Who will pay for the Great Recession ? You and I

 Robert L. Borosage

President, Institute for America's Future

Who Gets Hit With the Tab for the Great Recession?

Wall Street excess and conservative deregulation (by law and lassitude) blew up the economy, causing the Great Recession. The bankers were bailed out. Working families took the hit from the downturn -- in lost jobs, lost savings, weakened pensions, declining home values, pay and benefit cuts.

The recession blew a large hole in public finances at every level. Tax revenues plummeted. Expenses -- from unemployment insurance to food stamps to public health -- rose. Public pension funds suffered investment losses. States and localities face severe deficits with a mandate to balance their budgets. At the federal level, the recession doubled the national debt, and drove deficits up to 10% of GDP (much of this the result of plummeting tax receipts).

Governor Scott Walker and a gaggle of Republican governors assault the right of workers to bargain collectively in states across the country. Teachers get laid off as school budgets are cut across the country. Colleges hike tuitions and shut down course offerings. Public workers face furloughs, layoff, cuts in health care and pension benefits. Congress is tied in knots about how much and what to cut. And Republican and bipartisan pressure to go after Social Security and Medicare is escalating.

We should be very clear about what unites these stories, for these struggles will say much about what kind of America emerges from the rubble of the Great Recession.

Who gets stuck with the bill for the Great Recession?

From the tea party Republican caucus to the Obama White House, leaders of both parties have moved from worrying about the recovery to worrying about how to pay for the costs of the Great Recession. With 25 million Americans in need of full time work, this is bipartisan folly. With Japan melting down, the Middle East erupting, energy and food prices soaring, housing prices and starts sinking, states and localities enacting brutal budget cuts, it is callously irresponsible, risking a double dip recession that will explode public deficits.

But that's where we are -- focused on who pays for the mess. Wall Street excess and conservative deregulation (by law and lassitude) blew up the economy, causing the Great Recession. The bankers were bailed out. Working families took the hit from the downturn -- in lost jobs, lost savings, weakened pensions, declining home values, pay and benefit cuts.

The recession blew a large hole in public finances at every level. Tax revenues plummeted. Expenses -- from unemployment insurance to food stamps to public health -- rose. Public pension funds suffered investment losses. States and localities face severe deficits with a mandate to balance their budgets. At the federal level, the recession doubled the national debt, and drove deficits up to 10% of GDP (much of this the result of plummeting tax receipts).

Now the question is who pays for the damage?

The Republican position is clear and consistent at every level of government. They want to send the bill to teachers, cops, seniors, kids, the poor and the vulnerable. From Governor Walker in Wisconsin to Governor Kasich in Ohio and across the country, Republican Governors and conservative legislators are pushing for deep cuts in education, jobs programs, and public health programs (particularly Medicaid). They are slashing spending while seeking in many cases to cut taxes for corporations and the affluent.

That's true at the federal level as well. Republicans went to the mat to extend tax breaks for millionaires in December, and now are threatening to close down government to slash spending on education, jobs programs, energy and the environment, and public health for the remaining months of the FY 2011 budget. And for next year's budget, they are girding themselves to take on the core insurance programs -- Social Security, Medicare and Medicaid -- that provide the most vulnerable Americans -- seniors, the widowed, the disabled -- with some modicum of security.

We aren't buying what they are peddling

This agenda is immensely unpopular. Americans have rather clear and sensible ideas about how to cut the deficit. They want Social Security and Medicare protected. They oppose cuts in education. They don't like tax hikes on families that are already suffering pay cuts. With the growing and extreme concentration of income and wealth, voters support tax hikes for the richest Americans, imposing a surcharge on incomes above a million dollars. With Wall Street's casino wrecking ruin, they support taxes on bank profits, and a financial speculation or transaction tax to slow computer driven speculation. With the Pentagon spending about as much as the rest of the world combined spends on their militaries, they'd start with cuts in the defense budget, as well as subsidies for Big Oil and other corporate interests.

