"“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” -- Warren Buffet, June 2008
Ladies and gentlemen: pardon my intemperance, but it is high time for some moral outrage -- and a little good old-fashioned class warfare as well, at least in the sense of a return to seriously-progressive taxation.
After all, as this week's record-setting Wall Street
bailout with taxpayer money demonstrates once again, those in charge of running this country have no problem whatsoever waging "class warfare" against the rest of us -- the middle classes, workers and the poor -- whenever it suits their interests.
At a time when millions of Americans are facing bankruptcy and the risk of losing their homes without any help whatsoever from Washington DC, the CEOs and speculators who created this mess, and the top 10 percent of the wealth distribution that owns 85 percent of financial stocks, have teamed up with their "bipartisan" cronies in Congress, the US Treasury and the White House to stick us with the bill -- in a bum's rush toward a cockamamie solution.
This time they have gone too far.
As discussed below, the cost of this bailout could easily jeopardize our ability to pay for the entire economic reform program that millions of ordinary citizens across both major parties have been demanding.
Some kind of bailout may indeed be necessary from the standpoint of managing so-called "systemic" risk to the financial system.
But it should come at a price -- a hefty part of which should be paid by the tiny elite that was most responsible for creating this mess in the first place.
THE "GET REAL" NEW DEAL
To make sure that real economic reform is still feasible, we need to demand a "Get Real/ New Deal" from Congress right now.
At a minimum, this Get Real/New Deal package should include measures like: (1) the restoration of stiff progressive income and estate taxes on the top 1 percent of the population (with net incomes over $500,000 a year and estates over $5 million) -- especially on excessive CEO and hedge fund manager compensation; (2) much more aggressive enforcement and tougher penalties against big-ticket corporate and individual tax dodgers; (3) tougher regulation of financial institutions -- possibly by a new agency that, unlike the US Federal Reserve, the SEC, and the US Treasury, is not "captive" to the industry; (4) a crackdown on the offshore havens that have been used by leading banks, corporations, and hedge funds to circumvent our securities and tax laws; and (5) the immediate revision of the punitive bankruptcy law that Congress enacted in 2005 at the behest of this now-bankrupt elite.
We also need (6) a National Commission to investigate the root causes of this financial crisis from top to bottom, and actually (unlike the hapless, ineffectual 9/11 Commission) hold people accountable.
Over time, this progressive Real/ New Deal would help raise the
hundreds of billions of new tax revenue that will be needed to offset
the costs of this bailout.
It is essential if the Federal Government is to be able to afford key reforms like health insurance, clean energy, and investments in education.
These may not matter very much to Wall Street executives, financial analysts, Treasury and Federal Reserve executives, or the more than 120-130 Members of Congress and 40-45 US Senators who earn more than $1 million a year -- and are already covered by a generous "national health care" package of their own design. But these are the key "systemic risks" that ordinary Americans face.
These reforms may sound ambitious. So is the bailout. And the reforms that we are discussing are only fair.
After all, we the American people have been the very model of forgiveness and understanding lately.
We have tolerated and footed the bill for stolen elections, highly-preventable terrorist attacks, gross mismanagement of "natural" disasters, prolonged, poorly conceived, costly wars, rampant high-level corruption, pervasive violations of the US Constitution, and the systematic looting of the Treasury by politically-connected defense contractors, oil companies, oligopolistic cable TV and telecommunications firms, hedge fund operators, big-ticket tax evaders, and our top classes in general.
Does "class" still matter in America? You betcha -- perhaps more than ever. But enough is enough. Call your Congressperson now. Demand a"Get Real/ New Deal" qualifier to the bailout package before it is too late.
(c) SubmergingMarkets, 2008
CAPITALISTS AT THE TROUGH
The latest Wall Street bailout will cost US taxpayers at least another $600 - $800 billion.
This estimate assumes that the Feds acquire another $2.5-3.5 trillion of mortgage-backed securities and other private financial assets, that 30-40 percent of these assets derive from exuberant, fraud-prone mortgage lending in 2006-2007 , and that 60-80 percent discounts from book value, on average, will apply.
