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Heather McGhee on the Millennial Generation on billmoyers.com
In 1953 the CIA overthrows an elected leader in Iran to put a dictator, the Shah, the leader. This was for British Petroleum and oil for USA.
USA put military near House of Saud and Mecca and Medina after the Gulf War. Most of the criminals in 9/11 were from Saudi Arabia—military in Saudi Arabia was a stupid move for oil and a reason for 9/11.
The military industrial complex supports USA corporations and banks worldwide.
Instead of closing military bases after WWII, the USA set up more bases for leverage and control of the world. We do not know about secret bases. Reported are 737 bases in other countries, including 37 in Okinawa, and 6000 in USA.
The congress gave the president the power to start war, which is only for the congress, according to the constitution.
The World Bank and the International Monetary Fund are controlled by the USA and are used to take money from poor countries for USA corporations. The military industrial complex supports these. The United Fruit Company is an example.
The USA attorney general declares that we do not follow the ratified Geneva Treaty, which the constitution prohibits.
40% of the Pentagon budget is secret. The congress does not oversee the defense spending. Duke Cunningham is an example of this danger. Only the president knows the budget of the CIA. Does the president know how the CIA spends money? 1 trillion to the military does not include nuclear energy (Dept Energy), veteran affairs (Dept Veteran Affairs), foreign military aid (State Department), defense of homeland (Homeland Security).
The USA is playing with danger. If Saudi Arabia demanded payment in Euros, the stock market could fail and put the USA into bankruptcy. USA trade deficit, balance of payments, national debt to China and Japan, lack of manufacturing industry, lack of energy, and excessive jobs for military could cause a revolution in the USA.
United States of America (USA)
1. Federal government buys sugar for 22 cents a pound if sugar production is higher than the market, while Canada and Mexico people pay about 1/3 the amount for sugar than we do in USA.
a. Minimum wage violations occur in Everglades’ sugar production.
b. 10 workers are killed each year in sugar Everglades’ sugar production.
i. Scores of workers are injured.
2. Monsanto is destroying family farms in USA, Canada (Percy Schmeister is an example), India (Dr. Vandana Sheva describes the damage Monsanto is doing), and other countries.
a. Marie-Monique Robin in The World According to Monsanto gives details at http://topdocumentaryfilms.com/the-world-according-to-monsanto/ and at http://video.google.com/videoplay?docid=-4867493254318912106#.
i. There’s nothing they are leaving untouched: the mustard, the okra, the bring oil, the rice, the cauliflower. Once they have established the norm: that seed can be owned as their property, royalties can be collected. We will depend on them for every seed we grow of every crop we grow. If they control seed, they control food, they know it – it’s strategic. It’s more powerful than bombs. It’s more powerful than guns. This is the best way to control the populations of the world. The story starts in the White House, where Monsanto often got its way by exerting disproportionate influence over policymakers via the “revolving door”. One example is Michael Taylor, who worked for Monsanto as an attorney before being appointed as deputy commissioner of the US Food and Drug Administration (FDA) in 1991. While at the FDA, the authority that deals with all US food approvals, Taylor made crucial decisions that led to the approval of GE foods and crops. Then he returned to Monsanto, becoming the company’s vice president for public policy.
ii. Thanks to these intimate links between Monsanto and government agencies, the US adopted GE foods and crops without proper testing, without consumer labeling and in spite of serious questions hanging over their safety. Not coincidentally, Monsanto supplies 90 percent of the GE seeds used by the US market. Monsanto’s long arm stretched so far that, in the early nineties, the US Food and Drugs Agency even ignored warnings of their own scientists, who were cautioning that GE crops could cause negative health effects. Other tactics the company uses to stifle concerns about their products include misleading advertising, bribery and concealing scientific evidence.
3. Banks are Holding 1.4 Trillion, according to the FED; Could Create 19 Million Jobs
a. If you add together the $1.6 trillion that the banks are sitting on and the $2 trillion that the nonfinancial corporations have in liquid assets, $3.6 trillion, that's 23 percent of U.S. GDP sitting right there, one quarter of the entire level of activity in the entire economy.
i. The small business sector, or more precisely the non-corporate business sector of the economy, which is mostly small businesses, has actually been a net negative in terms of borrowing since 2008. In 2008 they went to negative $346 billion. That is, they were paying back $346 billion more than they were taking in, in new loans. Now, how can an economy recover when the businesses are just paying back loans and don't have any money to spend on hiring people or investing in equipment? So that was 2009. As of this past year, 2011, they're still--the small business sector as a whole is still at net negative. So that's where the bottleneck is in the economy. We've got $1.6 trillion that the banks are sitting on that they got for free, and we have businesses, small businesses, at net negative in terms of borrowing to expand their operations.
ii. We need to defend spending at the state and local level, and we need the federal government to support that.
iii. We need the banks to start lending money to small businesses. Small businesses are getting turned down at a rate of about 60 percent for loans, and that is not going to help us get the small businesses back on their feet.
4. Reference: 19 Million Jobs For U.S. Workers: The Impact Of Channeling $1.4 Trillion In Excess Liquid Asset Holdings Into Productive Investments, Pollin, Robert | Heintz, James | Garrett-Peltier, Heidi | Wicks-Lim, | 12/5/2011
BLACK: Well, first, let's get real.
The intermediary function, which means the banks are supposed to get money to finance productive purposes in the real economy, broke completely. The banks did the opposite. They provided funds to the least productive activities, the most fraudulent, the most bubble-creating. Second, people in the streets may not like bankers, but people in high government love bankers, and they love bankers worldwide, and they do tend to listen to them quite heavily, because they're a leading source of political contributions. But also, as my colleagues have mentioned, in Europe and in Japan, compared to the United States, there's vastly more dependence on banks than on the general capital markets to get funds. Third, TINA--there is no alternative--is the great ideological disaster, coupled with the concept that there was something virtuous about not running a deficit. The United States has run deficits roughly 93 percent of every year. And it's had its greatest growth opportunities when it's had deficits. When it has attempted to contract and end deficits, it has been followed in every case by a depression, except this case, which is a mere great recession. [incompr.]So whether or not you nationalize the banks, you assuredly should take insolvent banks and close them and reopen them the next day, which is what we do in the United States routinely, in the savings and loan crisis. It's called a pass-through receivership. And that option is fully available. It will keep the economy going, and you can choose your national policy on public versus private or some mixture. But the current system is broken. Ireland is broken because de facto it sought to bail out the German banking system. And there's a small scale problem in terms of the size of the Irish economy versus the German banking problem. So the euro is fundamentally flawed as it is set up. The ECB is fundamentally flawed as it is set up. Yes, we all understand the historic reasons why it screwed up, but what a population needs to do is adopt some degree of pragmatism and learn when events have changed. And so the bogeyman is not hyperinflation. We should be so lucky as to have to 2 to 3 percent inflation. That would actually be helpful in recovery. So right now everything in the system--the so-called Stability and Growth Pact, the single currency, and the single interest rate are conspiring to make sure that the periphery cannot recover and will be locked in long-term recession with sharply falling real wages to the working class. And that is what has tipped them back into recession. And according to the ECB, it's taking the entire eurozone back into recession. And we haven't mentioned it, but the Brits' Cameron is also very bad on this ideological ground.
Banks and Military
Messages to legislators January
Will you ask President Obama to tell you how much money the government gives to the CIA? Then ask to see how the CIA spends this money? Then publish this information for all people to see.
Will you find how much money the government gives to the Defense Department? Then ask how the defense department spends this money? Then publish this information for all people to see.
This and other messages at:
Military bases: 6,000 in USA; 700 in other countries (e.g. 37 in Okinawa); 300 or more secret.Is this your count?
BILL MOYERS: Heather McGhee speaks of how the neoliberal economic experience of the last 30 years – including cutting taxes on the rich and waiting for the wealth and prosperity to trickle down -- has left her generation of Millennials standing under a spigot someone forgot to turn on. After a few drips and drops, it went dry. So did the very notion of equal opportunity for all. And today we’re living in a country deeply divided between winners and losers. Nowhere is that more evident than in our tax system – so distorted by loopholes, exemptions, credits, and deductions favoring the already rich and powerful that it no longer can raise the money needed to pay the government’s bills.
Among the people who saw this crisis coming was the conservative economist Bruce Bartlett, the supply-side champion who wrote the manifesto for the Reagan Revolution. Bartlett became a senior policy analyst in the Reagan White House and a top official at the Treasury Department under the first George Bush. Yet for all those credentials, he is today an outcast from the very conservative ranks where he was once so influential. That’s because Bruce Bartlett dared to write a book criticizing the second George Bush as a pretend conservative who slashed taxes but still spent with wild abandon. The subtitle says it all: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy.
For his heresy Bartlett was sacked by the conservative think tank where he worked. Undaunted, this card-carrying advocate of free markets and small government has been a prolific writer for popular and academic journals and has just published a new book: The Benefit and the Burden: Tax Reform - Why We Need It and What It Will Take. It’s a layman’s guide through the jungle of a tax system that, thanks to rented politicians and anti-tax ideologues like Grover Norquist, enable the one percent to make off like bandits while our national debt soars sky-high. I talked to Bruce Bartlett soon after he had finished his new book.
BILL MOYERS: You've made the point that America's top earning one percent had an effective 33.1 percent federal income tax rate in 1986, and an effective rate of only 23.3 percent in 2008. And you say if the top one percent had kept paying at the 1986 effective rate, quote, "the federal debt today would be $1.7 trillion lower." That's a lot of money.
BRUCE BARTLETT: Well, that's right. And when I say effective rate that means the taxes that they paid divided by their income. So that tells you what the revenue is that the government gets from taxing them. And clearly, they were doing okay at the beginning of that period.
And that was Ronald Reagan's administration. Up until 1986, the top marginal rate, the top statutory rate was 50 percent. Now it's 35 percent. And all the pressure is on to lower that even further. And this just doesn't make a great deal of sense to me. When people say, 'Oh, we can't raise taxes on the rich. They'll go on strike, they'll move to another country.' But within recent memory, it hasn't been that long ago that we had rates that were substantially higher. And these people did just fine.
BILL MOYERS: Well, when I was growing up in the '50s the top marginal tax rate, if I remember correctly, was 91 percent.
BRUCE BARTLETT: That's right. And I just think that there's a disconnect between the facts of what taxes do and the sort of mythology of what they do.
I think in many ways, the tax debate is a code for an attitude towards the individual vis-à-vis government. If you think government is bad or incompetent, if you glorify the individual against the state, then taxes is sort of your, the territory where you're going to fight these battles.
It's a signaling mechanism. It tells people you're one of us on the tax issue. You're for tax cuts and low tax rates and things like that. And that translates into an attitude towards government that goes into spending and lots of other issues.
BILL MOYERS: It's also a case, though, isn't it, that if you pay taxes, whatever taxes you pay, you want to get some services in return. You want your mail to be delivered on time, the potholes to be fixed, the bridge to be safe, the schools to teach your children. And there is that dissatisfaction with government because it hasn't been delivering the services that people really have a right to expect.
BRUCE BARTLETT: That's true. The composition of government spending has changed enormously over the last 50 years or so. The vast bulk of federal spending goes to Medicare, Social Security, Medicaid, interest on the debt. And that has a lot to do with, I think, people's attitudes towards government. They view this redistribution policy as taking from me and giving to them, so there is an antagonistic attitude towards that kind of just shuffling money around. And, but people don't seem to be willing or able to confront that fact, and instead, have concentrated solely on the tax side of the equation. But you can't do one without the other. You just can't keep cutting taxes unless you're going to start cutting spending meaningfully, which means essentially, cutting Medicare. That is the 600 pound gorilla.
BILL MOYERS: You write the Bush tax cuts have added at least $3 trillion to the debt. When Bush took office, budget projections showed a $6 trillion surplus, enough to pay off the pending $6 trillion national debt.
Instead, by the time Bush left office, the national debt had ballooned to over ten trillion, and the Republicans are refusing to take responsibility for having driven the borrowing binge that put the nation in the hole it is in now.
BRUCE BARTLETT: That's exactly correct. One of the things that Bush argued during the campaign, not so much after he took office, is that budget surpluses are a bad thing. Because they might get spent. It really sounds silly when you say that. But he did say this over and over again.
And so, the idea of cutting taxes was a part of a policy that I call starving the beast. It's you take away the government's credit card, as Ronald Reagan said. And this will force spending down. This will shrink the size of government. And conservatives believe that there's only so much freedom out there. And the more the government, the more power government has, there's less freedom for the people.
And they have a tendency to look at this in terms of spending as a share of GDP. So it can be measured very precisely. So if the federal government takes 25 percent of GDP, then essentially, we have only 75 percent freedom. We're not 100 percent free. You know, if we could cut government spending down to 20 percent of GDP, then we would gain five percent freedom. We'll go from being 75 percent free to being 80 percent.
I'm serious. This is the way they think. And this drives a lot of these policies that on the surface don't make any sense. They're just about taking away the government's resources to force it to shrink to -- if you cut the budgets of the regulatory agencies, then they can't regulate. This is a good thing.
They really believe that there's absolutely nothing good that comes out of government, unless it comes out of the Pentagon.
And the starve the beast theory is really extraordinarily pernicious, because one of the things that it is related to is the so-called tax pledge, which my friend Grover Norquist came up with. And which has become a ban on raising taxes at any time for any reason.
But at the same time, all tax cuts are okay. So you just have this constant ratchet down. Every time you can cut taxes, you've lowered the threshold that you can never then go up against. So it's like you're coming down a series of stairs. And this is all very conscious, because Grover believes that if you take away the government's ability to tax, it will necessarily be forced to spend less. Government will shrink. Freedom will increase. It's that simple.
