The Dirty Bargain

The Greeks didn't sign onto it: now their debt has been driven to junk bond status.

The closer you get to Wall Street, or the City of London, the more likely you are to see the bargain in action.

In 1933, FDR closed the banks. When they reopened, government had created rules that maintained financial stability until the 1970's. The result: financial crises were negligible and under control.

Beginning in the 70's, there was a sustained and successful attack against those rules, culminating in the repeal of Glass-Steagall, which had kept taxpayer-insured money separate from investment banking speculation. Since the 70's, we've had a series of financial crises, culminating in the 2007-8 collapse. That's no coincidence.

Unfortunately, neither W, nor Obama "took over" the banks. They revived the banks with trillions of government dollars. Now, banks are so strong they can weaken, or stymie any thoroughgoing financial reform: there will be no Glass-Steagall, and banks will be too big to fail. Governments will have to bail them out when risk-taking gets them in trouble.

In addition, the elites are able to control enough of the information people depend upon, that they have changed the conversation: it's no longer recovery, and jobs, but solvency and cutbacks. Deficit reductions and cutbacks don't come at the expense of the banksters who got us into this mess, but at the expense of the victims: the people thrown out of work, or working 60 hour weeks just to pay the bills.

And it isn't just the banksters. It's the elites generally. Health reform comes at the expense of the insured, who will see their premiums soar, even though the reform will hand providers a whole new government-subsidized market.

What are some of the elements of this "bargain?" When decision-makers propose raising a stock-transfer tax, their government's bonds will be besieged. When politicians suggest raising taxes on the wealthy to pay for the needed recovery, capital flees the country.

Have you noticed that huge amounts of capital have washed up in the US? Despite Obama's stimulus, with a deficit and debt rivaling that of Greece in GDP terms, US Treasury rates are still extremely low. There has been no need to raise rates to find buyers. That's because formerly liberal leaders like Obama and Cuomo have bowed to the bargain: no new taxes on the wealthy. Republicans would never raise those taxes in the first place.

The "tea party movement" is a political expression of the media power of capital. People who are hurting--the financial system robbed them blind--are persuaded that big Government did it.

The Tea Party is Wall Street's insurance, but if a genuinely progressive movement gained power, we'd face a capital strike like the one that brought down Greece.

The financial/corporate elites, the selfish class I've written about on this site, now rule most of the world: through extortion.

Tax Madness

Any suggestion for raising taxes meets howls of resistance, not just from tea partiers in these dark times: states are going bust. Yet, Wall Street financiers pay themselves even fancier bonuses than they did last year, bonuses made possible by taxpayer money.

Financial firms oppose taxing hedge fund managers' income at the rates working people pay. The parallels are striking with the Roman Empire at the tail end of its history. Go to http://www.roman-empire-america-now.com/taxes.html. Roman wealthy didn't pay taxes, and hedge fund traders, some making as much as $1 billion a year, are taxed at a flat 15% rate, while most of us pay between 20% and 39%.

Hedge fund managers have also been part of the Wall Street lobbying onslaught to prevent financial reforms. They scream that regulation will cost profits, when it was their ruthless pursuit of fast profits that nearly destroyed the whole world economy!

NY's Governor Paterson, formerly liberal, has summarily rejected a "billionaire's tax," despite the huge state deficit he's desperately trying to close. And he and the US Congress, refuse to consider a stock transfer tax, a cent or two per share traded, despite the fact that the tax would not only raise very needed revenue (a state tax might make up NY's deficit), it would also discourage the kind of hyper-speculation that led to the near financial collapse.

Wall Street is practically apoplectic at the idea of either tax, and yet, they almost drove us off a financial cliff, and cost the US 15 million jobs it will take many years to replace. Both taxes would discourage the kind of antics that led to the collapse--and raise revenue where it is most needed to continue an economic recovery--for a state budget that otherwise requires drastic cutbacks, laying off even more jobs.

Liberals are scared shitless advocating for any tax, even if they know it would be good policy. Why? Because the right-wing media have whipped up a frenzy about raising any taxes, and Republicans have jumped enthusiastically on board.

The furthest Democrats in Washington dare go, is to let the Bush tax cuts lapse. Republicans scream, that's a tax increase! It is, but only for taxpayers earning over $250,000 a year. I'd be very comfortable on half of that: most people will never come close to it.

Does nobody remember? In the Eisenhower years, top tax brackets paid over 90% above a cutoff, but the 1950's were booming, and we weren't fighting two wars. Historically, more highly graduated tax rates correlate with higher growth as well as with greater economic equality, despite conservative economic theory to the contrary.

The hype about "raising" taxes is madness; raising rates on the higher brackets would reduce US inequality (worst among developed nations)--and restore the economy. Will that happen? Only if liberals find some cojones.