This estimate is consistent with the $700 billion that President Bush will reportedly request from Congress this week to fund the new "resolution trust."
It is also consistent with the 78 percent "haircut" that Merrill Lynch took on the value of mortgage-backed securities portfolio to Bank of America last week.
In fact no one has any precise idea what all this will cost, since it depends to a great extent on US housing prices. These which have already fallen by nearly 20 percent since mid-2006, and are continuing to decline in most major markets.
In any case, the cost of this bailout will be on top of the $400 - $500 billion in expected losses that the Treasury has already assumed this year for the ad hoc bailouts of Fannie Mae, Freddie Mac, AIG, and Bear Stearns.
It will also be on top of the $400- $500 billion per year budget deficits (gross of $180 billion borrowed each year from Social Security trust fund) that the Bush Administration has compiled for 2008-09, the continued cost of the Iraq and Afghan Wars, and the likely impact of the deepening recession on federal, state, and local tax revenues.
HIJACKING THE FUTURE
Last
week's events have already produced terabytes of erudite speculation by Wall
Street pundits about "systemic risk," short-selling rules, and the
impact of the US Treasury's actions on the structure of financial
services.
For the 90 percent of Americans who own no money-market funds, and less than 15 percent of all stocks and bonds, this bailout means just one thing.
All of the money has just been spent. And it has not been spent on you.
Regardless of who is elected President, unless we demand some increased taxes on the very rich for our money, this means that:
There will be no federal money available for health insurance or public health.
There will be no additional federal funding for schools or college tuition.
There will be no additional federal funding for energy conservation, wind, or solar power.
There will be no additional funds for national parks.
Indeed, we might as well start by privatizing our national and stat
e
parks, and drilling for oil and gas in the Arctic National Wildlife
Refuge, Yosemite, the Grand Canyon, and right off the Santa Barbara
coast. We're going to need those federal lease royalties. (Perhaps the
oil barons will be willing to lend us an advance.)
There will be no funds for the reconstruction of our aging public highways and mass transit systems. Highway privatization and toll roads, here we come.
The supply of housing loans and other credit will remain tight, despite the bailout.
Meanwhile, the government-sponsored consolidation of the financial services industry will make the financial services industry more profitable than ever.
That is very good news to the "owners of the means of production" -- the tiny share of the population that already stands to reap almost all the benefits of this bailout. For the rest of us, it means steeper, less competitive premiums and fees on house and car loans, credit card debt, brokerage transactions, and banking feeds.
Some of you need to keep repeating: you do not exist to serve these people!
Meanwhile, if the elite has its way, the long-sought dream of "a home for every middle-class American family" may well be abandoned as a goal of government policy.
There will be no money to bail out the millions of Americans who are on the brink of losing their homes.
There will, however, rough justice under the latest bankruptcy "reform" -- rammed through the Congress in 2005 with "bipartisan" support from many top Democrats.
There will be no money to shore up Social Security or Medicare.
Indeed, ironically enough, this latest bank bailout may even increase the financial pressure to privatize these comparatively successful government programs.
There will be no extra money to house our thousands of new homeless people, relieve poverty, rebuild New Orleans, or support immigration reform.
There will be no funds available for increased homeland security.
There will certainly be no "middle-class" tax cut.
Absent progressive tax reforms, the only "cut" the middle class is going to receive is another sharp reduction in living standards.
All told, this "permissive banking/ massive bailout" model beats even the old 1980s vintage Reagan formula of trying to force government down-sizing with huge tax cuts.
Contrary to the sales pitch, those cuts actually never produced any incremental tax revenue, let alone any government down-sizing. Back then, it simply proved to be too easy for the federal government to borrow.
Now, however, given the sheer size of these new federal
obligations, even the incremental borrowing capacity of the US Federal
Government is beginning to tighten.
Already foreign creditors, who have recently been supplying more than
half of new Federal borrowing, have been muttering about taking their
lending elsewhere.
(c) SubmergingMarkets, 2008
Comments