BILL MOYERS: Grover Norquist is the one who famously said that he'd like to shrink the government to the size where it could fit into a bathtub and be drowned, take it back to the size it was before World War II.
BRUCE BARTLETT: Well, we'd have to go back before World War I, really, to get to that size.
BILL MOYERS: You remember back when the first George Bush was in the White House, and he raised taxes because even though he had said, "Read my lips, no new taxes," in his convention speech, his acceptance speech, he raised taxes because he felt the economic situation necessitated new taxes. And the conservative Republicans went after him. They were willing to take down one of their own.
BRUCE BARTLETT: Yes. And they did. Remember, you had Ross Perot running. You had -- and a great many Republicans voted for him because they thought that George Bush was a turncoat, and I think Mr. Bush's support for a tax increase in 1990 was an enormous act of courage that no Republican has been willing to show since, and probably never will.
I mean, would you want to be a Republican running in a Republican primary, where Grover Norquist comes in and says, ‘This guy must be defeated because he violated the pledge, or he refused to sign the pledge’? The members of the Tea Party don't need to know anything else. That guy's history.
And we saw during the 2010 campaign that these Tea Party people are capable and perfectly willing to defeat incumbent Republicans even when -- at the cost of having that seat go to the Democrats. You saw guys like Robert Bennett in Utah, who is no liberal by any means.
BILL MOYERS: He was the epitome of the conservative--
BRUCE BARTLETT: That's right.
BILL MOYERS: Stalwart. And--
BRUCE BARTLETT: But he wasn't conservative enough. And so, they tossed him out.
And Republicans lost seats in places like Colorado and Delaware, where the Tea Party people were so insistent that their own people be in there, and that they don't have these RINO Republicans, you’ve probably heard that term, stands for Republican in name only. And believe me, among Republicans there's nothing worse that you can be called. But there’s other groups as well. The Club for Growth has been extraordinarily important.
Because they ensure that there will always be unlimited or virtually unlimited financing available to anybody who runs against a RINO, against a tax pledge breaker, or somebody who refuses to sign the pledge. They're very, very obsessed about this.
And they just have vast sums of money. And even before the Citizens United decision made it easier for them to raise money, they still had an enormous amount of money available. And I honestly don't know where it's coming from or what we can do about it.
BILL MOYERS: You've made it clear that the Bush cuts were worth little to those making $150,000, but a huge amount to those making five, ten, 15, $25 million. Do those folks in the Tea Party get that?
I'm not sure. I'm not sure if they really know very much about taxation. Back when the Tea Party first came into existence, back in 2009 they had a big demonstration in Washington. And we went around and we surveyed a good percentage of the people in this demonstration about what they knew about taxes, what they thought the top rate was, what they thought their tax rate was. You know, questions of just straight factual knowledge, not opinion.
And it turned out that these people all thought taxes were vastly higher than they really are, and that they were paying exorbitantly high tax rates that would be impossible for them to pay. And so, I think that this is part of what's going on here, is simple misinformation.
And there have been other polls and things that are showing the same thing. I mean, if you really thought, if you're a typical middle class person, you really believe the government was taking half your income, you'd be out demonstrating. But the fact of the matter is that the vast majority of people pay less than 10 percent federal income taxes. So they simply have a wrong understanding of what they pay.
BILL MOYERS: Well, there are all the other taxes, of course. State taxes, sales taxes, toll fees and all of that.
BRUCE BARTLETT: That's true. But all taxes taken together as a share of GDP is only about a third, or even less. More -- it's like 30 percent. That's all federal, state and local taxes all put together. So that you're not going to have taxes being much higher than that for anybody.
BILL MOYERS: You remind me that ideology is a worldview that can be believed despite all the evidence to the contrary.
BRUCE BARTLETT: Well, it's very much like religion. And I think that it's not a surprise that so many very, you know, devout Christians are a part of the Republican Party and accept a lot of this. Because the nature of deep religious belief is faith, which means you accept things for which there is no proof.
And so, I think it's not that hard to shift that faith over to believe a lot other things that you've been told are true so many times that you just accept that on faith as well. That if you cut taxes, revenues will go up, you know, and things of this sort. That all tax cuts are good and all spending cuts are good, and all government is bad.
BILL MOYERS: Are you pessimistic?
BRUCE BARTLETT: Oh, absolutely. I'm very pessimistic.
BILL MOYERS: What makes you most pessimistic right now?
BRUCE BARTLETT: The gridlock in Congress. Or I don't know. It's the lack of willingness to discuss issues in a reality-based way. We just seem to live in a zone in which people no longer really seem to care about facts or analysis. And we talk in sound bites.
And the media of course contribute to this. The decline of the major media. People don't want to read magazines. They don't even want to read a newspaper article if it's more than a couple of inches. And if it doesn't mention Lindsay Lohan, they move on.
Clearly people don't seem to know as much. And they don't seem to care that they don't know as much about public policy or just the basic facts of, you know, how much does the government tax, how much does the government spend? What does the government spend money on? I've seen more than one poll that shows people believe that 20 percent of government spending goes to foreign aid.
20 percent. It's actually one percent. But of course if you believe a huge percentage of government spending is going to just giveaways to foreigners then why not cut taxes and slash spending? It's not coming out of anything that matters to you. People have to be given the factual information they need to make decisions. And they're not getting it. And they may not even want it.
BILL MOYERS: I just read a summary of a study done at the University of Michigan that over a period of time shows that people have confronted with facts they believe to be true will reject them nonetheless if they offend or undermine their belief system. That their beliefs -- our beliefs are more important to us than the facts.
BRUCE BARTLETT: Oh, I think we need some -- instead of talking to economists like me, we need to be talking to psychologists and sociologists to try to get at the root of this problem.
BILL MOYERS: You wrote in the Washington Post, "The growing inequality of wealth and income distribution is both a moral and economic problem." How do you see it as a moral problem?
BRUCE BARTLETT: Well, I think it's wrong to have people with such extraordinary wealth that pass it down from one generation to another, with people not having to work for a living, being able to have control perhaps over government. Clearly wealth and power are interrelated at least to some extent. And, of course you see members of both parties now going hat in hand to the exact same group of people on Wall Street.
And it's naïve to think that they're not getting something for their contributions. I don't think it means that politicians are being bought. But when the class of people that they spend all of their time with, talking to and so on, they're bound to pick up part of their point of view, their attitude. And, of course, many politicians these days hope to be able to join those groups of people.
BILL MOYERS: When they leave office--
BRUCE BARTLETT: When they leave office, that's right.
BILL MOYERS: 300 former members of Congress are now lobbying in Washington.
BRUCE BARTLETT: Yes indeed. But it’s more, I don't know, class consciousness is the only word I can think of, but it doesn't really get quite at what I'm talking about. It's the community of shared interests.
But we have public policy problems. For example, we have a large budget deficit that many people, myself included, believe will require higher taxes to deal with at some point. But -- and so, if the wealthy don't contribute more, then the rest of us are going to have to contribute more.
If the wealthy are unwilling to pay more taxes, then this is going to lead to spending cuts. And if you put off the table things like national defense, then you're going to end up cutting more and more out of programs that aid the poor. So, I think there are consequences to this idea that tolerance for inequality requires us to -- to just do nothing to make the wealthy contribute a higher share of resources to fund the government.
BILL MOYERS: Here's some data from the nonpartisan Congressional Budget Office. Let me see what you think about this.
Between 1979 and 2007, about 30 years there, roughly 40 percent of all income growth, post-tax, post-benefit, accrued to the upper one percent. And in just the five years between 2002 and 2007, over half went to the top one percent. What do you make of that?
BRUCE BARTLETT: It's extraordinary. But I think it's even worse than the data show because if you disaggregate the one percent, you find out that the vast bulk of the gains made by the one percent were by the top 0.1 percent. So -- and this also makes another point, which is that if you ignore the top one percent, the increase in inequality is not that great.
The income classes of the bottom 99 percent have moved more or less together. It's the top one percent that has just skyrocketed up out of proportion to everybody else. So, in other words, there's a huge difference between being in the ninety-eighth percentile and being in the ninety-ninth percentile. And it's important not to lump in people who merely make, you know, a couple hundred thousand dollars a year with people who are making millions upon millions, and even billions of dollars a year.
And that's something that I think is not -- doesn't always come through in the context of the debate. We're talking about a really small number of people, in the hundreds, who have really acquired a huge outsized share of all of the gains that this country has made in terms of income and wealth over the last few years.
BILL MOYERS: More than any other group, the tax rates for the wealthiest Americans have been coming down these last 30 years. This couldn't have happened without a bipartisan consensus that it's a good thing.
BRUCE BARTLETT: Yes.
BILL MOYERS: How did that happen?
BRUCE BARTLETT: Clearly, ideology has a great deal to do with it. The conservative side of our political spectrum has had an outsized voice over the last few years. I think especially since the establishment of Fox News, which has created an echo chamber in which people just hear the same ideas repeated ad infinitum.
And you know, it's just basic advertising, basically. You hear the same idea over and over again. Or you can call it propaganda if you like. It's broadly believed and people just keep saying these things all the time, that ‘Rich people create jobs.’ ‘Yes, rich people create jobs.’ ‘They're motivated primarily by taxation.’ ‘Yes, they're motivated by taxation.’ ‘We must cut their taxes.’ ‘Yes, we must cut their taxes.’
BILL MOYERS: Becomes a mantra.
BRUCE BARTLETT: That's right. Year after year after year of people watching Fox News and listening to talk radio, had conditioned them in advance to believe that the government is responsible for all of our problems.
BILL MOYERS: Your old boss, Ronald Reagan, said government is the problem, not the solution. And Bill Clinton, Democrat, echoed that refrain when he was in office.
BRUCE BARTLETT: One idea that a friend of mine, Mike Lofgren came up with, is that the conservative side of this political spectrum hates government, per se. And it's in their interest to make it be ineffective. And so, they'll cut the budget, for example, for a regulatory agency such as the Securities and Exchange Commission.
And then, when some problem arises on Wall Street, they will then say, ‘Ha-ha, this proves that the SEC doesn't work.’ And this will justify further cuts in the agency's budget, so that everything that they do reinforces their basic ideology, which is that government is the source of all of our problems. Government doesn't work. And then they make sure that it doesn't work by cutting its budget and tying its hands so that everything is a race to the bottom and it didn't use to be that way.
I think coming out of World War II in particular, people had a much more positive attitude towards government. It was something that was capable of doing good. And, of course, that led to the creation of many programs, to aid the poor and the middle class. Housing programs, things of that sort.
BILL MOYERS: But if it's true that in some profound way Washington, the government, has made the rich richer, and turned its back on the middle class, you can hardly blame Tea Partiers and others for saying, ‘Why should I be taxed more for the government? The government's working for them. It's not working for me.’ Isn't that dynamic working out here?
BRUCE BARTLETT: I think so. I mean, certainly the Occupy Wall Street group has some similarities with the Tea Party group in that regard. And I've always thought that a lot of these Tea Party people could easily switch sides, like, overnight depending on the circumstances. For example it's obvious that a lot of Tea Party members tend to be elderly. You've seen that famous sign, "Tell the government to keep its hands off my Medicare." And I think as long as the government does keep its hands off their Medicare, they're fine with talking about low taxes.
But once they start to realize that the Republicans really do want to not just cut Medicare, but essentially abolish it, you know, I just think those people are not going to be part of the Tea Party. They're going to be over with the Occupy Wall Street.
BILL MOYERS: Bruce Bartlett, thank you very much for sharing this time with us.
BRUCE BARTLETT: Thank you.
DAVID STOCKMAN: Money dominates politics. And as a result we have neither capitalism or democracy. We have some kind of -- we have crony capitalism.
BILL MOYERS: And…
GRETCHEN MORGENSON: The big powered, moneyed institutions are in control in Washington, there's no doubt about it. You and I don't have a lobbyist and so we are not represented.
BILL MOYERS: Welcome. This week we’re continuing our exploration of Winner-Take-All Politics: How Washington Made the Rich Richer and Turned its Back on the Middle Class. If you missed our first installment, you’ll find it at our website, BillMoyers.com.
Now this is only the second broadcast of our new series, yet we’ve already made our choice for the best headline of the month. Here it is:
"Citigroup Replaces JPMorgan as White House Chief of Staff."
Behind that headline is a tangled web.
The new chief of staff is Jack Lew. He used to work for the giant banking conglomerate Citigroup. His predecessor as chief of staff is Bill Daley, who used to work at the giant banking conglomerate JPMorgan Chase. Daley was maestro of the bank’s global lobbying and the chief liaison to the White House.
Bill Daley replaced Obama’s first chief of staff, Rahm Emanuel, who once worked for a Wall Street firm where he was paid a reported $18.5 million in less than three years.
The new chief of staff, Jack Lew, comes from Obama’s Office of Management and Budget, where he replaced Peter Orszag, who now works as vice chairman for global banking at the giant conglomerate Citigroup. Still following me?
It’s startling the number of high-ranking Obama officials who have spun through the revolving door between the White House and the sacred halls of investment banking.
But remember, it was Bush and Cheney’s cronies in big business who helped walk us right into the blast furnace of financial meltdown. Then they rushed to save the banks with taxpayer money.
But of course, Bush and Cheney aren’t the only ones to have a soft spot for financiers. Bankers seem to come and go pretty frequently at the White House. President Obama may call them "fat cats" and stir the rabble against them with populist rhetoric when it serves his purpose, but after the fiscal fiasco, he allowed the culprits to escape virtually scot-free. And when he’s here in New York, he dines with them frequently and eagerly accepts their big contributions.
