The tax changes are the latest in a series of proposals billed by the Obama administration as a dramatic overhaul of the deregulated financial system that brought about the economic collapse. Recent figures underscore the severity of the toll on the US economy. Last week, the International Monetary Fund said global banks and financial institutions have lost an estimated $4.1 trillion during the financial crisis. Of that total, $2.7 trillion in losses originated in the United States. In another report, the IMF also projected the cost to US taxpayers for the Wall Street bailout and other economic spending could be far higher than government officials have claimed. IMF analysts say the taxpayer tab could come out to $1.9 trillion over the next five years. The figure amounts to around $6,200 for every US citizen, and just over 13 percent of annual gross domestic product.
William Greider talking,
I think it was like a series of big waves coming at this country for really twenty-plus years, some of which I wrote about rather forlornly, trying to say, to know what’s happening to us. And those waves were ignored and, in many cases, launched by what I call the governing elites, the people in power, not just government, but finance, business, Republicans and Democrats alike. And either out of blindness or a kind of craven unwillingness to deal with reality, those waves have crashed over us. And I’m talking about trade. I’m talking about the militarism that drives our spending and our adventures overseas, the weakening condition of the US economy. And on top of that is a financial system that is wildly inflated in value, in power and in all those things.
And here we are. I mean, all of that is now either crashing or subsiding. I feel it strongly, is that we’re just at the beginning of a really long, hard passage in which Americans, like it or not, have to adjust to these new realities. And I’m an American-born optimist. I think that can actually be good, not just for the world at large, but for our country, in the long run, if we face reality. And if we keep denying reality, it will get harder and harder.
President Obama responds to the current crisis the great moral test of his administration, not merely an economic test.
Because in the financial sphere, which is where the big bucks have been flowing, he is rewarding the people who caused this, and very specifically. We can name names, can’t we? Americans at large know the names of these big financial firms and banks. And people know in their guts, a thousand times—people know this is wrong. You don’t have to explain it to them. They know that—and it doesn’t matter what their politics, their labels are, left, right, whatever. People everywhere know it’s wrong to reward the malefactors who caused this catastrophe and at the same time be less ardent about doing something for people all across America who are really in desperate times.
The big picture is this: Wall Street’s inflation—inflated values, inflated profits, inflated salaries, all of that—is in deflation now. It’s literally subsiding. A huge amount of wealth, trillions of dollars, has been lost. That’s not coming back, in my judgment.
The President and his administration and the figures in Wall Street are acting as though they think they can pump it back up and get everything sort of back to normal, albeit with fewer financial firms, and some of them are now extinct. I think that’s wrong. And actually, a lot of experts, who are more expert than I, have been saying the same thing: it’s not going to happen. Forget the morality, it’s not going to happen.
So then the question becomes, who’s going to cover the losses? And what the government has been doing, both—first under Bush and now under Obama, is assert that they have to transfer those losses from the private balance sheets of a Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America—make your own list—the biggest and most, allegedly most, influential firms, to the public balance sheet. And they’re trying to do that. Fortunately, the public anger is so intense and so general that they’re reluctant to take that next step. And I don’t trust Congress to hold its ground on much of anything, but at the moment, Congress really doesn’t want to hear from this president, “Give us another couple hundred billion dollars, because we’ve still got to make these balance sheets of these private firms whole.” Meanwhile, what I call the big dogs of banking, which are those same firms I named, are pushing the President. I mean, this is a really intense and important power struggle. Who’s going to take charge?
And Jamie Dimon from JP Morgan and the guy from Goldman Sachs are acting as though, “What crisis? Look at our quarterly returns. Everything is back to normal. Get out of our way. We don’t want any more of your money. In fact, we’ll give some of the money back.” I said in The Nation, this arrogance is breathtaking, even for Wall Street bankers. I mean, it really is, when you think about it. This new president, who’s got all these important things that he wants to accomplish, is just getting a shove, a really hard shove, from the people he’s helping. And he is being tested by this moment, because, it seems to me, if he doesn’t respond to that and stand up to them and assert the government’s emergency powers, then every other power center will take his measure and decide they can have this guy.
The administration has to announce the results of its stress tests on the nineteen biggest banks deemed too big to fail. And obviously, all of these bankers are very nervous about what the impact will be on this. But then, suddenly, yesterday the President announced he also wants to begin eliminating all these tax loopholes with some of these same banks, have been involved in sheltering huge amounts of profits overseas.
I think that is exactly what it is. I think he put out a rook. I think this is a good big play he made yesterday. And it’s pushed back to the bankers saying, “You want to talk profits and losses and taxes? I can talk that.” And so, he’s putting in front of the public, consistent with his campaign, a point that the big dogs don’t want to talk about, which is that they evade their taxes by moving their, quote, “headquarters” to the Grand Cayman Islands, and they move to other offshore places, and then they pretend to be holding their taxes due in some offshore. Some day they’ll bring it back to the United States, and it’ll be taxed, but not now, right? That would interfere with their profits.