The more people become aware of the Republican agenda, the less they like it. In Wisconsin, Governor Walker hoped he could cram his legislation through a legislature under Republican control before people knew what hit them. But when workers mobilized, and Democratic Senators left the state, the voters got a chance to look at the Governor's program -- and his popularity plummeted. The same would surely be true of the public's reaction to the cuts demanded by the House Republicans in Washington, were we ever to have a pitched battle over them.

Dismember the Opposition

That reality requires the second front in the conservative offensive: a frontal assault to weaken the ability of organized people to counter the power of organized money.

Doing the bidding of corporations, banks and the wealthy insures that conservatives will have well stocked campaign coffers and deep independent expenditure money pots that can fund air and ground wars in support of their actions. Citizens United, the ruling written by the conservative gang of 5 on the Supreme Court, opened the floodgates to corporate money. Its effect -- like that of Reagan firing the Patco workers -- was as much symbolic as substantive, making it clear to corporate CEOS that this was the moment to go all in.

But even the most sophisticated Orwellian ad and Astroturf campaigns have a hard time overcoming the opposition of organized people. So conservatives have set out systematically to weaken or destroy the opposition.

That's why core worker rights are under assault in states across the country. This isn't about balancing the budget; it is about weakening the ability of workers to resist. Unions are the most potent opponent of the conservative agenda. With private sector unions weakened by globalization and the all out corporate assault on them over the last three decades, public employee unions -- teachers, cops, fire fighters, nurses -- are the leading edge of the opposition, and the leading target of the new attack.

But it isn't just unions. In states across the country, efforts are underway to strip students of their right to vote on their campuses, hoping to suppress the votes of the young. Various forms of requiring voter ID at the polling booth are being revived, seeking to depress the votes of seniors, minorities and the poor. Acorn, the most effective minority voter registration operation, is hit by a dishonest sting operation, ending with federal spending cut off. Planned Parenthood, a respected women's organization with chapters across all 50 states, is another target, with an attack on its funding now underway. Tort reform is aimed at trial lawyers, a leading source of liberal funds, curbing both their ability to bring actions and to collect damages.

The Big Kahuna

The stakes in this debate go far beyond getting public budgets in order. At stake is what kind of a society and economy we will build coming out of the worst economic downturn since the Great Recression.

Will we set in place the priorities and programs that can rebuild a broad middle class -- or will we return to the pre-recession economy with Gilded Age inequality increasing, and the middle class an endangered species?

Central to this is whether the democracy can rescue government from the clutches of predatory corporate interests and turn it back once more to an instrument of the common good. Will we bring our budget into balance by putting people back to work, and enacting progressive tax reform that sends the bill to those who helped create the mess, or balance it by cutting spending on education and other areas vital to providing opportunity to all? Will we take on the entrenched corporate interests that feed off government subsidy and privilege -- or go back to business as usual?

These questions are posed each day in Congress. Cut funding for schools or cut subsidies to big oil? Cut health care for seniors and the disabled or cut subsidies to the drug and insurance companies that drive up health care costs. Invest in rebuilding America, or continue to squander resources policing the world? Cut Social Security benefits that workers have paid for or require the wealthiest Americans to pay a higher tax rate than their secretaries?

Here again, unions are central to the story. After World War II, unions represented about 35% of the private workforce. As productivity and profits rose and the country got richer, unions helped insure that workers -- union and non-union -- got a fair share of the benefits. We all grew together and created the great triumph of America -- an American Dream that was within reach of a broad middle class.

But after 1980, with globalization, the corporate offensive on unions, the conservative era in our politics, unions declined dramatically to less than 7% of the private workforce. Productivity and profits continued to rise. Contrary to conservatives, America isn't broke. It generates more income now than it did a decade ago, and will generate more income in the next decades than it does now. America isn't broke but its working families are struggling. That's because they no longer share in the increased profits and productivity they help to create. The richest 1% captures fully 23% of the income in the society, and has more wealth than 90% of Americans, while most households lost ground when the economy was growing in the last decade. If the right succeeds in destroying unions, it will surely accelerate the destruction of the middle class and our descent into ever greater inequality.

