgage – trading equity (would-be inheritance) for cash minus interest. This is only a good idea if you are planning to be dead before you run out of equity.
Nonsense, especially in this case. Free market fanatics have always claimed that if we give the rich more money they'll automatically invest it and create jobs. We tried that in the 1980s, and it didn't work. And the more we try it, the less it works. That's because they don't spend the money to create jobs, they spend it on jets and cars and vacations and $20,000 umbrella stands and gold bathroom fixtures.
Leopold is right: that $150 billion is our money, coming out of our pockets --- and clearly we need it a hell of a lot more than the fat cats do!
Just the facts leftword.
Most homeless people are not alcoholics or addicts. They're individuals who can't locate and access affordable housing. While the answer may be "higher paying jobs" - in the short term, these citizens need our help to survive. When we give the poor/homeless money for food - it frees up money to pay for a place to stay, buy clothes and/or meet other "needs". Info to show that "helping our homeless" isn't subsidizing addiction:
"Families with children are among the fastest growing segments of the homeless population."
"In 2003, children under the age of 18 accounted for 39% of the homeless population"
"Nationally, approximately half of all women and children experiencing homelessness are fleeing domestic violence"
"In fact, in the median state a minimum-wage worker would have to work 89 hours each week to afford a two-bedroom apartment at 30% of his or her income, which is the federal definition of affordable housing"
http://www.nationalhomeless.org/factsheets/who.html
It seems, however, that you agree with the concept that putting money into a system “frees up money†to be used for another purpose. You can’t claim that these specific dollars will be spent on these specific expenses. It is a nice way to satisfy pay-as-you-go rules designed to encourage deficit neutral bills; but in the end you are simply increasing taxes and increasing spending (increasing government).
Take the SCHIP program, for example, “funded†by cigarette taxes. If people quit smoking, would we end the SCHIP program? Of course not; we would find some other way to pay for it - meaning it was never really tied to cigarette taxes in the first place.
What if universal healthcare precludes the need for SCHIP? Would we then get rid of cigarette taxes? Of course not; doing so would defeat the purpose of a “sin†tax; meaning the tax was never about SCHIP in the first place.
Taxing and spending should be justifiable individually. Tying them together is nothing more than politics and number games. Taxing bonuses at 75% is dumb as they will find another way to pay themselves. Spending money to “create†jobs is dumb because the government is less efficient at it.
Any problems with my other analogy?