Let me get this straight. First, a bunch of financial barons, in their wild pursuit of profits from reckless financial bets (affectionately called "financial innovation"), crash our entire economy. Then we, the taxpayers, fearing another Great Depression, bail them out with trillions of dollars in cash, asset guarantees and market support programs.
And now Wall Street is back to making record profits and bonuses. But its casinos aren't doing anything for the 29.9 million Americans left jobless (or underemployed) by Wall Street's crash. Meanwhile, the Great Recession plus the enormous bailouts plus ludicrous tax cuts for the super-rich are running up our national debt. And lost revenue has left state and local budgets in shambles.
So what does President Obama propose? Does he demand that Wall Street pay restitution for the mess it made and profited from?
No. He wants to freeze public employees' wages and shower the super-rich with more gifts -- by extending the Bush tax cuts for the rich and reducing estate taxes for the super-rich.
An array of pundits and policy wonks claim that Obama's bargain with the Republicans, which includes extended unemployment benefits and payroll tax cuts, is a good deal because it will create many new jobs. Really? The sad truth is that Obama's economic policies will do a great deal for the very rich and very little for the rest of us.
Two Million Public Sector Workers versus 25 Hedge Fund Managers?
Team Obama made so many dumb moves this week that last week's dumb moves are already fading from view. Last week was when Obama tried to placate the deficit hawks by calling for a freeze on federal workers' pay. This gratuitous attack on government employees is not only a weak-kneed sop to deficit hysteria, it's also certain to touch off a tsunami of state and local government pay freezes and cuts. These, in turn, will neutralize the impact of the "good deal" Obama thinks he struck with the Republicans this week. Mother of God, can't anyone in the White House tell Obama that cutting middle-income wages is exactly what you don't do to stimulate the economy and create jobs? (More on this travesty in a moment.)
Obama is looking for deficit reduction in all the wrong places. Let's do the math. The wage freeze, the New York Times reports, will save $5 billion over the next two years. We could raise more than twice that amount if we closed just one tax loophole on the 25 richest hedge funds managers.
This year the top 25 hedge fund moguls will again make about $1 billion each for a total of $25 billion -- just for 25 individuals. Because of an unconscionable tax loophole, their staggering personal incomes are not considered "income" at all, but instead are taxed at the capital gains rate of 15 percent. In the current deal, Obama abandoned his earlier call for an anemic five percent increase in the capital gains tax. But "capital gains" is not an accurate phrase for the incomes of these 25 moguls. If these 25 individuals paid the current Bush top income tax rate of 35 percent on their income like other affluent people do, the federal government would gain $5 billion in revenue per year -- twice the amount delivered by the federal worker wage freeze. If the Bush tax cuts ever expire (fat chance -- unless there's a revolution) and the top income tax rate returns to 39.6 percent, the extra tax haul just on those 25 elites would produce an additional $6.5 billion a year of badly needed revenue. All from a fair tax on only 25 of the richest individuals in the world.
Instead of joining Republicans in beating up public employees and sending yet more
Christmas gifts to the super-rich, President Obama should be using the bully pulpit to explain to the American public why these hedge fund moguls -- and other ultra-wealthy people -- must pay their fair share. And why the money we recoup from them should be used to create jobs. He should be embarrassing Congress by forcing votes on closing that ridiculous loophole. Instead, in his defensive press conference on December 7, he embarrassed himself by attacking the very people who helped to put him into office.
Obama Launches Massive Anti-Stimulus Program?
And it gets worse. The Obama administration is now very proud that economists are praising its proposed tax deal, which they say will pump more money into the economy. Though the payroll tax cut will net a lot more cash for the prosperous than for the poor, reducing payroll taxes and extending unemployment benefits certainly will put more money into the hands of people who will spend it. The lavish gifts to the super-rich will not.
But forget about putting more money into the pockets of federal workers -- they're getting a wage freeze, and 600,000 of them actually will see a tax increase as a result of Obama's grand compromise with the Republicans. The payroll tax cut does not apply to these workers because they are not part of the Social Security system. Also Obama's deal will eliminate the Work Pay credit which gives up to $400 to low and middle income workers. (See "In Tax Deal Many Public Employees to Pay More," New York Times)
Doesn't Obama realize that he's sending a signal to every public employer in the country to follow suit? You can be sure that hard-pressed state and local governments across the nation will use President Obama's wage freeze as a template for eviscerating the pay and benefits of their own employees. By closing ranks with the most vicious anti public-employee politicians (like New Jersey's Governor Chris Christie), President Obama is encouraging state and local governments to take out of our pockets as much money as the new round of tax cuts and unemployment checks will put into it. That's voodoo economics on a grand scale.