Conservatives are very clear about this. House Budget Chair Paul Ryan says the choice is between "European Social Democracy" and traditional American free enterprise. But he and his colleagues define social democracy to include the core institutions of middle class security and opportunity -- Social security, Medicare and Medicaid, pensions, living wages, affordable health care, public schools, affordable colleges, etc. They are intent on using this crisis to rollback as much of this as they can. They know it won't be popular so they are intent on crippling unions and other institutions that they know will stand in the way.

The fight in Wisconsin and elsewhere for the right to bargain collectively isn't divorced from the budget fights in Washington and the states. These are all part of a struggle for what kind of America we will build. No one can be a bystander in this debate.

Follow Robert L. Borosage on Twitter: www.twitter.com/borosage

HUFFPOST LIGHTBOX

The Banker

A similar tax has been proposed for the U.S. by the AFL-CIO

The Looting of the U.S. economy: Les Leopold


1."Honest, we didn't do it!" 
Two years ago Wall Street's colossal greed crashed our economy. Our financial elites created and spewed highly leveraged toxic assets around the globe. These poisonous "innovations" pumped up the housing bubble and Wall Street grew insanely rich in the process. When it all burst, we learned that the big Wall Street institutions that had caused the crash were far too big to fail -- and too connected. High government officials came to their rescue with trillions in cash and guarantees -- underwritten, of course, by we taxpayers. Everyone knew this at the time. But if you asked just about anyone on "The Street" they denied all culpability and pointed the finger everywhere else: Fannie, Freddie, the Fed, the Community Reinvestment Act, tax deductions for home buying, bad regulations, not enough regulations, too many regulations, too much consumer debt, the rating agencies, the Chinese -- and on and on. Sadly, their blame-shifting strategy worked, bamboozling the media and people across the political spectrum. The GOP members of the Financial Crisis Commission are so drunk with this Kool-Aid that in their minority report, they refuse even to use the words "Wall Street" or "speculation" in assessing the causes of the crash. Hypocrites? Crooks? Morons? Take your pick.

2."The overall costs will be incredibly small in comparison to almost any experience we can look at in the United States or around the world." 
Ever since Treasury Secretary Timothy Geithner screwed up his tax returns we knew he was numerically challenged. But his statement to Congress on December 16, 2010, on the cost of the bailout shows a willful inability to count. Yes, Wall Street has paid back most of our bailout funds. Whoopee! Our economy is in shambles, and millions of people are suffering. With his offensive "no big deal" analysis, Geithner glosses over all this human misery, and sidesteps the hidden costs of the bailout, including the financial insurance we taxpayers provided to every giant financial company in the country via the Fed. On the open market, that insurance -- which guarantees trillions of dollars in toxic assets -- would come at a very steep price. We coughed it up for free. But that's still chump change compared to the human costs of the worst employment crisis since the Great Depression -- the lost income, the depleted savings, the ravaged neighborhoods. Then there's the capsized state and local budgets, the public service reductions, the laid off teachers, firefighters and police officers -- all resulting from a plunge in public revenues caused by Wall Street's crash. Why aren't these costs on Geithner's balance sheet? A cynic might think Tim was priming us to accept the latest round of Wall Street bonuses. Hey -- they paid us back, so why should we care how much they earn?

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).

Make Wall Street Pay

Richard Trumka: Make Wall Street Pay

So now we learn that as millions of America's families were losing their homes, Goldman Sachs cheeredbecause it stood to make huge money betting on a housing market gone bad. Is that Wall Street's vision of American values? It's not mine. And it's not the values of the thousands of working Americans who are marching on Wall Street today in person with me and online.

Our message is simple: Big Banks tanked our economy and took our money when they needed a bailout. Now they're thumbing their noses at our communities but making billions in profits. It's time they pay up.

Pay up by investing in communities to create jobs for the millions of unemployed workers -- like Terry in Florida, who was laid off a week before Christmas. Being forced to return his family's Christmas gifts to the store was just the beginning of his pain. While the corporation he worked for is turning a profit, he fears his family will be homeless by summer.