Like his predecessors, Obama’s administration has also provided the banks with billions of low-cost dollars they used for high-yielding investments to make big profits.
It's a fact. The largest banks are actually bigger than they were when he took office. And earned more in the first two-and-a-half years of his term than they did during the entire eight years of the Bush administration.
And get this: President Obama’s new best friend, according to The New York Times, is Robert Wolf. They play golf, basketball, and they talk economics when Wolf is not raising money for the President’s re-election campaign. Now, just who is Robert Wolf? Well, he's top dog at the U.S. branch of the giant Swiss bank UBS, the very bank that helped rich Americans evade taxes. Here, Senator Carl Levin describes some of the tricks used by UBS:
SENATOR LEVIN: Here, Swiss bankers aided and abetted violations of U.S. tax law by traveling to this country with client code names, encrypted computers, counter-surveillance training, and all the rest of it, to enable U.S. residents to hide assets and money in Swiss accounts.
BILL MOYERS: Quite a tangled web. One man who has strong views on all these cozy ties between Wall Street and Washington is David Stockman.
In the 1970s, he was a young Republican congressman from Michigan and an early proponent of supply-side economics -- some call it trickle down.
You know the theory; if you cut taxes on the wealthy, while cutting government, the economy will take off, money trickling down and creating millions of jobs.
It was the centerpiece of Ronald Reagan’s 1980 campaign for president.
RONALD REAGAN: There is enough fat in the government in Washington that if it was rendered and made into soap, it would wash the world.
BILL MOYERS: Once in the Oval Office, President Reagan made David Stockman his budget director.
DAVID STOCKMAN: When President Reagan gave me this job he pointed to that budget which is some thousands and thousands of pages long, and he said go through it from top to bottom with a fine tooth comb and unless you can find a persuasive demonstration why funds must be spent, cut those budgets.
BILL MOYERS: Stockman helped Reagan usher in the largest tax cut in U.S. history, a cut that mainly favored the rich. But things didn’t go exactly as they planned them. The economy sagged, and in 1982 and ’84, Reagan and Stockman agreed to tax increases.
In 1985 Stockman left government and wrote a book critical of his own years in power: The Triumph of Politics: The Inside Story of the Reagan Revolution. He then took his economic expertise to Wall Street and became an investment banker. Thirty years later, he’s writing a new book, with the working title The Triumph of Crony Capitalism.
I sat down with him to talk about how politics and high finance have turned our economy into a private club for members only.
What do you mean by crony capitalism?
DAVID STOCKMAN: Crony capitalism is about the aggressive and proactive use of political resources, lobbying, campaign contributions, influence-peddling of one type or another to gain something from the governmental process that wouldn't otherwise be achievable in the market. And as the time has progressed over the last two or three decades, I think it's gotten much worse. Money dominates politics.
And as a result, we have neither capitalism or democracy. We have some kind of --
BILL MOYERS: What do we have?
DAVID STOCKMAN: We have crony capitalism, which is the worst. It's not a free market. There isn't risk taking in the sense that if you succeed, you keep your rewards, if you fail, you accept the consequences. Look what the bailout was in 2008.
There was clearly reckless, speculative behavior going on for years on Wall Street. And then when the consequence finally came, the Treasury stepped in and the Fed stepped in. Everything was bailed out and the game was restarted. And I think that was a huge mistake.
BILL MOYERS: You write, quote, "During a few weeks in September and October 2008, American political democracy was fatally corrupted by a resounding display of expediency and raw power. Henceforth, the door would be wide open for the entire legion of Washington's K Street lobbies, reinforced by the campaign libations prodigiously dispensed by their affiliated political action committees, to relentlessly plunder the public purse." That's a pretty strong indictment.
DAVID STOCKMAN: Yeah and, but on the other hand, I think you would have to say it was fair. When you look at what came out of 2008, the only thing that came out of 2008 was a stabilization of these giant Wall Street banks. Nothing came out of 2008 that really helped Main Street. Nothing came out of 2008 that addressed our fundamental problems, that we've lost a huge swath of our middle class jobs. Nothing came out of 2008 that made financial discipline or fiscal discipline possible.
It was justified as sort of expediency. We need to do this. We need to stop the contagion. But it wasn't thought through as to what the long-term implications of this would be.
BILL MOYERS: How did you see it playing out?
DAVID STOCKMAN: I think there was a lot of panic going on in the Treasury Department. I call it "The Blackberry Panic." They were all looking at their Blackberries, and could see the price of Goldman Sachs or Morgan Stanley dropping by the hour. And somehow they thought that was thermostat telling them that the economy was coming unraveled.
I don’t believe that was right. I think what was going on was simply a huge correction that was overdue on Wall Street. The big leverage hedge funds on Wall Street that called themselves investment banks weren't really investment banks. They were just big trading operations using 30, 40 to one leverage. And it was that that was being corrected.
But they used the occasion of the Wall Street banking crisis to create the impression that this was the beginning of a kind of black hole the whole economy was going to drop into. I think that was wrong.
And it was that fear that led Congress to do anything they wanted. You know, the Congress gave them a blank check.
BILL MOYERS: Not at first, don’t you remember, Congress first refused to approve the bailout, right?
DAVID STOCKMAN: And then, the stock market dropped 600 points because all of the speculators on Wall Street all of a sudden began to think, "Hey, they might let capitalism work. They might let the rules of the free market function."
BILL MOYERS: You mean by letting them fail.
DAVID STOCKMAN: Yes.
BILL MOYERS: If they let them fail?
DAVID STOCKMAN: I think if they let them fail it wouldn't have spread to the rest of the economy. There wouldn't have been another version of the Great Depression. There weren't going to be runs on the bank. We weren't going to have consumers lined up in St. Louis and Des Moines and elsewhere worried about their bank. That's why we have deposit insurance, the FDIC. But it would have been a big lesson to the speculators that you're not going to be propped up and bailed out,
You're not going to have the Fed as your friend. You're not going to have the Treasury with a lifeline. You're going to have to answer to the marketplace. And until we get that discipline back into our financial system, the banks are just going to continue to grow, continue to speculate and find new ways to make easy money at the expense of the system.
BILL MOYERS: President Bush, he was still in office then.
DAVID STOCKMAN: Yes.
BILL MOYERS: He said, I have to suspend the rules of the free market in order to save the free market.
DAVID STOCKMAN: You can't save free enterprise by suspending the rules just at the hour they're needed. The rules are needed when it comes time to take losses. Gains are easy for people to realize. They're easy for people to capture. It's the rules of the game are most necessary when the losses have to occur because mistakes have been made, errors have been made, speculation has gone too far. The history has always been -- and this is why we had Glass-Steagall and a lot of the legislation in the 1930s.
BILL MOYERS: Glass-Steagall was the provision --
DAVID STOCKMAN: The division of banks between the commercial banking and investment banking and insurance and other --
BILL MOYERS: So that you, the banker, could not take my deposits and gamble with them, right?
DAVID STOCKMAN: That's exactly right. And we need not only a reinstitution of Glass-Steagall, but even a more serious limitation on banks. And what I mean by that is, that if we want to have a way for, you know, average Americans to save money without taking big risks and not be worried about the failure of their banking institution, then there can be some narrow banks who do nothing except take deposits, make long-term loans or short-term loans of a standard, business variety without trading anything, without getting into all of these exotic derivative instruments, without putting huge leverage on their balance sheet.
And we need to say simply, that if you're a bank and you want to have deposit insurance, which ultimately, you know, is backed up by the taxpayer -- if you're a bank and you want to have access to the so-called "discount window" of the Fed, the emergency lending, then you can't be in trading at all.
Now, on the other hand, if they want to be a hedge fund, then they’ve got to raise risk capital and they have to take the consequences of their risks, both to the good side and the bad side. And until we really approach that issue, and dismantle these giant, multi-trillion dollar balance sheet banks, and separate retail and deposit insured banking from just financial companies, we're going to have recurring bouts of what we had in 2008.
And they haven't even begun to address that, and it's so disappointing to see that the Obama administration, which in theory should've had more perspective on this than a Republican administration under Bush, to see that one, they appointed in the key positions the same people who brought the problem in: Geithner and Summers and all of those, and secondly, that Obama did nothing about it.
It could have easily -- they could have begun to dismantle a couple of these lame duck institutions, Citibank would have been a good place to start. But they did nothing. They passed Dodd-Frank, which said, now we're going to have everybody write regulations -- tens of thousands of pages that you know, it was a full employment act for accountants and lawyers and consultants and lobbyists. But they didn't go to the heart of the problem. If they're too big to fail, they're too big to exist. And let's start right with that proposition.
BILL MOYERS: You've described what other people have called the financialization of the American economy, the growth in the size and the power of the financial industry. What does that term mean to you, financialization? And why should we care that it's happened?
DAVID STOCKMAN: Because what it means is that a massive amount of resources are being devoted, being allocated or being channeled into pure financial speculation that has no gain to society as a whole, has no real economic contribution to the process by which GNP is created, GDP is created and growth occurs.
By 2007 40 percent of all the profits in the American economy were coming from finance companies. 40 percent. Historically it was 15 percent.
So the financialization means that as we attracted more and more resources and capital, and we made speculation easier and easier, and we funded it with almost free overnight money, managed and manipulated by the Fed, that's how the economy got financialized. But that is a casino. Casinos -- they're, you know, places for people to go if they want to speculate and wager. But they're not part of a healthy, constructive economy.
BILL MOYERS: What do you mean by the free money that banks are using overnight?
DAVID STOCKMAN: Well, by that we mean when the Fed, the Federal Reserve sets the so-called federal funds rate at ten basis points, where it is today, that more or less guarantees banks can go into the Fed window, the discount window, and borrow at ten basis points.
And then you take that money and you buy a government bond that is yielding two percent or three percent. Or buy some corporate bonds that are yielding five percent. Or if you want to really get aggressive, buy some Australian dollars that have been going up. Or buy some cotton futures. And this is really what has been going on in our markets.
The cheap funding, which is guaranteed by the Fed, the investment of that cheap funding into speculative assets and then pocketing the spread. And you can make huge amounts of money as long as the music doesn't stop. And when the music stops then all of a sudden, the cheap, overnight money dries up. This is what's happening in Europe today. This is what happened in 2008.
And then people are stuck with all these risky assets, and they can't fund them. They owe cash to the people they borrowed overnight from or on a weekly basis. That's what creates the so-called contagion. That's what creates the downward spiral. Now, unless we let those burn out, it'll be done over and over. In other words, if, you know, if a lesson isn't learned, then the error will be repeated over and over.
BILL MOYERS: Stockman says the modern bailout culture took off under President Bill Clinton. It was engineered with the help of Federal Reserve Chairman Alan Greenspan and top economic advisors at the Treasury, Larry Summers and Robert Rubin.
BILL CLINTON: The American people either didn’t agree or didn’t understand what in the world I’m up to in Mexico.
DAVID STOCKMAN: I think it started with the bailout of the banks in 1994 during the Mexican Peso Crisis.
REPORTER: For investors it was a sight for sore eyes. Mexico’s stock market actually soaring instead of plummeting for the first time in weeks. All this, an immediate reaction to news of a major international aid package – nearly half of it from Washington.
DAVID STOCKMAN: That was allegedly designed to help Mexico. It was $20 billion with no approval from Congress that was used, I think inappropriately out of a Treasury fund. And why were we doing this? It's because the big banks were too exposed to some bad loans that they had written in Mexico and elsewhere.
BILL MOYERS: Wall Street banks. U.S. banks.
DAVID STOCKMAN: Wall Street banks. Wall Street banks. The banks of the day, Citibank, Bankers Trust, the others that existed at that time. And so the idea got started that Washington would be there with a prop, with a bailout, with a helping hand. And then the balls start rolling down the hill.
DAN RATHER: The Federal Reserve Bank of New York has taken highly unusual action to head off what could have been a severe blow to world economies.
BILL MOYERS: When the hedge fund Long Term Capital Management blew up in 1998, it was big news.
REPORTER: Dan, the Long Term Capital fund lost billions in the recent market turmoil and last night, stood on the brink of collapse.
DAVID STOCKMAN: Long Term Capital was an economic train wreck waiting to happen. It was leveraged 100 to one. It was in every kind of speculative investment known to man. In Russian equities, in Thailand bonds, and everything in between. And it was enabled by Wall Street.
REPORTER: An emergency meeting was organized by the Federal Reserve last night, here at its New York office. At the table, more than a dozen of Wall Street’s biggest bankers and brokers including David Komansky, Chairman of Merrill Lynch, Sandy Weill of Travelers and Sandy Warner of JP Morgan. One by one the firms each agreed to kick in more than $250 million to bail out Long Term Capital before its troubles sent shockwaves through the banking system.
DAVID STOCKMAN: Why did the Fed step in, organize all the Wall Street banks, and kind of sponsor this bailout? Because all of the Wall Street banks that enabled Long Term Capital to grow to this giant size, to have 100 to one leverage, by loaning them money. So when the Treasury and the Fed stepped in and bailed out, effectively, Long Term Capital and their lenders, their enablers, it was another big sign that the rules of the game had changed and that institutions were becoming too big to fail.
Fast forward. We go through one percent interest rates at the Fed in the early 2000s, we go through the housing bubble and collapse.
BILL MOYERS: Following the 2008 economic meltdown came the mother of all bailouts.
GEORGE W. BUSH: Good morning. Secretary Paulson, Chairman Bernanke and Chairman Cox have briefed leaders on Capitol Hill on the urgent need for Congress to pass legislation approving the Federal government’s purchase of illiquid assets such as troubled mortgages from banks and other financial institutions.