Obama Whuped by Wall Street?
Obama turned on public workers because he's been beaten into submission by Wall Street. After our bailouts, the too-big-to-fail banks got even bigger and richer. Then they turned around and used their vast clout to thwart serious financial reforms. They also blocked any move to close their tax loopholes -- which could have funded job programs and reduced the debt.
Obama and his Wall Street advisors gambled that if he bailed out our financial elites, the jobs would come. Unfortunately, this version of trickle-down economics didn't work any better than Bush's. Obama let the Wall Street gamblers reopen their casinos and collect record profits yet again. Yet unemployment remains higher than at any time since the Great Depression. Understandably, in November the American people pummeled the Democrats for Obama's failure to put our country back to work.
After that humiliation, the president knew he had to demonstrate some backbone somewhere. Why not show public employees who's boss? Government workers are the perfect scapegoat for our economic ills: They're heavily unionized and one of the last groups in the country still holding on to decent jobs and benefits. It's child's play to stoke the resentment of hard-strapped private sector workers against public employees with better wages and benefits. Why are we spending our hard-earned tax dollars to support these lazy people? They even get vacations and pensions! Screw them!
Conservative politicians and think tanks are fanning the flames with bogus statistics supposedly showing that public sector workers are wildly overpaid and have far richer benefits than the rest of us. But more careful studies show that when you compare public workers by education and job title with their counterparts in the private sector, the cost per worker is lower in the public sector. (See the Economic Policy Institute's report.)
Although Obama never would admit it, probably even to himself, he's doing Wall Street's bidding yet again by broadcasting the idea that public workers have to pay for the deficit -- not the Wall Street honchos who caused the crash. Obviously Wall Street has no intention of paying for the mess it created. So they want us to pay. And slapping around federal workers is a great way to start.
Do Progressives have the guts to act?
It's time for progressives to reconsider their strategic options. Some key liberal leaders want to find a candidate to challenge Obama in the 2012 primaries. But the problem is not just Obama. The Democratic Party as whole sold its soul to Wall Street long ago in a bid for campaign dollars and lucrative jobs. It's no accident that the Democrats didn't take on too-big-to- fail institutions. It's no accident that we don't hear the Dems talking about windfall profit taxes on Wall Street or closing the obscene hedge fund tax loopholes. (As we speak, Peter Orszag, the 41-year-old Obama deficit hawk and budget chief is resigning as head of OMB to take a fat-paying job with CitiGroup, the giant bank that was saved by enormous tax-payer bailouts. Many more Democratic officials will be following him to Wall Street.)
And, it remains to be seen if many Democrats will even rebel against Obama's tax gifts to the super-rich.
The American people want fairness and they want jobs. Scapegoating public sector workers will get them neither. The only decent alternative is to make Wall Street pay for its mess and use that money to create jobs -- now. If that takes a new political formation, so be it. In less than two years, the Tea Party has changed the political landscape. We need a Jobs Party to do the same. Clearly President Obama doesn't have the courage to take on the super-rich... But do we?
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. He is currently working on a new book, How to Earn $900,000 an Hour: The Rise of Wall Street Billionaires and the New Class War, (hopefully to be published in 2011).
Follow Les Leopold on Twitter: www.twitter.com/les_leopold
70% of American economic activity is driven by consumers, and the GOP, which bankrupted the consumer in our society, is now going to starve the goose that lays golden eggs for the "rich."
Obama understands this, but not many of the privileged class do, and even fewer of the "professional liberals."
Wall St and the banks have already proved that they and Congress are best of friends. Neither dares to call the other on the carpet to explain what and why.The bonuses would have to be 15-30% larger if they were taxed appropriately and well, they really can't afford that.
Without the governmnet support a criminal investigation into fraud and deceit peddled by many financial and banking companies that precipitated this mess, will never happen. 2 years ago they told America if you do not give us money to fix 'our' problem, the situation will only get worse. I suspect 'worse' was about the impact to the wealthy and nothing more. Thnaks to the taxpayers, they now are doing real well. Thanking the Republicans for a 15% tax on their obscene bonuses far less than the middle-class pays.
Isn't this a great country. Millions unemployed, millions more under employed and the wealthy, well they are doing so well, that they can share and give out billion dollar bonuses.