Meanwhile, in 2009, 25 hedge fund managers were paid the equivalent of the salaries of 680,000 school teachers. That's in 2009, when we taxpayers spent billions of dollars bailing out the financial sector. If Goldman Sachs is cheering at the collapse of the housing market, what's the rest of Wall Street saying? Thanks, suckers?

Those may be Wall Street's values. They're not America's.

In a stunning new Pew poll, more than half of those surveyed say within the past year a member of their household has been out of work -- up 15 percentage points since last year. Fully 70 percent of Americans say they have faced one or more job- or financial-related problems in the past year, up from 59 percent in February 2009.

And homelessness no longer is a scourge of the most troubled of our society. Maria Foscarinis, executive director of the National Law Center on Homelessness and Poverty, describes the nation's epidemic of homelessness as reaching crisis proportions not seen since the Great Depression -- and it stems directly from the Big Bank-fueled recession in which millions of workers lost jobs and savings and can no longer afford their mortgage or rent.

Meanwhile, the Big Banks announced massive first quarter earnings -- Citigroup, $4.4 billion; Bank of America, $4.2 billion; Goldman Sachs, $3.46 billion; JPMorgan Chase, $3.3 billion; and Morgan Stanley, $1.8 billion. It turns out that much of that money was made by the same risky trading practices that cost taxpayers a $700 billion bank bailout.

The damage inflicted has deepened economic inequality, which has gotten worse since 2007. The richest 10 percent now control nearly 70 percent of the wealth. Those with incomes in the bottom 50 percent have a little more than 2 percent of the wealth.

The bottom line is Wall Street should pay to clean up the mess they made and Congress must enact strong Wall Street reform. We are supporting four ways for the Big Banks to pay -- President Obama's bank tax, a special tax on bank bonuses, closing the carried interest tax loophole for hedge funds and private equity and, most important, a financial speculation tax levied on all financial transactions -- including derivatives -- that would raise more than $150 billion a year, according to the Congressional Budget Office. The financial speculation tax would have a negligible impact on long-term investors but would discourage the short-termism in the capital markets that led to so much destruction over the past decade.

Congress also must aggressively address the jobs crisis now -- if not because it's the right thing to do, then because of November 2010. That Pew poll I cited above? It found Americans united in the belief that the economy is in bad shape: 92 percent give it a negative rating.

Wall Street's values are based on greed. The American people's values are rooted in working hard, playing fairly and doing right by our family, neighbors and friends.

If you can't march and rally with us on The Street, join us live online today at 4 p.m. EDT. We'll be 10,000 strong on the ground and marching for tens of thousands more who have signed up to take part in our virtual march.

Working people are angry -- and we are right to be angry at the betrayal of our economic future. Help us turn that anger into the energy to create jobs, fix our economy and build a stronger nation.

 

Related News On Huffington Post:

13 Bankers

Trumka: Showdown in Chicago

Campaign for America's Future

I'm going to Chicago next week for the American Bankers
Association meeting. Oddly, I haven't been invited to
the Roaring '20's dance party I hear they're having.

Why wouldn't they celebrate the era of wild money and
hot times (which slid into the Great Depression)? After
all, the bankers are doing well these days.

They're doing well because after financial institutions
caused the global economic crisis, we bailed them out,
to the tune of some $700 billion.

Now they're in good enough shape to pay the suits $7
billion in bonuses for driving working families and our
economy to our knees--to the verge of a second full-
fledged depression.

Things might be turning around for the bankers, but for
the rest of us, unemployment heads toward 10 percent and
home foreclosures continue to devastate families and
communities. Working families have lost health care,
pensions and savings--and in exchange we've gotten
predatory lending, outrageous overdraft fees and sky-
high credit card interest rates.


Meanwhile, the bankers are doing the Charleston, taking
taxpayer money, handing out bonuses for disastrous
failure, becoming profitable without lending money that
could put people back to work--and spending billions
lobbying Congress to kill financial reform.

Shameless. Absolutely shameless.

On Tuesday, about 5,000 of us will be in Chicago to tell
them what we think.