BILL MOYERS: The Bush administration came to the rescue of some of the county’s largest financial institutions, to the tune of 700 billion tax-payer dollars.
DAVID STOCKMAN: We elect a new government because the public said, you know, "We're scared. We want a change." And who did we get? We got Larry Summers. We got the same guy who had been one of the original architects of the policy in the 1990s, the financialization policy, the too big to fail policy.
Who else did we get? We got Geithner as Secretary of the Treasury. He had been at the Fed in New York in October 2008 bailing out everybody in sight. General Electric got bailed out. Morgan Stanley, Goldman Sachs, all of the banks got bailed out, and the architect of that bailout then becomes the Secretary of the Treasury. So it's another signal to the financial markets that nothing ever changes. The cronies of capitalism are in charge of policy.
BILL MOYERS: You name names in your writing. You identify several people as the embodiment of crony capitalism. Tell me about Jeffrey Immelt.
DAVID STOCKMAN: He is the poster boy for crony capitalism. Here is GE, one of the six triple-A companies left in the United Sates, a massive, half-trillion dollar company, massive market capitalization. I'm talking about the eve of the crisis now, in September, 2008.
Suddenly, when the commercial paper market starts to destabilize and short-term rates went up. He calls up the Treasury secretary with an S.O.S., "I'm in trouble here. I need a lifeline." He had recklessly funded a lot of assets at General Electric Capital in the overnight commercial paper market. And suddenly needed a bailout from the Treasury. Within days, that bailout was granted.
And therefore, General Electric was able to avoid the consequence of its foolish lend long and borrow short policy. What they should have been required to do when the commercial paper market dried up -- that was the excuse. They should've been required to offer equity, sell stock at a highly discounted rate, dilute their shareholders, and raise the cash they need to pay off their commercial paper.
That would've been the capitalist way. That would've been the free market way of doing things. And in the future they would've been less likely to go back into this speculative mode of borrowing short and lending long. But when we get to the point where the one triple-A, a multi-hundred billion dollar company gets to call up the secretary, issue the S.O.S. sign and get $60 billion worth of guaranteed Federal Reserve and Treasury backup lines, then we are, you know, our system has been totally transformed. It is not a free market system. It is a system run by powerful, political and corporate forces.
BARACK OBAMA: Thank you. Thank you.
BILL MOYERS: So when you saw that President Obama had appointed Jeffrey Immelt, as the head of his Council on Jobs and Competitiveness, what went through your mind?
DAVID STOCKMAN: Well, I was in the middle of being very disgusted with what my own Republican Party had done and what Bush had done and the Paulson Treasury. And then when I saw this, I got the title for my book, “The Triumph of Crony Capitalism.”
BARACK OBAMA: And I am so proud and pleased that Jeff has agreed to chair this panel, my Council on Jobs and Competitiveness, because we think GE has something to teach businesses all across America.
DAVID STOCKMAN: If you have a former community organizer who was trained in the Saul Alinsky school of direct democracy, appointing the worst abuser, the worst abuser of crony capitalism, GE, who came in and begged for this bailout, to head his Jobs Council, when obviously GE's international corporation, they've been shifting jobs offshore for decades, then it becomes so obvious that we have a new kind of system, and that we have a real crisis.
BILL MOYERS: Where is the shame? Shouldn't these people have been at least a little ashamed of running the economy and the financial system into the ditch and then saying, "Come lift me out?"
DAVID STOCKMAN: Yes. You know, I think that's part of the problem. I started on Capitol Hill in 1970s. And as I can vividly recall, corporate leaders then at least were consistent. They might've complained about big government, or they might've complained about the tax system.
But there wasn't an entitlement expectation that if financial turmoil or upheaval came along, that the Treasury, or the Federal Reserve, or the FDIC or someone would be there to back them up. That would've been considered, you know, it would've been considered, as you say, shameful. And somehow, over the last 30 years, the corporate leadership of America has gotten so addicted to their stock price by the hour, by the day, by the week, that they're willing to support anything that might keep the game going and help the system in the short run avoid a hit to their stock price and to the value of their options. That's the real problem today. And as a result, there is no real political doctrine ideology left in the corporate community. They are simply pragmatists who will take anything they can find, and run with it.
BILL MOYERS: So this is what you mean, when you say free markets are not free. They've been bought and paid for by large financial institutions.
DAVID STOCKMAN: Right. I don't think it's entirely a corruption of human nature. People have always been inconsistent and greedy.
But I think it's been the evolution of the political culture in which there have been so many bailouts, there has been so much abuse and misuse of government power for private ends and private gains, that now we have an entitled class in this country that is far worse than you know, remember the welfare queens that Ronald Reagan used to talk about?
We now have an entitled class of Wall Street financiers and of corporate CEOs who believe the government is there to do what is ever necessary if it involves tax relief, tax incentives, tax cuts, loan guarantees, Federal Reserve market intervention and stabilization. Whatever it takes in order to keep the game going and their stock price moving upward. That's where they are.
BILL MOYERS: You were disaffected with the party of your youth, the Republican Party, because it has because -- it’s become dogmatic on so many of these issues and no longer listens to evidence and facts. I’m disaffected with the party of my youth because that Democratic Party served the interest of the working people in this country like Ruby and Henry Moyers. And so many people feel the same way. How do we overcome this pessimism about the American future? “The Wall Street Journal” had a headline on an op-ed piece that said, "The End of American Optimism." A recent survey said only 15 percent of the people were satisfied about the direction of the American people. I mean, this is a serious situation, is it not?
DAVID STOCKMAN: I think it is. And -- but we also have to recognize the pessimism that the public reflects in the surveys and polls is warranted. In other words the public isn't being unduly pessimistic. It's not been overcome with some kind of a false wave of emotion. No. I think the American public sees very clearly the current system isn't working, that the Federal Reserve is basically working on behalf of Wall Street, not Main Street.
The Congress is owned lock, stock and barrel by one after another, after another special interest. And they logically say how can we expect, you know, anything good to come out of this kind of process that seems to be getting worse. So how do we turn that around? I think it's going to take, unfortunately a real crisis before maybe the decks can be cleared.
BILL MOYERS: What would that look like?
DAVID STOCKMAN: It will take something even more traumatic than we had in September 2008.
BILL MOYERS: But on the basis of the record, the lessons of the past. The experience you have just recounted and are writing about. Do you see any early signs that we might turn the ship from the iceberg?
DAVID STOCKMAN: No. I think we've learned no lessons. We really have not restructured our financial system. The big banks that existed then that were too big to fail are even bigger now. The top six banks then had seven trillion of assets, now they have nine or ten trillion.
Rather than go to the fundamentals which have been totally neglected-- we've simply kind of papered over the current system and continued the game of having the Federal Reserve and the Treasury if necessary prop up all of this leverage and speculation, which isn't helping the economy.
And when we talk about zero interest rates. That’s not helping Main Street. Our problem in this economy is not our interest rates are too high. The zero interest rates are just more fuel for leverage speculation for what’s called the carry trade and that is causing windfall benefits to the few but it’s leaving the fundamental problems of our economy in worse shape than they’ve ever been.
BILL MOYERS: No one I know has a better understanding of the see-saw tension in our history between democracy and capitalism.
Capitalism, you accumulate wealth and make it available. Democracy being a brake, B-R-A-K-E, on the unbridled greed of capitalists. It seems to me that democracy has lost and that capitalism is triumphant -- crony capitalism in this case.
DAVID STOCKMAN: And I think it's important to put the word crony capitalism on there. Because free-market capitalism is a different thing. True free-market capitalists never go to Washington with their hand out. True free-market capitalists running a bank do not expect that every time they make a foolish mistake or they get themselves too leveraged or they end up with too many risky assets that don't work out, they don't expect to go to the Federal Reserve and get some cheap or free money and go on as before.
They expect consequences, maybe even failure of their firm, certainly loss of their bonuses, maybe the loss of their jobs. So we don't have free-market capitalism left in this country anymore. We have everyone believing that if they can hire the right lobbyist, raise enough political action committee money, spend enough time prowling the halls of the Senate and the House and the office buildings, arguing for their parochial narrow interest -- that that is the way that will work out. And that is crony capitalism. It’s very dangerous and it seems to be becoming more embedded in our system.
BILL MOYERS: So many people say, “We've got to get money out of politics.” Or as you said, “Money dominates government today.”
DAVID STOCKMAN: Well look, I think the financial industry, over the two or three year run up to 2010 spent something like $600 million. Just the financial industry, the banks, the Wall Street houses and some hedge funds and others. Insurance companies. $600 million in campaign contributions or lobbying.
That is so disproportionate, because the average American today is struggling to make ends meet. Probably working extra hours in order, just to keep up with the cost of living, which is being driven up unfortunately by the Fed.
They don't have time to weigh into the political equation against the daily, hourly lobbying and pressuring and you know, influencing of the process. So it's asymmetrical. And how do we solve that? I think we can only solve it by -- and it'll take a constitutional amendment, so I don't say this lightly. But I think we have eliminate all contributions above $100 and get corporations out of politics entirely.
Ban corporations from campaign contributions or attempting to influence elections. Now, I know that runs into current free speech. So the only way around it is a constitutional amendment to cleanse our political system on a one-time basis from this enormously corrupting influence that has built up. And I think nothing is really going to change until we get money out of politics and do some radical things to change the way elections are financed and the way the process is influenced by organized money. If we don’t address that, then crony capitalism is here for the duration.
BILL MOYERS: David Stockman, thank you very much for sharing this time with us.
One of journalism's premier business reporters is with me now. Gretchen Morgenson won the Pulitzer Prize for her fearless exposés of Wall Street's dirty secrets and reckless behavior. In her “Fair Game” column for The New York Times she digs into some of the most disturbing and complex scandals of our time. Her recent book with Joshua Rosner on crony capitalism at Fannie Mae is called Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon. Welcome.
GRETCHEN MORGENSON: Thanks, Bill.
BILL MOYERS: You just heard David Stockman say it could happen again. Do you think it could happen again?
GRETCHEN MORGENSON: It will happen again and the unfortunate fact is we did not fix the problem. The Dodd-Frank legislation which was supposed to be the fix-it for the enormous crisis that erupted in 2008 failed in so many ways to really address the major issues, the most important being too-big-to-fail, did virtually nothing to cut these big and impossible to manage banks down to size.
But there are other elements to the Dodd-Frank law that I think are also problematic. Now we have hundreds of rules being written by the regulators and although it might make sense that they know what they're doing a little bit more than maybe your, you know, average lawmaker, what it did was it gave the financial services industry two bites at the apple. They can lobby their lawmaker when Dodd-Frank is being written and now they are lobbying strenuously the regulators to make sure that the rules are written in a not too, you know, onerous fashion.
I mean, I think that you see this in the length of time, Bill, that it's taking to write these rules, tremendous jockeying back and forth by the financial services industry which of course has billions of dollars to spend on lobbyists to go and influence the outcome.
And so when you see, you know, the Commodity Futures Trading Commission trying to write rules about derivatives that would bring them into the open, that would make a failure like that almost brought AIG to its knees, make that a thing of the past you see a lot of the big Wall Street banks lobbying heavily to keep these things in the shadows.
BILL MOYERS: Listening to both David Stockman and you, it. After what we've been through since 2008, the millions of lost jobs, the millions of foreclosed homes, the people whose pensions have been shrunk, you both are saying not only can it happen again, but it will happen again. I mean, I have to tell you it boggles my mind.
GRETCHEN MORGENSON: When I was living through it, watching it in terror literally at my desk at The New York Times because it really was on the precipice, there we were, I thought to myself, "We will address this because this is so frightening and so scary and so damaging to this country." And I thought we will address it because this is the big one.
This is the big crisis that we've been leading up to. Long-Term Capital Management didn't really destabilize the system, the internet bubble didn't really destabilize the system, this was the big one. And yet the response was so lame and so ineffectual that it absolutely will happen again.
BILL MOYERS: What's the answer? Why don't we have the reform we want?
GRETCHEN MORGENSON: Well, a big part of it is the money problem, that money -- the big powered, moneyed institutions are in control in Washington, there's no doubt about it. You and I don't have a lobbyist and so we are not represented in this melee, call it what you will, that happens, you know, when laws are created.
There is no balance here. There's a drastic imbalance between the people who created the problem and the people who had to pay the problem and it has not been addressed.
What David Stockman pointed out which is extremely important to remember in this whole thing is the rise of the financial institutions as a percentage of GDP in this country, as a percentage of as he said the resources that are put into this business. They have become all powerful.
These people have gotten themselves in such a position of power because they are financial intermediaries, because they are -- they affect every American with their business, they are able to much more than say the steel industry or the coal industry or the car industry manipulate the dialog. They can persuade the treasury secretary that, if you don't bail me out Armageddon is going to happen and everyday people will lose access to their money and the world will come to an end.
BILL MOYERS: Right now we're hearing a lot about how Dodd-Frank is actually costing the banking industry. I think losing about $3 billion in the third quarter. Was Dodd-Frank responsible for that?
GRETCHEN MORGENSON: I think that the small banks might have a point in that, in making that argument. The small banks that, by the way, did not create the problem, they're being penalized just like the Main Street people are because they have to now step up and do these new regulations that are quite costly for a small to midsize institution.
The big banks really don't have increased costs to that degree because they already have a huge compliance effort. They have a huge regulatory effort already. So it might be additional cost, but for them it's not as large as it would be for a small institution.
