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.