It's called the Showdown in Chicago. We're gathering
outside the American Bankers Association meeting to
demand financial reform and re-regulation that will
allow us to rebuild our communities, our lives and the
real economy.

We've got a lot to rebuild.

For decades, these bankers have been dealing to each
other in what amounts to their own private casino,
inventing more and more exotic financial vehicles
together and basically regulating themselves. Their Wild
West capitalism allowed them to take outsized risk with
no oversight and then come hat in hand to the American
taxpayers when their house of cards collapsed.

They've become a menace. No one is safe while their
private casino bankrupts the real economy and ignores
necessary investments in jobs, health care and
retirement without oversight or regulation.

This is a complicated topic, but we can break down a
plan for reform into four basic needs:

  1. The Consumer Financial Protection Agency (CFPA)
  that President Obama has proposed. This agency would
  protect the public against credit card and mortgage
  rip-offs. The agencies that were supposed to protect
  us from financial meltdown failed. The CFPA would
  place consumer protection authority in the hands of a
  single agency that would monitor banks and other
  institutions and their credit products like mortgages
  and credit cards--but not your butcher, as a
  ridiculous over-the-top ad by the U.S. Chamber of
  Commerce claimed.

  2. A council of regulators to identify and fix
  systemic risks that could threaten the entire
  financial system--risks such as institutions becoming
  "too big to fail," too complex  or too interconnected.
  When the government intervenes, the purpose
  has to be to protect the public, not just rescue
  executives and rich investors. The past year has
  proven that the Federal Reserve Board is just too
  close to the banks. We need either to
  reform and democratize the Fed or to give this
  job to a true public agency. Let's do it right.

  3. Bring the "shadow markets" into the daylight. Most
  people probably don't really know what hedge funds,
  private equity funds and derivatives are or do.
  You're not supposed to--it makes them easy to
  manipulate. They've been unregulated and totally
  lacking in transparency. These vehicles need serious
  regulation and oversight before they suck more money
  into the black hole of convoluted transactions.

  4. Reform corporate governance and CEO compensation
  to protect the interests of long-term investors--people
  saving for retirement, not speculating.

It's time we hold banks and other financial institutions
accountable for making this mess that required trillions
of our dollars to clean up.

It's time to hold them accountable for the pain they've
inflicted on working families.

It's time to put them back to work for working people,
supporting families and jobs.

I've been spending a lot of time on Capitol Hill,
calling for reform in meetings with committee chairs and
other members of Congress. And everywhere I go,
financial industry lobbyists are there, pushing back all
out to block reform.

Congress is deciding right now how it will shape
financial reform--we need congressional support and
intense presidential leadership.

Call your members of Congress. They're sure hearing from
front groups for the banks. They need to hear from you,
too. Tell them to produce a financial system that isn't
set up to reward big banks at the expense of everyone
else. The money has to start flowing to regular people
and businesses that can create jobs.

And if you're in Chicago on Tuesday, join me. We'll meet
up at 10:30 a.m. at Wacker Drive and Michigan Avenue to
march to the Sheraton Chicago Hotel & Towers where the
bankers are meeting.

See you at the Showdown

______________

Bankers 10; Homeowners 0

Arianna Huffington: Why Are Bankers Still Being Treated As Beltway Royalty?
Just this week, America's bankers and their lobbyists -- who you might have reasonably thought would be the political equivalent of lepers these days -- have kneecapped bankruptcy reform in the Senate, helped pull the plug on a deal with Chrysler, and tried feverishly to place a roadblock in the way of credit card reform in the House. According to Sen. Dick Durbin, the banks "are still the most powerful lobby on Capitol Hill. And they frankly own the place." When it comes to reforming our financial system, we are truly through the looking glass. I mean, since when did it become "to the vanquished go the spoils"? How do the same banks that have repeatedly come to Washington over the last eight months asking for billions to rescue them from their catastrophic mistakes, somehow still "own the place"?