Again, this is the same imbalance, the same unfairness where a small institution that did nothing wrong now has to pay the price just like the taxpayers who did nothing wrong now have to pay the price while the big boys, you know, can complain about it, hire their lobbyists to do try to do something about it. I really discount a lot of the talk about how expensive Dodd-Frank is, particularly from these big institutions because they should really sit down and shut up.
BILL MOYERS: Yes, I don't think they're going to but I think that's good advice. You do think as I do that Dodd-Frank is just too complex for effective enforcement, right?
GRETCHEN MORGENSON: Yes, you know that Glass-Steagall was 34 pages long.
BILL MOYERS: 34 pages?
GRETCHEN MORGENSON: The act that protected Americans from rapacious bankers for almost 70 years was about 34 pages long.
BILL MOYERS: And Dodd-Frank is 2,300 pages --
GRETCHEN MORGENSON: Way too complicated, all kinds of loopholes, right? You know, the more complex a law is the more you can probably finagle around it.
BILL MOYERS: Why should middle class people on Main Street care about how banks are regulated? What difference does it make to them?
GRETCHEN MORGENSON: It makes a tremendous difference, Bill, because it affects every part of their lives. When they have to pay higher fees to get access to their money that's a cost they can ill afford. When banks are luring them into loans that are poisonous and toxic, that are designed to make the bank money and designed not to help the borrower, that is a real concern.
GRETCHEN MORGENSON: It could not be more important to rein these institutions in because they affect every piece of your life. They affect your retirement, they affect your everyday expenses, whether you can put food on the table for your family.
They permeate your life, and so the degree to which they are making it more onerous to borrow is a huge -- has huge consequences.
BILL MOYERS: Since you've been covering capitalism, business and finance what's been the biggest change you've seen?
GRETCHEN MORGENSON: Previously I believed that bankers that presided over this kind of a train wreck would have wandered away from the scene, tail between their legs, ashamed, or the regulators would have cleaned house, fired the management, clawed back their compensation.
We've seen none of that in 2008. Did the U.S. government replace any of these managements? No. Did the U.S. government claw back any of the money that these people made when the boom was going on which we now all know was a phony boom and so therefore that was phony money that they earned during those years.
We also didn't have a penalty, there were no penalties paid except by the innocent taxpayers. There were no penalties paid by the people who created the crisis.
BILL MOYERS: Yeah, I read in one of your columns not too long ago that if a CEO is indicted, the penalties he may have to pay or even the cost of his lawyer -- he doesn't pay.
GRETCHEN MORGENSON: The director's and officer's insurance often pays for these costs. The company many, many times pays for these costs. Angelo Mozilo is a perfect example, the former chief executive, co-founder of Countrywide, one of the most toxic lenders out there, really has created huge problems for especially minorities in this country.
He was charged with insider trading by the SEC, they settled the case. He didn't admit or deny guilt. All he paid was $22.5 million to civil penalties in the case. He sold stock worth more than $500 million over a period of years at the end of the boom. We are talking about a cost of doing business, something that he has no trouble paying. He happily wrote that check.
BILL MOYERS: What do you think about the SEC's, the Securities and Exchange Commission's, performance since the meltdown?
GRETCHEN MORGENSON: I think they have not been aggressive enough in going after compensation of these executives. I do think that they're understaffed, undermanned. They're always fighting for money.
They have gone after some very large insider trading cases, but again nothing to do with the crisis. There has been a resounding silence, Bill, from the prosecutorial function in this country to this crisis. There has been no one gone to jail from, that was really involved at a high level at one of these big mortgage companies.
BILL MOYERS: What did you learn about crony capitalism in doing “Reckless Endangerment” based upon the mortgage industry business?
GRETCHEN MORGENSON: What I learned was going back in time and examining Fannie Mae and as you know that's the company that doesn't make mortgages, but it buys mortgages and it guarantees them. So it is a huge player in this business.
That was really the quintessential crony capitalism, that company. They learned how to manipulate their regulator, to neutralize their regulator, to manipulate Congress, throw money around. They really told, almost showed Wall Street how to do it, they gave them a playbook. And what they did was they wrapped themselves in the American flag of home ownership so that they were impervious for many critics.
Fannie Mae, who used its implicit government guarantee for its own purposes, it was able to borrow money at a far cheaper rate than in any other financial company. And that subsidy, it took one third of that, billions of dollars every year, for itself.
So it really taught Wall Street how to be the quintessential, you know, crony capitalist. How to use your influence, how to use your money to buy protection for yourself on Capitol Hill and to manipulate the dialog so that there were no critics, no criticism of what you do, this whole idea of this financial services industry having to be protected.
Now, of course we know that Fannie and Freddie are into the taxpayer for $150 billion and no end in sight. So we know how that movie ends. And yet that is the practice and it continues.
BILL MOYERS: The question is to me why don't we put those toxic twins, as you call them, out of business, close them down?
GRETCHEN MORGENSON: Well, because they're the only game in town right now for people who need to get a mortgage. And people need to get mortgages. They move, they get a new job. There does need to be the opportunity for movement in mortgage world and that’s -- they're the only game in town because banks are loathe to lend.
BILL MOYERS: Without -- they’re loathe to lend our money back to us, right?
GRETCHEN MORGENSON: Correct. Absolutely.
BILL MOYERS: Yeah, we bailed them out and they won’t put capital where it should go, to small businesses, to individuals who need it.
GRETCHEN MORGENSON: Absolutely, that's again here we are back at the same question. These people who drove us into the ditch, got our money to save themselves are now not lending to the degree that they ought to.
BILL MOYERS: Which brings me to what you described in your column at the end of last year, the ugliest paradox of the financial crisis which you say became clear in 2011.
GRETCHEN MORGENSON: Well, as you know, Bill, we're only really starting to learn the full extent of what went on during the mortgage boom. But one element of it that I find especially troubling is the degree to which minority borrowers, first time borrowers, first time homeowners, immigrants, the least sophisticated people in this country, the very people that the government said they wanted to help become homeowners, to get their piece of the American dream -- those people were targeted by these banks because they knew they were unsophisticated.
They were targeted with the most expensive, the most punitive and the most toxic loans bar none. And to me that is such a failure of this country. If we are going to encourage home ownership, let's not do it on the backs of the very people that we are supposedly trying to help, the most vulnerable people in this country have been hurt the worst by this crisis, families wrecked, homes lost. They were abused in this entire mania and people profited from that abuse and I think that's wrong.
BILL MOYERS: Well, as you know the pushback is, well, they shouldn't have been encouraged to buy a home, but they should have had the common sense not to buy a home without knowing more about what they were getting into.
GRETCHEN MORGENSON: That's a good argument. But when you talk to people who English is their second language and when you talk to people who have never, you know, had an investment account, who really don't even maybe have a bank account and you've got some slick mortgage broker saying, "Oh, just sign here on the dotted line, everything's going to be fine," you can see how that goes awry. I mean, I’m a sophisticated person and, you know, I have to ask multiple questions if I’m looking at one of these mortgage documents.
BILL MOYERS: What makes you angry about this?
GRETCHEN MORGENSON: Well, it makes me angry because there has been no penalty. There has been no price for the people who created the mess. I thought there would be some sort of solution, some addressing of the problem, some punishment, penalty. Whatever you want to call it.
Now with the benefit of hindsight, you know, three, four years later nothing was done and so I am angry that nothing was done because that was one hell of a crisis and that was big enough for me, thank you very much, to learn the lesson of what we must do going forward to prevent another such thing.
And yet we didn't and that makes me angry because I have a son and he is going to live through this and he is going to pay the price for this. Not to mention, you know, everyday people who are going to live through it maybe within ten years. I don't think it's so far off that we're going to have another crisis.
It's really interesting, that we're still archeologists. I'm a journalist but I feel like I'm an archeologist digging in this crisis and still coming up with shards of pottery that I dust off and then I can fit into the puzzle. Because nobody wanted anyone to understand what really happened.
And there has been a tremendous, you know, attempt by the powers that be and I'm talking about the United States government, the Federal Reserve, the Treasury, banks, private institutions, as well, to prevent us from really learning the full extent of this. And so here we are, we're still uncovering things that we didn't know back in 2008, 2007. So no, I don't think anything significant has changed.
BILL MOYERS: Is there anything you see that makes you a little optimistic?
GRETCHEN MORGENSON: What makes me optimistic is that people are understanding this now, that Main Street gets it, you know, the thing that I found compelling about the Occupy Wall Street movement was that it seemed to be tapping into this anger. Previous to that there was just this kind of silence, you know, people were maybe too flabbergasted by what had gone on.
This is a very complex crisis that was built over a long period of time. You have to connect the dots to understand it. And so we're writing history and helping people to understand what happened to them.
But we still don't know it all and until we do we can't really protect ourselves going forward. But I do get a sense that there is anger, that there is rage and that maybe, maybe, just maybe somebody in Washington might pay attention to that.
BILL MOYERS: The book is Reckless Endangerment, Gretchen Morgenson with her colleague, Joshua Rosner. Thank you, Gretchen, for being with us.
GRETCHEN MORGENSON: It is my pleasure, Bill.
BILL MOYERS: That’s it for this week. When we continue our investigation of politically engineered inequality next week, you’ll meet John Reed, the bankers’ banker who was there when Washington closed its eyes to the Wall Street follies.
JOHN REED: It wasn't that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did. And then the whole system came down.
BILL MOYERS: And former Senator Byron Dorgan, who saw it all coming.
BYRON DORGAN: (Speaking on the Senate Floor) And we are deliberately and certainly with this legislation moving towards inheriting much greater risk in our financial services industries.
BYRON DORGAN: If you were to rank big mistakes in the history of this country, that was one of the bigger ones.
BILL MOYERS: And check out our new website, BillMoyers.com. And read there an interview with Ellen Miller of the watchdog group the Sunlight Foundation.
See you online at BillMoyers.com, and see you here, next time.
BILL MOYERS: This week on Moyers & Company.
PAUL PIERSON: I think a lot of people know that inequality has grown in the United States. But saying that inequality has grown doesn't begin to describe what's happened.
JACOB HACKER: It's not the haves versus the have-nots. It's the have-it-alls versus the rest of Americans.
BILL MOYERS: And…
LINNEA PALMER PATON: This is supposed to be a government run by the people and if our voices don’t matter because we’re not wealthy, that’s really unacceptable and it’s dangerous.
BILL MOYERS: Welcome. I’m glad we could get together again. I look forward to your company from week to week – here and online at BillMoyers.com. It’s good to be back.
We begin with the question that haunts our time: Why, in a nation as rich as America, has the economy stopped working for people at large even as those at the top enjoy massive rewards?
The struggle of ordinary people for a decent living, for security, is as old as the republic, but it’s taken on a new and urgent edge. Instead of shared prosperity our political system has now produced a winner-take-all economy.
BUD FOX: How much is enough Gordon?
BILL MOYERS: Hollywood saw it coming.
GORDON GEKKO: The richest one percent of this country owns half our country's wealth: five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows' idiot sons and what I do -- stock and real estate speculation. It's bullshit. You got 90 percent of the American people have little or no net worth. I create nothing; I own.
We make the rules, pal. The news, war, peace, famine, upheaval; the price of a paper clip. We pull the rabbit out of the hat while everybody else sits out there wondering how the hell we did it. Now, you're not naive enough to think we're living in a democracy are you, Buddy?
BILL MOYERS: That, of course, was Michael Douglas as the wheeler-dealer Gordon Gekko, responding to his protégé, played by Charlie Sheen in the movie Wall Street, 25 years ago!
Back in the late 80s, the director Oliver Stone, himself the son of a stockbroker, saw something happening before it reached the mainstream. Before the rest of us knew what hit us. That little speech about the richest one percent and the demise of democracy proved to be prophetic. Flesh-and-blood Americans are living now every day with the consequences.
AMANDA GREUBEL: My name is Amanda Greubel. I am 32 years old, born and raised in Iowa. I've been married for ten years today to my high school sweetheart, Josh. He’s the High School Band Director in the same district where I am the Family Resource Center Director. We have a five-year old son Benen, and our second child on the way in December. Like a lot American families, we have a lot of debt - mortgage, two vehicles, and because we both have masters degrees, a lot of student loan debt.
BILL MOYERS: Amanda Greubel was invited to testify last summer at a Senate hearing on how Americans are coping in hard times. When the state cut funding for local school districts, Amanda Greubel and her husband feared they might lose their jobs. At the last minute, they were spared, although her salary was reduced by $10,000.
AMANDA GREUBEL: $10,000 might not seem like a lot to some people, but that loss of income required a complete financial, emotional and spiritual overhaul in our family. […] It means that even though I would rather shop at local grocers, I shop at Wal-Mart for groceries because that's where the lowest prices are. Sometimes the grocery money runs out before the end of the month, and then we have to be creative with what's in the cupboard - and that was a fun challenge at first, but the novelty wears off after a while. […] It means that most of our clothing comes from Goodwill, garage sales, and the clearance racks because we try not to spend full-price on anything anymore. It means that when my son brought me the snack calendar for his classroom and I saw that that month was his week to provide snacks for 15 classmates, I was scared because I knew that it would stretch the grocery budget even further. And we didn't have roast beef or pork chops in our house that month. […] This past spring our son was hospitalized for three days, resulting in $1000 in out-of-pocket medical expenses beyond what our insurance covered. Then a problem with our roof required $1500 in repairs. Even though we'd been setting aside money every month for emergencies like that, we still didn't have enough. And so we’ve spent the last few months catching up.
And finally, this change in our finances meant giving very serious consideration to whether it was even a good idea for our family to have another child. Thankfully, life has a way of reminding us through our son's brief illness and hospitalization that some things are more important than money and that we’ll figure it out.