We should be grateful, Obama worked out a plan that would extend the filing deadline for extended unemployment benefit for 6million people, while the 5million 99ers try to imagine ways to keep shelter, food and their 401k from becoming more cheer for the wealthy.
Obama, like many of his predecessors, is CEO of an organization that has grown with reckless arrogance into facets of society where it is incompetent, ineffective, and irresponsible. It's a problem of poor incentives and lack of direct accountability. What fiscally-responsible entity (whether public or private) consistently has higher expenses than revenues? Geeze, I'm no rocket scientist, but I'd say that's a glaring problem that needs to be fixed.
Workers are losing their jobs largely because they have skill sets that, increasingly, are not valued by society. If they were, why are they unemployed? Public-sector workers should say nothing but Thank You to the private sector. Thank for you allowing us to siphon money from your productivity via taxes and fees in order to pay ourselves. Nah, that'll never happen....
Rather, I believe that the politics and processes over which we are free to debate take place in front of an opaque curtain, behind which all actual deals are done. In an age of solid decline of the institution of the free press, few who remain employed therein have either the fortitude or curiosity or impulse to professional suicide to allow us a peak behind the curtain, where the crisis capitalists misrule us by proxy through both parties and out of sight. We are all, pace McCain, corporatists now, trapped in a thoroughly bought-out political process that cannot produce anything for anybody unless it firstly and mostly produces for the powerful.
Our betters won't pay more taxes. They have let those that need to know all about it, and the knowing are now gesticulating and grimacing in front of the curtain, as if there might be other outcomes. But they will deliver what is required.
Many believe that the car of our democracy has run into a ditch from which it might be extricated and set on the right road. I no longer can. I believe the car now belongs to our betters, who also bought the road. We remain free to argue on the curb, and if hostages are needed, we may be hustled off into the trunk, but we're not driving.
The early 20th century British elites survived because they understood history and social responsibiÂlity; they understood what could come if they did not loosen their grip and start needed reforms. The 18th century French nobility did not understand history or anything else; they were the proponents of "Let them [the people] eat cake." if they have no bread. As a consequencÂe, most of them landed upon pitch forks or the guillotineÂ.
Here, both parties have been bought outright by their benefactors, and both work tirelessly to cede to them that which was once the people's. What the people receive from their machinations is a much ballyhooed afterthought to the real business at hand.
The amount of general misery requisite before folks rise up is thankfully small, but it is growing. Were I not so confident in the business of persuasion, I would hold out more hope for change to come from the bottom. But instead, I believe ordinary people will be successfully misdirected as per usual, and will howl at the moon, at the foreign Other and at those poorer than themselves when they finally feel the wall at their backs. But not at their betters, who, after all, are just folks like themselves, only richer.
For anyone sentient in America today, that is the question: can this be fixed, and if so, how?
Worse things have been fixed. The civil rights struggle ended up with a major success, and things on that end looked as bad as this. We got out of Vietnam--once upon a time, that was VERY bad.
But this is a new kind of bad--a kind of bad in which a deeply entrenched ruling class has brought to bear a new tool kit: a powerful, well run media arm, a well established bribery and payoff system, a deadened, superficial, anti-intellectual, bigoted, violent and materialistic culture, focus groups and research and polling and the ability to spend vast amounts of money from extremely high profit monopolistic corporate systems.
We'd have to get the people that are running this country to enact legislation that is not in their best interest, to put it mildly, and as this latest fiasco makes clear, that's not going to happen the way things are now.
We'll have to take to the streets and get French Revolution on these people, and we're not close to that now. They keep pushing the limits of this, they just did it again, and after the yelling and debating dies down, this bill will be the law of the land.
What we endure today is not even called by its true name or described in its true dimensions by those who are paid to inform us. We are already a corporatocracy in fact, though we cling to older definitions of our government in hope that the stranglehold of the business interest on possibility itself is but temporary, which it is not.
I fan you for your insight.
Good for Senator Bernie Sanders and the House Dems for telling the President he has no clothes.
Here are two:
The Vermont Progressive Party, aligned with Senator Bernie Sanders has elected members of BOTH houses of Vermont's legislature and could be used as a model for a new nationwide Progressive Party.
www.progressiveparty.org
The Green Party has over 140 elected officials across the country and has achieved state legislative representation in the past.
www.gp.org
Or we can continue to whine and support a corporate-owned Democratic Party that cannot, will not, and does not want to be reformed from within.
The choice is yours.
Fanned.