No Banker Left Behind

In for a Penny, In for $2.98 Trillion

By Robert Scheer

The good news on the government’s “No Banker Left Behind” program is that, according to the special inspector general’s report on Tuesday, the total handout to date is still less than 3 trillion dollars. It’s only $2.98 trillion, to be precise, an amount six times greater than will be spent by federal, state and local governments this year on educating the 50 million American children in elementary and secondary schools.

The bad news is that even greater amounts of money are to be thrown down what has to be the world record for rat holes.

Where did the money go? Almost all of it went to the bankers and stockbrokers who got us into this mess by insisting that the complex-by-design derivatives they trafficked in should not be regulated by government since they were private transactions between consenting professionals. Sort of like a lap dance: If it doesn’t work out, that’s the problem of the parties involved and no concern of the government.
From: Truthdig.org
Click on the title for the full article.

Wall Street vs working people

Lets arrest the bank managers

No bottom in sight yet: a conversation with Doug Henwood
By Steve Perry | Published Wed, Jan 21 2009 8:07 am

Doug Henwood
For the past 20 years plus, journalist/author Doug Henwood’s Left Business Observer newsletter has been an essential source for economics news and analysis from a left-progressive viewpoint. Likewise his books, which include After the New Economy, a critique of the tech bubble years and “new economy” hoohah, and Wall Street: How It Works and for Whom, which is available for free download at the LBO website. He's currently working on a book about the American ruling class.
I spoke to Henwood (who also hosts a weekly radio show at WBAI in New York that’s archived at LBO) yesterday afternoon, just a couple of hours after Barack Obama took the oath of office, to see what he makes of the tea leaves and of Obama’s likely course.
SP: A great many economists--including Nouriel Roubini, who famously predicted the credit crisis back in 2006--now say that the likeliest scenario is a very steep recession that lasts through this year and part of next year. What's the most compelling case about the length of this downturn that you’ve encountered?
Doug Henwood: It’s hard to say. There are really no signs of it approaching a bottom yet. None of the leading indexes seem to have approached a bottom. If we were going to see some kind of stabilization by mid-year, that would start showing up in some of the leading indexes now or soon. So we’ll be looking for that, but there’s no reason to believe we’re anywhere near that point.
If you look at the history of financial crises--and there’s a good paper by a couple of economists, Kenneth Rogoff and Carmen Reinhart, that looks at some of the major financial crises of the past several decades and looks at what happens to real economies after them--the average increase in unemployment rates was about 7 points. We started at 4.5, which means we’d end at 11.5, which would be a post-1930s record. The authors also saw very, very steep declines in GDP, on the order of 9 or 10 percent. We’ve only seen a fraction of a percent so far.

So judging on the basis of past financial crises, we are not even halfway through this.

See the entire article here.
http://www.minnpost.com/steveperry/2009/01/21/6035/no_bottom_in_sight_yet_a_conversation_with_doug_henwood

OK. So most people don’t know what to do. Here is one idea.
Lots of serious economists and observers are now saying that this economy is in crisis and needs a significant jolt to return confidence. ( see below) Well, most of them are not talking about what would produce confidence among working people.
So, I will give it a try.
I think the government should arrest the top 100 or so corporate CEO’s and prosecute them for theft. They have taken billions from investors, caused the decimation of pensions, and caused 1.2 trillion to be drained from the economy.
By any standard they are thieves.
On the other hand, they should receive a fair and impartial trial. Much of what corporate finance did with their derivatives was illegal until 2001 when Democrats and Republicans united in the U.S. Congress to make this looting legal.
See, William Black, The Best Way to Rob a Bank is to Own One, and David Cay Johnston, Perfectly Legal. and Free Lunch: How the Wealthiest Americans Enrich themselves at Government Expense (and stick You with the Bill).
My knowledgeable friends tell me that you can’t arrest these people. They claim that our major banks and industries would collapse. I don’t think so. If you arrested the top twenty executives at Citicorp, for example, there are at least 40 more officers just below them who could take over. And, If you arrested the top twenty, the next forty would be much more careful with the public’s money in the future.
Of course another option is to nationalize the major banks, but that seems radical.
Duane Campbell