BILL MOYERS: She told the senators how the sour economy has affected her students and their parents.
AMANDA GREUBEL: If my family with two Master's degrees is struggling, you can imagine how bad it is for other people.
The past few years our school district has seen our percentage of students on free and reduced lunch increase steadily. In a community that has a reputation of being very well off, over 30 percent of our elementary level students qualified for that program this year. I’ve sat with parents as they’ve completed that eligibility application, and they cry tears of shame, and they say things like “I never thought I’d have to do this,” and “I’ve never needed this help before.” They worry that their neighbors will find out and that their kids will be embarrassed. And it’s my job to reassure them that reaching out for help when you need it is no problem – it’s not a shame, it’s not anything to be embarrassed about. […] Kids don't necessarily tell their parents when they're afraid, because they see that their parents are stressed out enough already and they don't want to make it worse. Sometimes their clothing becomes more tattered and we see parents cut the toes off of tennis shoes to accommodate a few more months’ worth of growth, and let those shoes last just a little bit longer. When kids don't have enough to eat or they worry about losing their homes they cannot concentrate on learning their math facts, or their reading strategies. And in some cases financial concerns lead to or exacerbate issues such as domestic violence, child abuse, substance abuse, and physical or mental health conditions. All of the things that are ailing our families right now are so interconnected.
[…] I may have been called on to be the voice of struggling families today, but there are millions more out there who want and need to be heard by you. And I would ask that you not only listen, but that you then come back here and do something. Because it was your commitment and your passion for public service that brought you here in the first place.
BILL MOYERS: Our once and future middle class is in trouble. Their share of the nation’s income is shrinking, while the share going to the top is growing. Wages are at an all-time low as a percentage of the economy, and chronic unemployment is at the highest level since the Great Depression, but the richest Americans now hold more wealth than at any time in modern history.
This gross inequality didn’t just happen. It was made to happen. It was politically engineered by powerful players in Washington and on Wall Street. You can read how they did it in this book, Winner-Take-All Politics, by two of the country’s top political scientists, Jacob Hacker and Paul Pierson.
They were drawn to a mystery every bit as puzzling as a crime drama: How Washington Made the Rich Richer—and Turned Its Back on the Middle Class.
Quote: “We wanted to know how our economy stopped working to provide prosperity and security for the broad middle class.” And that’s what you saw.
PAUL PIERSON: I think a lot of people know that inequality has grown in the United States. But saying that inequality has grown doesn't begin to describe what's happened. The metaphor that we had been using lately is if you imagine a ladder, with the rungs in the ladder, and you think, "Okay, well inequality's growing. So the rungs are getting further apart from each other."
That's not what's happened in the United States. What's happened in the United States is that the top one or two rungs have shot up, you know, into the stratosphere while all the other ones have stayed more or less in place. It's really astonishing how concentrated the gains of economic growth have been.
JACOB HACKER: You know, the startling statistic that we have in the book is that if you take all of the income gains from 1979 to 2007, so all the increased household income over that period, around 40 percent of those gains went to the top one percent. And if you look at the bottom 90 percent they had less than that combined.
And it is not just a one or two year story. I mean, we've seen a terrible economy over the last few years. And the last decade is now being called "The Lost Decade" because there was no growth in middle incomes, there was no, there was an increase in the share of Americans without health insurance, more people are poor. So there was a terrible ten years.
But we were actually looking at the last 30 years, and seeing that the middle class had only gotten ahead to the extent that it had because of families working more hours.
So this is a story that isn't just about those at the top doing much, much better. But is, also, we found, a story about those in the middle not getting ahead, often falling behind in important ways, failing to have the same kinds of opportunity and economic security that they once had.
BILL MOYERS: Let's take a look at just how dramatic the inequality is. You have a chart here. I'm not an astute reader of charts, but this one did hit me. What are you saying with that chart?
JACOB HACKER: It says how much did people at different points on the income ladder earn in 1979 and how much did they earn in 2006 after adjusting for inflation?
It exploded at the top. The line for the top one percent, it's hard to fit on the graph because it's so much out of proportion to the increases that occurred among other income groups including people who are just below the top one percent. So, that top one percent saw its real incomes increase by over 250 percent between 1979 and 2006. Yeah. Over 250 percent.
PAUL PIERSON: And actually, even this graph-- we couldn't find a graph that fully describes it because even this graph actually really understates the story. Because it—
BILL MOYERS: Understates it?
PAUL PIERSON: Understates it.
BILL MOYERS: I mean, this is pretty powerful. When I looked I thought it was a showstopper.
PAUL PIERSON: Okay, so well, if you really if you really want the showstopper you have to go one step further because that big increase is for the top one percent. But the real action is inside the top one percent. If you go to the top tenth of one percent or the top hundredth of one percent, you know, you would need a much bigger graph to show what's happening to incomes for that for that more select group. Because they've gone up much faster than have incomes for just your average top one percent kind of person.
BILL MOYERS: But we've all known for a long time that the rich were getting richer, and the middle class was barely holding its own. I mean, that was no mystery, right?
JACOB HACKER: Oh, it is. It's a mystery when you start to look beneath the familiar, common statement that inequality has grown. Because when you think about rising inequality, we think, "Oh, it's the haves versus the have-nots." That the top third of the income distribution, say, is pulling away from the bottom third.
And what we found is it's not the haves versus the have-nots. It's the have-it-alls versus the rest of Americans. And those have-it-alls, which are households in say the top one-tenth of one percent of the income distribution, the richest one-in-a-thousand households are truly living in an unparalleled age.
Since we've been keeping records on the incomes of the richest from tax statistics in the early 20th century, we never saw as large a share of national income going to the richest one-in-a-thousand households as we did just before the great recession.
Their share of national income quadrupled over this period, to the point where they were pulling down about one in eight dollars in our economy. One-in-a-thousand households pulling down about one in eight dollars in our economy before the great recession began.
BILL MOYERS: You set out to try to solve three mysteries: who done it, who created the circumstances and conditions for the creation of a winner-take-all economy. And your answer to that in one sentence is?
JACOB HACKER: American politics did it far more than we would have believed when we started this research. What government has done and not done and the politics that produced it is really at the heart of the rise of an economy that has showered huge riches on the very, very, very well off.
BILL MOYERS: It's the politics, stupid?
JACOB HACKER: Exactly.
BILL MOYERS: How did they do it?
PAUL PIERSON: Through organized combat is the short answer.
BILL MOYERS: And why did they do it?
JACOB HACKER: Because they could. Because the transformation of political organization, the creation of a powerful, organized business community, the degree to which that was self-reinforcing within both parties has meant that politicians have found that they can on issue after issue cater to the interests of the very well off while either ignoring or only symbolically addressing many of the concerns that are felt by most Americans and get reelected and survive politically.
PAUL PIERSON: If you listen to many public officials over the over the last 20 or 30 years as they've started to recognize that inequality has grown, typically what they'll say is, this is a result just of economic change. It's a result of globalization changes in technology that have advantaged the educated at those with high skills at the expense of the uneducated.
And there, clearly, there is some truth to this story that education matters more in determining economic rewards. But the more we looked at this, the less satisfied we were with that explanation.
That it couldn't explain why the economic gains were so concentrated within a very small subset of the educated people in American society. I mean, 29 percent of Americans now have college degrees. But a much, much smaller percentage of Americans were benefiting from this economic transformation.
BILL MOYERS: Well, as you speak, I can hear all of those free-marketers out they say, "Come on, Piers-- come on Hacker it is the global economy. It's that cheap labor overseas. It's those high technology skills that you say are required, these deep forces that actually are beyond our control, and are making inevitable this division between the top and everyone else." Right? That's what they're saying as they listen to you right now.
JACOB HACKER: We think the story that’s told about how the global economy has shifted clearly matters. But that it doesn’t get to the sort of really powerful role that government played in adapting to this new environment and in changing the well-being of people in the middle and at the top.
PAUL PIERSON: And again, we wouldn't want to say that the kinds of changes that they're talking about don't matter at all. But they still leave open for a country to decide how they're going to respond to those kinds of economic challenges.
And when you look at other affluent democracies that have also been exposed to these same kinds of pressures, who are actually more open -- smaller economies are often more open to the global economy than the United States is -- you don't see anything like the run-up in inequality, especially this very concentrated high-end inequality, in most of these other countries that you see in the United States. Which to us, really, was a very strong clue that we need to understand why the American response to globalization, to technological change has been different than the response of most other wealthy democracies.
JACOB HACKER: So it's one thing to say, "Oh, the rich are getting richer because we have this new global economy."
But how do you explain the fact that we've seen over this period where the rich have gotten richer the tax rates on the richest of the rich come dramatically down. You know, Warren Buffet now says that he thinks he's paying a lower tax rate than the people who work for him do.
PAUL PIERSON: The thing that got us going at the very beginning was the Bush tax cuts.
GEORGE W. BUSH: This tax relief plan is principled. We cut taxes for every income taxpayer. We target nobody in, we target nobody out. And tax relief is now on the way. Today is a great day for America.
PAUL PIERSON: The Bush tax cuts in a lot of ways were written like a subprime mortgage. You know, they were designed to make people see certain things, and not see a lot of the fine print.
JACOB HACKER: Fully 30 to 40 percent of the benefits were going to the very top, of the income distribution. The top one percent. And when you broke it down, it was really the top one-tenth of one percent that did so well because of the estate tax changes, and because of the changes in the top tax rates, the changes in the capital gains taxes. And if you go to 2003, changes in the dividend tax.
I mean, these were all tax breaks that were worth a vast amount to the richest of Americans and worth very little to middle class Americans.
PAUL PIERSON: Within a few weeks after the legislation was passed, we all get a letter that says Congress and the President have given you this tax cut. And then that's pretty much it for the middle class. But for higher income groups, the further forward you go in time, the bigger and bigger the benefits get. So it was really designed to front-load the relatively modest benefits for the middle class, and to back-load the benefits for the wealthy.
JACOB HACKER: So why? Why do the winners get policies that make their winnings even larger? You know, this is not a trivial change. If you say from the mid-90s to 2007, those top 400 tax payers, they've seen their tax rates decline so much that it's worth about $46 million for every one--
BILL MOYERS: For every--
JACOB HACKER: Of those 400 tax payers. So it's-- the numbers are staggering. When you start to look within the top one percent, and look at what government has done to help those people out, through taxes, through changes in the market, financial deregulation and the like, and through protecting them from efforts to try to push back.
BILL MOYERS: Protecting them?
JACOB HACKER: Well, I think this is something that really needs to be understood. You know, these large shifts in our economy had been propelled in part by what government has done, say deregulating the market, the financial markets, to allow wealthy people to gamble with their own and other peoples' money, and ways to put all of us at risk, but allow them to make huge fortunes.
And at the same time, when those risks have become apparent, there has been a studious effort on the part of political leaders to try to protect against government stepping in and regulating or changing the rules.
BILL MOYERS: You write, we have a government that's been promoting inequality, and at the same time, as you just said, failing to counteract it. This has been going on, you write, 30 years or more. And here's the key sentence: Step by step, and debate by debate, our public officials have rewritten the rules of the economy in ways that favor the few at the expense of the many.
PAUL PIERSON: In some ways, the fundamental myth that we're trying to break out of is the idea that there's something natural out there called "the American economy" that is prior to government, prior to politics. And that government, if it's involved at all, is only involved sort of at the end of the day, maybe tidying things up around the edges, or redistributing money from some people to another.
And I think the financial crisis has been a rude awakening for people who viewed the economic world that way. It's now, I think, very clear in retrospect that the decisions that leading public officials made over a period of decades helped to get us to a point where a financial crisis could be so devastating to all Americans.
BILL MOYERS: How can this happen? How could Washington turn its back on the broad middle class to favor a relatively few at the top in a democracy?
JACOB HACKER: What has really changed is the organization of American politics, particularly the organizations that represent the deepest pocketed members of American society. What we've seen as an organizational revolution over the last 30 years that has meant that business, and Wall Street, and ideological conservative organizations that are pushing for free market policies have all become much more influential.
And at the same time, a lot of the organizations that once represented the middle class, labor unions, broad-based civic organizations and, sort of, organizations at the local and grassroots level, including social movements, have all lost enormous ground.
And so it's that imbalance, that shift, I think, that is the sort of underlying pressure that plays out in our politics today. The way we describe it in the book is as if the ecosystem of American politics has changed. And everyone in American politics, Democrats, Republicans, liberals, conservatives has had to adapt to this new world where money matters much more in our politics, and where groups representing business and the wealthy are much more powerful than in the past.
BILL MOYERS: And you don't beat around the bush. You say, quote, "Most voters of moderate means…have been organized out of politics, left adrift as the foundations of middle class democracy have washed away.”
JACOB HACKER: Yeah, I mean, if you look at the history of American democracy it is about a broadening of our understanding of political equality to incorporate African Americans and women and ultimately to also incorporate the idea that large inequalities of property were a threat to democratic equality. So FDR during the Great Depression famously said that political equality was meaningless in the face of economic inequality.
So we now, I think, understand that inequality of income and wealth is part of a capitalist society, but it can't overwhelm our democracy. And what we've seen in the last 30 years is a gradual erosion of the firewalls that protect our democracy from the inequalities that are occurring in the market. Money has come into politics much more.
And the power that people have in the market is being used more and more in politics as well. And that's a concern because Americans have very complex views about equality, but they all agree in this basic idea that as Thomas Jefferson famously said, "All men are created equal."
And he meant men probably, but you know, the modern understand of that phrase, we believe that people whether they're rich or they're poor, whether they have lots of property or not, whether they're in, on Wall Street or off, they should have equal potential to influence what government does. Anybody who looks around at our government today cannot believe that's the case or that we're even close to that.
PAUL PIERSON: Well certainly you just have to look at recent headlines to see a Washington that seems preoccupied with the economic concerns of those at the top and is resistant in many cases to steps that are clearly favored by a majority of the electorate such as wanting to increase taxes on the very well-to-do, letting the Bush tax cuts for the wealthy expire as if you want to do something about the deficit. That’s the single most popular proposal for doing something about the deficit would be to let the Bush tax cuts for the wealthy expire. And yet that gets nowhere in Washington.
JACOB HACKER: You know, there is an organized, powerful constituency for deregulation, for high end tax cuts, for policies that are neglecting some of the serious middle class strains. And there just isn't anything of comparable size or power on the other side.
And that has pulled Washington way toward the concerns of the most affluent, most privileged members of our society and led them to often neglect the real struggles that Americans are facing during this economic crisis, struggles that are magnified versions of what Americans have been going through for 25 years or so.
BILL MOYERS: There was a time when we were sure that a strong middle class was the backbone of a democracy. And there was a time, after the second World War when I was a young man when incomes actually grew slightly faster at the bottom and the middle than at the top, is that right? Do your figures support that?
PAUL PIERSON: Yes, they do. And we describe that period after World War II, which lasted for about 30 years as being a country which we labeled Broadland. And—
BILL MOYERS: Broadland?
PAUL PIERSON: Broadland. And I think it's most clearly captured by that old idea that a rising tide lifts all boats.
Everybody's income is going up at the roughly the same rate, slightly faster actually towards the bottom of the income distribution than towards the top, but everybody's incomes were going up. And it's important to understand, so this wasn't some egalitarian fantasy world. It wasn't Sweden.
It was the United States, recognizably the United States with significant inequalities of wealth, but everybody was participating in prosperity and seeing their incomes rise. And then after the mid 1970's we start moving towards a distribution of income that looks more like that of a third world oligarchy. It looks more like Mexico or Brazil or Russia. Income inequality that statistics on income inequality now suggest that inequality is higher in the U.S. than it is in Egypt. And that’s quite a journey from where we were when I was growing up.
JACOB HACKER: Right now I think we're seeing the kind of bitter fruit of winner-take-all politics because this financial crisis was not an act of God or work of nature. It was brought on by poor decisions that were made in Washington and on Wall Street. Yes, there's a global dimension to this, but a big part of it was failures of domestic policy. You know, if you look to our northern neighbor, Canada, it had nothing like the same degree of banking crisis the United States did. And that's partly because it had much more effective regulations of the financial sector. You know, over this period that we saw leverage and speculation increasing on Wall Street, Washington, both Democrats and Republicans, were trying as hard as they could to allow Wall Street to do even more.
BILL MOYERS: So the winner-take-all politics has produced a winner-take-all economy? Right?
JACOB HACKER: Yes.
PAUL PIERSON: Yes.
BILL MOYERS: And the winners are?
JACOB HACKER: The winners are those who've made out so well in this new economy, the very well off and financial-- and people in the highest reaches of finance and corporate executives suites.
BILL MOYERS: And the losers?
PAUL PIERSON: Well, the losers are, I think, almost all of us.
I think almost all Americans lose from the shift toward a society in which rewards are so narrowly concentrated on a small segment of the population.
I was talking yesterday evening with a friend of mine who spends much of his time in Mexico who was describing a society in which a small group of wealthy people are protected by guns mostly from the rest of the population and dart from one protected location to another protected location completely separate from the rest of society.
We're not there yet but we've moved a long way down a road in which there's just a sharp social, economic, cultural separation from the vast bulk of Americans and a small astonishingly successful financial elite. And I don't think that -- I think most Americans would consider that not to be an improvement. They would consider themselves to be losers from that.
JACOB HACKER: And there's no sign that the sort of massive concentration of the gains of the economy at the very top is slowing down. In fact, this downturn has been remarkable in the degree to which those at the very top seem to have weathered it pretty well. Profits are still very high.Those who are on Wall Street have recovered thanks to a massive government bailout.
BILL MOYERS: Taxpayers put it up. I mean, they're spending taxpayer money.
JACOB HACKER: Yes, yes. And so we've seen the economy over 30 years very consistently shift in this direction. And what I think has not happened and what concerns us greatly is a kind of real undermining, deep undermining, of the operation of our democratic institutions.
I mean, we're describing a massive erosion, but the question is could we see those democratic political institutions really cease to function effectively in the future if we have a society that continues to tilt so heavily towards winner-take-all. And that's why we wrote the book because, you know, Walter Lippmann back in the early 20th century said the challenge for democratic reform is that democracy has to lift itself up by its own bootstraps.
And we're, we are deep believers in the ability of American democracy to reform itself, of the strength of our democratic institutions. But they're in very serious disrepair right now. And we've seen in recent political fights a sort of paralysis and a broad loss of faith in government. And that sort of secession of the wealthy from our economic life that we've already started to see could be matched by a secession of them from our political life and a sort of loss of that broad democracy that was characteristic of mid-20th century. That's the greatest fear that we have.
BILL MOYERS: Would you say we still have a middle class country?
PAUL PIERSON: That's--
BILL MOYERS: Wow.
PAUL PIERSON: No, no, I wouldn't, I wouldn't.
BILL MOYERS: You're hesitant.
PAUL PIERSON: If you asked me if you asked me that point blank, I mean--
BILL MOYERS: Point blank, Paul, do we still have a middle class country?
PAUL PIERSON: I would say no. I mean, obviously there is still something there is still something that we would recognize as a middle class, it's still probably the biggest segment of the population. But in terms of its weight in the society, its ability to produce a society and reproduce a society that is oriented around the needs and concerns and opportunities of the middle class, I don't think that we live in that country anymore.
JACOB HACKER: There was a poll done in 2010 that asked Americans whether the federal government had helped a great deal the following groups: large financial institutions and banks, 53 percent of Americans said they'd been helped a great deal.
What about large corporations? 44 percent of Americans said they'd been helped a great deal. Then they asked, well, has the federal government helped the middle class a great deal? And do you want to guess what percent of Americans said that they'd been helped a great deal-- the middle class had been helped a great deal? Two percent.
BILL MOYERS: Two percent?
JACOB HACKER: Two percent.
BILL MOYERS: Well, this is—
JACOB HACKER: And so it's just a remarkable sense that Washington isn't working for the middle class. And after writing this book I think Paul and I feel as if that assessment, while excessively harsh, is grounded in a reality that Washington isn't working well for most Americans.
BILL MOYERS: Did either of you happen to catch the Senate hearings last summer when a procession of ordinary Americans came and testified about what was happening?
AMANDA GREUBEL: We did everything we were always told to do to have the American dream. We finished high school, we went to college, we got married, we work hard, we pay our bills. We have no credit card debt. We waited to have children until we believed we were ready. We both got graduate degrees to be better at our jobs and make ourselves more marketable and increase our worth as employees. We volunteer, we donate to help those in need, and we vote. We did everything that all the experts said we should do, and yet still we’re struggling. And when you work that hard and you still feel sometimes like you’re scraping, it gets you really down really quick.
JACOB HACKER: When I hear stories like that I think, what is wrong with the priorities of our society that we cannot figure out how to translate our great wealth, our ingenuity, the hard work of our citizens, into a better standard of living that is shared broadly across the population? That’s a fundamental thing that a well-functioning democracy should do.
BILL MOYERS: And you say we are way behind in mobility. Behind Australia, Norway, Finland, Germany, France, Spain, and Canada. We are way down the list in terms of social mobility. Am I reading you right?
JACOB HACKER: Over this period in which those at the very top have done better and better the chance of climbing up the economic ladder hasn't grown at all, it may have actually declined. And that is reflected, I think, in a sense of pessimism that you see among many middle class Americans about whether the American dream still holds true.
At the individual level Americans are extremely optimistic. And if you ask them, "Will you achieve the American dream?" Most Americans say yes. But at a collective level when you ask people, "Does the American dream still hold true?" We're seeing in surveys for the first time that only about, you know, half of Americans are agreeing that the American dream still holds true. And that's remarkable.
BILL MOYERS: What's the practical consequences of that? Of giving up faith and hope in that dream?
JACOB HACKER: The fact is that for most middle class and working class Americans the politics seems increasingly removed from their everyday experience and their life. And there is a current of distrust and anger towards Washington is that is so deep right now.
AMANDA GREUBEL: When we turn on our TV's, our radios, or pick up our newspapers, we read about what is going on in our federal and state governments, and we start to believe that you don’t care about us. We hear that corporate welfare continues and CEO's get six-figure bonuses at taxpayer expense, and we wonder who you’re working for. And we look across the kitchen table at our families eating Ramen noodles for the third time this week and wonder how that’s fair. We read that the wealthy get bigger tax breaks in hopes that their money will “trickle down” to us, then we turn the page and read about how our school districts are forced to cut staff again. We know that money talks around here, and that means you don't hear us.
JACOB HACKER: That is one of the big changes that occurs over this period. Money becomes more important for campaigns and it also becomes much more important in terms of lobbying, which in some ways is the more important way that money changed American politics. It's really the development of lobbying over this this last 25, 30 years that stands out as the most dramatic role of money in American politics.
We tell the story in the book of the Tax Reform Act of 1986, because this was one of these great examples when the lobbyists were overcome. You know, the Gucci Gulch right outside the Senate chamber where the well-heeled lobbyists attend to members of congress. Well, Gucci Gulch was a place of, not of celebration, but of despair after 1986 because all these tax loopholes were closed, rates were brought down in a way that was actually making the tax code more equitable. And that was considered to be a big step forward for the public interest.
Well, a few years later lobbyists had written a lot of these loopholes back into the tax code. Ten years later, you know, you could hardly see any traces of the 1986 Tax Reform Act. Almost all of the good government public interest reforms that were put into the tax code in 1986 overcoming the lobbyists have been put back in, have been overwhelmed by the day in, day out lobbying to get those tax provisions right back into place.
BILL MOYERS: Quite a cycle, I mean, if you're creating a winner-take-all economy the winners have more money to contribute to the politicians, who turn it into a winner-take-all politics. I mean, it just keeps—
PAUL PIERSON: Right. It is the story that we try to tell in this book that there has been a 30 year war in which the sound of the voice of ordinary Americans has been quieter and quieter in American politics and the voice of business and the wealthy has been louder and louder. Many people, I think, read this book and think it's a pessimistic book, that it's grim reading and there are ways in which that's true.
But Jacob and I genuinely believe that it's an optimistic story compared with the story that we're typically told about what's been happening to the American economy. Because what we're typically told is there's nothing you can do about this, that it's just an economic reality, there's no point in blaming any political party.
And I think the main punch line of our story and the optimistic message is that politics got us into this mess and therefore potentially politics can get us out of it.
BILL MOYERS: But if both political parties are indebted to the winners where do the losers find an army to join?
JACOB HACKER: When citizens are organized and when they press their claims forcefully, when there are reformist leaders within government and outside it who work on their behalf, then we do see reform. This is the story of the American democratic experiment of wave after wave of reform leading to a much broader franchise, to a much broader understanding of the American idea.
In the mid-20th century we saw a period in which income gains were broadly distributed, in which middle class Americans had voice through labor unions, through civic organizations and through, ultimately, their government. We've seen an erosion of that world, but just because it’s lost ground doesn't mean it can't be saved. And so in writing this book we were hoping to sort of tell Americans that what was valuable in the past could be a part of our future.
BILL MOYERS: Jacob Hacker and Paul Pierson, thank you.
PAUL PIERSON: Thank you so much.
JACOB HACKER: Thank you.
BILL MOYERS: By coincidence I first met with Jacob Hacker and Paul Pierson on the very day Occupy Wall Street had sprung up in lower Manhattan. And I wondered, as so many others did, were we seeing the advance guard of a movement by organized people to challenge the power of organized money? Well, it’s still too soon to know. But in the weeks that followed, every time we went down to the encampment, there was no mistaking the message.
LINNEA PALMER PATON: I don’t have thousands of dollars to go buy myself a lobbyist to lobby for my views, but corporations do.
BILL MOYERS: Linnea Palmer Paton is 23 and an Occupy Wall Street Volunteer.
LINNEA PALMER PATON: This is supposed to be a government for the people, run by the people and if our voices don’t matter because we’re not wealthy, that’s really unacceptable and it’s dangerous.
HERO VINCENT: My name is Hero Vincent, I'm 21 years old. I’ve been here since day one. My parents were foreclosed on, my father’s been unemployed a couple of years. My mother was the only one taking care of the family for a while. I’ve been working since I’ve been 14 years old, you know, trying to put food on our table, trying to help out with the bills. So all these circumstances-- my sister is in college and she-- we can barely afford it, you know. And so it brought us here. The struggle brought us to this occupation, this day, this moment.
[NATSOT]: It ain’t hard to occupy if you’re set on freedom.
BILL MOYERS: Amin Husain is a former corporate lawyer. He’s now an artist who has become one of the many organizers of Occupy Wall Street.
AMIN HUSAIN: This connection between government and state regulating money and the flow of money at the expense of 99 percent of the population is untenable and it’s no longer being accepted. There’s been a shift in the way that people think of themselves in this political process. That there has been a level of empowerment. But this movement is about transforming society.
WOMAN AT PROTEST: I just need to interrupt one second and say you’re doing a great! I love you. All of us who are sleeping at home, we’re writing letters, we’re thinking about you.
AMIN HUSAIN: Thank you, thank you. I really appreciate it.
WOMAN AT PROTEST: We’re changing our bank accounts!
YESENIA BARRAGAN: My family’s home was almost foreclosed in Hackensack, NJ. First by Providian Bank, then by Bank of America, then Chase. The names changes. And we were almost homeless.
BILL MOYERS: Yesenia Barragan is working for her doctorate in Latin American history at Columbia University.
YESENIA BARRAGAN: We were able to gather enough resources, enough money within our family to save the house. So we like to say that we were the lucky ones. And I’m basically here because I don’t want to live in a world where there are lucky ones and unlucky ones.
DANIEL LYNCH: My name is Daniel Lynch, I live in Manhattan. And in my spare time I try to trade stocks. I might even be center-right! And I still support this, and I want people to know that, right, 99 percent exactly, right? I’ve been worried for a long time about problems with wealth inequality in the country, income inequality, and I just wanted to throw my support a little. I don’t march, I don’t carry a sign. But I come down at night I talk to some people.
I believe in capitalism, I believe in capital markets. But unchecked like this, especially the way we have estate taxes, income taxes, it subverts capitalism, it becomes feudalism. Owners of capital are winning so much more than laborers, right capital it has no roots, right? To just deny that that’s happening and not have a little bit of an activist tax policy about it, I think is naïve, it’s destructive, and it’s just absurd.
NELINI STAMP: My name is Nelini Stamp, I’m 24 years old.
BILL MOYERS: Nelini Stamp is a community organizer. She joined Occupy Wall Street on its first day.
NELINI STAMP: I’ve been fed up with having to worry about living pay check to pay check because of corporate greed and because we don’t have a very high minimum wage in New York. I really just wanted to take a major leap in fighting back.
I think that we need to, first of all, have public financing of elections. That is a huge deal one of the reasons is why corporations-- because there’s an unlimited amount of donations that they can give to political campaigns. And it’s about time we all stand up and take this back.
TYLER COMBELIC: I found my voice. I’ve been very apathetic, very cynical of the system that: do I matter? Do I matter to politicians? Do I matter to government when policies are being made?
BILL MOYERS: Tyler Combelic is a volunteer with the media outreach team.
TYLER COMBELIC: Personally, I want to see money out of government. I’m a very big proponent of campaign finance reform, of limiting the role of lobbyists, and limiting the role of corporate personhood because I feel right now, who has the largest war chest is the determiner of who’s going to be elected for a specific office or what kind of laws are going to be passed by Congress. And that corporatist-type of government is not what the United States is supposed to be.
MAN AT PROTEST: You got a better chance of being an organ donor than seeing any retirement money!
PETER CRAYCROFT: I think this is a perfect kind of forum for us all to come and talk about--
STEPHEN HAYS: Back and forth.
PETER CRAYCROFT: Yeah. I’ve seen many souls changed in the last three days.
STEPHEN HAYS: Really?
PETER CRAYCROFT: Yeah. On all sides. Including the other side of the--
STEPHEN HAYS: You see I came through the Woodstock generation and I thought it’s just back to business as usual and sort of it was a big party. That’s what I see this as, a party with no cover. I’m a defender of money. Freedom, individual freedom, rich people. Because I’m still, even though I’ve got gray, I’m still trying to be one. Because the more money I have the more good I can do. And it will be my decision as to how I allocate that good. How I allocate that capital.
When I look around at all these buildings, hospitals, colleges, I don’t see many poor people’s names. They’re all rich people. Reverend Ike a black minister who used to preach up here in New York. Used to say, “If you curse the rich, you’ll never be one.”
CALVIN BELL: Look at the people out here! You think they’re out here just hanging out? I mean, that blows my mind that you came out here and you said, well, people out here, you know, they have something against wealthy people, you know, wealthy people should be allowed to be wealthy people, because while we’re wealthy people we’ll throw money out and sprinkle them all and make people’s lives better. It’s not happening. Wealthy companies are not making the common person’s lives better. They’re taking their money, they’re moving it abroad, they’re doing different things. What’s that got to do with anything?
STEPHEN HAYS: You’ve got a nice camera, you’ve got clothes, you’re blessed.
CALVIN BELL: I just told you that I’m not one of the ones—
STEPHEN HAYS: I can’t be so pessimistic about things.
CALVIN BELL: I’m being realistic.
I live in a very nice house, my family’s blessed. So I’m not going to pretend that, you know, I don’t have anything. But I do also recognize that a lot of the situations we’re in now is because of greed. It’s because – it’s not what he said, you just let people take their money and they’ll do good things with it. Not all people do good things with their money.
WILLIAM K. BLACK: (During a teach-in) The one percent have dominant political power over both parties.
BILL MOYERS: Organizers invited Bill Black to lead a teach-in at “the people’s microphone.”
WILLIAM K. BLACK: (During a teach-in) How many think they stole from all of us?
BILL MOYERS: A senior federal regulator in the 1980s, Black cracked down on banks during the savings and loan crisis. He now teaches economics and law at the University of Missouri, Kansas City.
WILLIAM K. BLACK: What we have is recurrent, intensifying financial crises driven by elite fraud and now it's done with almost absolute impunity. So the whole idea of noblesse oblige and such and that the rich were supposed to have special responsibilities, that's all gone, right? They have a God-given right to the lowest conceivable taxes.
When you put anti-regulators in charge of the agencies who believe that regulation is bad and completely unnecessary and they destroy it, creates a self-fulfilling prophecy that produces massive fraud at the most elite levels.
But, worse, it all feeds into politics. So, once you get a group that completely dominates the economy, they're going to completely dominate politics, as well.
WILLIAM K. BLACK: (During a teach-in) There is no excuse for not prosecuting. It is an obscenity. It’s surrender to crony capitalism.
WILLIAM K. BLACK: What's distressed me, and I think is one of the major reasons we get recurrent intensifying crises, is we seem to have lost our capacity for outrage. And it's only people getting outraged that produces really positive social change.
[NATSOT]: We are the 99 percent! So are you! We are the 99 percent! So are you!
MARILYN BRANDEE: I’ve been waiting years for people to get angry enough to do something. We want to just support these young people and the people who are sacrificing so much comfort for all of us.
RONNI TERR: I have a brother who’s been out of work for two years. He has a family, I think it’s just terrible that they don’t care. They’re making millions of dollars. Mitch McConnell is a multi-millionaire, John Boehner is a multi-millionaire. They don’t care about the people, they really don’t. And their own districts have many people who are unemployed, who are having foreclosures. And it’s time they stop playing this game and really said, you know I think maybe we’ll pass something that will help build our infrastructure or get people back to work. So this is a start, I hope that it makes a dent. But the fact that it’s not just here, it’s all over the country now, means that somebody is waking up.
BILL MOYERS: Waking up is right. Waking up to the reality that inequality matters. It matters because what we’re talking about is what it takes to live a decent life. If you get sick without health coverage, inequality matters. If you're the only breadwinner and out of work, inequality matters. If your local public library closes down and you can't afford to buy books on your own, inequality matters. If budget cuts mean your child has to pay to play on the school basketball team or to sing in the chorus or march in the band, inequality matters. If you lose your job as you’re about to retire, inequality matters. And if the financial system collapses and knocks the props from beneath your pension, inequality matters.
I grew up in a working class family. We were among the poorest in town, but I was rich in public goods.
I went to a good public school, played sandlot ball in a good public park, had access to a good public library, drove down a good public highway to a good public college, all made possible by people I never met. There was an unwritten bargain among the generations -- we didn’t all get the same deal, but we did get civilization.
That bargain’s being shredded. The occupiers of Wall Street understand this. You could tell from their slogans. A fellow young enough to be my grandson wore a t-shirt emblazoned with the words: “The system’s not broken. It’s fixed.” That's right. Rigged. And that’s why so many are so angry. Not at wealth itself, but at the crony capitalists who resorts to tricks, loopholes, and hard, cold cash for politicians to make sure insiders prosper and then pull up the ladder behind them.
Yes, Americans are waking up. To how they’re being made to pay for Wall Street’s malfeasance and Washington’s complicity. Paying with stagnant wages and lost jobs, with slashing cuts to their benefits and to their social services. And waking up to the grotesque Supreme Court decision defining a corporation as a person, although it doesn’t eat, breath, make love or sing, or take care of children and aging parents. Waking up to how campaign contributions corrupt our elections; to the fact that if speech is money, no money means no speech.
So the collective cry has gone up loud and clear: enough’s enough. We won’t, as I said, know for a while if this is just a momentary cry of pain; or whether it’s a movement that, like the Abolitionists and Suffragettes, the populists and workers of another era, or the Civil Rights movement of our time, gathers force until the powers-that-be can no longer sustain the inequality, the injustice and yes, the immorality of winner-take-all politics.
Our coverage of politically engineered inequality continues in our next two broadcasts. First, David Stockman, a one-time enforcer of the Reagan revolution.
DAVID STOCKMAN: There was clearly reckless, speculative behavior going on for years on Wall Street. It was encouraged by the Federal Reserve which is dominated by Wall Street.
BILL MOYERS: And John Reed, a banker’s banker who was there when Washington loaded the dice, and Wall Street rolled them.
JOHN REED: It wasn't that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did. And then the whole system came down.
BILL MOYERS: And at our new website, BillMoyers.com, I interviewed two Occupy Wall Street organizers who give us insight into the movement and what it hopes to accomplish. We'll also link you to our interview with the editors of Mother Jones magazine, and their coverage of the "dark money" that has cast a deep shadow across this election year. That’s at BillMoyers.com. See you there, and see you here next time.
Go to voterocky.org and see if you want an Occupy president in the Whitehouse? Then put your ideas on Twitter. You can find me there and elsewhere.
13,101 signatures for Justice Party in Idaho http://treegrower.org/about/Rocky/Justice%20Party%20in%20Idaho.html
Rocky's rule of law is at http://www.youtube.com/watch?v=ECPGenexyKM&feature=player_embedded
I put Rocky in the Salmon news: http://treegrower.org/about/Rocky/Poplar/RecHerald.html
If you are in Salmon, stop by.
If all Occupy helped Rocky, we might fix this country. My idea of the USA now is at http://treegrower.org/about/Rocky/Working%20on%20letter.html
If you can't get people to Occupy, maybe you can get them to sign a petition. Most people in Salmon are about as aware as their ancestors were in 1930. Then FDR helped them. Now Rocky will, if we give him the chance.
No way can I vote for a president who signed the NDAA, hired Somers and Geithner, talks the rule of law and at the same time violates it http://www.youtube.com/watch?v=xNPnWR1HeKA
The Republicans and Democrats put us in the mess we are in. Occupy is the only solution.
What we need to do is embark on a massive investment program—as we did, by accident, 80 years ago—that will increase our productivity for years to come, and will also increase employment now. This public investment, and the resultant restoration in G.D.P., increases the returns to private investment. Public investments could be directed at improving the quality of life and real productivity—unlike the private-sector investments in financial innovations, which turned out to be more akin to financial weapons of mass destruction.
Can we actually bring ourselves to do this, in the absence of mobilization for global war? Maybe not. The good news (in a sense) is that the United States has under-invested in infrastructure, technology, and education for decades, so the return on additional investment is high, while the cost of capital is at an unprecedented low. If we borrow today to finance high-return investments, our debt-to-G.D.P. ratio—the usual measure of debt sustainability—will be markedly improved. If we simultaneously increased taxes—for instance, on the top 1 percent of all households, measured by income—our debt sustainability would be improved even more.
The private sector by itself won’t, and can’t, undertake structural transformation of the magnitude needed—even if the Fed were to keep interest rates at zero for years to come. The only way it will happen is through a government stimulus designed not to preserve the old economy but to focus instead on creating a new one. We have to transition out of manufacturing and into services that people want—into productive activities that increase living standards, not those that increase risk and inequality. To that end, there are many high-return investments we can make. Education is a crucial one—a highly educated population is a fundamental driver of economic growth. Support is needed for basic research. Government investment in earlier decades—for instance, to develop the Internet and biotechnology—helped fuel economic growth. Without investment in basic research, what will fuel the next spurt of innovation? Meanwhile, the states could certainly use federal help in closing budget shortfalls. Long-term economic growth at our current rates of resource consumption is impossible, so funding research, skilled technicians, and initiatives for cleaner and more efficient energy production will not only help us out of the recession but also build a robust economy for decades. Finally, our decaying infrastructure, from roads and railroads to levees and power plants, is a prime target for profitable investment.
The second conclusion is this: If we expect to maintain any semblance of “normality,” we must fix the financial system. As noted, the implosion of the financial sector may not have been the underlying cause of our current crisis—but it has made it worse, and it’s an obstacle to long-term recovery. Small and medium-size companies, especially new ones, are disproportionately the source of job creation in any economy, and they have been especially hard-hit. What’s needed is to get banks out of the dangerous business of speculating and back into the boring business of lending. But we have not fixed the financial system. Rather, we have poured money into the banks, without restrictions, without conditions, and without a vision of the kind of banking system we want and need. We have, in a phrase, confused ends with means. A banking system is supposed to serve society, not the other way around.
That we should tolerate such a confusion of ends and means says something deeply disturbing about where our economy and our society have been heading. Americans in general are coming to understand what has happened. Protesters around the country, galvanized by the Occupy Wall Street movement, already know.
Published on Friday, December 23, 2011 by Vanity Fair
The Book of Jobs: “A Banking System is Supposed to Serve Society, Not the Other Way Around”
Forget monetary policy. Re-examining the cause of the Great Depression—the revolution in agriculture that threw millions out of work—the author argues that the U.S. is now facing and must manage a similar shift in the “real” economy, from industry to service, or risk a tragic replay of 80 years ago.
by Joseph E. Stiglitz