A really fundamental initiative, because it leads to, eventually, a general reform of the corporate income tax, and that has—can have deep impact on trade. What happens in this country, unlike most other advanced economies, is the government for thirty years has said, “Whatever is good for the US multinationals will ultimately be good for everyone in America, and therefore, that’s our national interest, to advance these firms.” Obama is offering a different analysis now, saying, “Wait a minute. These guys aren’t paying any taxes. They’re moving jobs offshore. How can that be good for the Americans?” And that’s the beginning, just a beginning, of a really profound debate, which no other president has had the nerve to initiate.
Federal Reserve Bank is a central bank. And I know there’s a lot of argument that people make about whether the Fed is public or private, but believe me, trust me—I wrote a long book about the Fed twenty years ago—it’s an arm of government. It is cloistered in what I regard as an illegitimate way, literally protected from political accountability by the way it was set up. And that was supposed to keep the unruly masses from pushing it around and getting inflation and doing bad things like low interest rates and easy credit.
But the truth is, it has always, from the beginning in 1913, been very close to these same folks, the largest, most influential, most powerful financial institutions. And it’s, I say, a central culprit, alongside those private institutions, in causing our present disaster. And it’s a long story of how it did that, but to put it crudely, instead of being a balance wheel that serves labor and capital, more or less in moderation on both sides, it tipped the balance of policy hard in favor of capital and against labor. It literally suppressed wages, while it cut loose regulation and allowed these firms to do all of the so-called modernization which have led to this disaster.
So, if we have a genuine new politics, and it’s not clear whether we will or not, but if we do, I think at the top of the agenda should be a deep, critical look at the nature of the Federal Reserve—how it functions, who it works for, who it ignores—and a deep reform of that institution.
I saw one of your New York newspapers the other day called him “the Wall Street poodle” or something really nasty, which I think is not inaccurate. I mean, Timothy Geithner was at the New York Fed, perfectly earnest and bright and all those good things, but he never took on these big banks when he saw and, in fact, publicly worried now and then about derivatives and all these other excesses. But he never used his power as a regulator to call them in and say, “Look, we’ve got to clean up this mess before it explodes on us.”
Then, after it does explode, and we lose Bear Stearns and Lehman and a bunch of others, he has been in the room every time these deals were made, which is, “We’ll take Fed money, Treasury money. We’ll give you—we’ll finance your losses and keep you whole.” And that’s his mentality. I sort of tried to hold off making it a personal critique, but it’s unavoidable. His view is, and I fear it’s now shared by the President, that we will spend the public money to put Humpty Dumpty back together again. That’s literally what they’re doing. It sounds corny, but it’s true. And first of all, that’s wrong. But secondly, they will fail.
Democratic Party, after many years—and I’m a Democrat, I voted for Obama, I share those broad values very broadly—but they’ve had it both ways for twenty-five years or more, where they serve the financial interests and the big insurance companies and some other players, and at the same time they’re the party of working people. And that didn’t work very well for working people. But the Democrats always had an excuse: “Well, we don’t have the votes,” or “We’ve got this terrible Republican president in who won’t let us do good things for the folks.”
All those excuses are gone now, and we are seeing for the first time really in three decades the true nature of the Democratic Party. And it’s being tested and, so far, not doing very well. I won’t say it’s failed, but I think there’s a real possibility that it will.
The labor legislation is a good example. I’ve been around the issues of labor organizing and unions and what was happening to them over the last three decades. They were getting hammered by economic forces, like companies that broke every law in the land to keep them from organizing, firing the organizers, firing the workers who signed up. They really played vicious, hardball labor suppression and got away with it. The government never stepped in and stopped it.
So now labor wants a fairly modest bill, actually, to reform the processes of people organizing their own representatives. Sounds like democracy, doesn’t it? And the same forces are burying the politicians in propaganda and trying to convince the public this is a bad idea. And we’re seeing the Democratic Party, which now has virtually sixty votes in the Senate and a strong majority in the House, sort of saying, “Well, we don’t know if we can do this this year.”
I think this is also the time for labor to stand up. And it has to get much more explicit and dry-eyed with the Democratic Party in saying, “We’ve been there for you year after year with our votes, with our money, with our hearts and minds. If you’re not going to deliver now, when are you going to deliver?”
I looked around the world and describe in a couple of chapters our national—our, quote, “national defense strategy,” which is really a strategy of offense. It’s deploying forces, weaponry, secret agents, and called Green Berets and others, as far forward as we can get them; surrounding other countries that we deem to be hostile, starting with China, with Russia and a bunch of others; and then intruding in countries with the Special Forces and other means to first try to bump off people whom we again regard—we’ve decided they’re dangerous jihadists, or whatever they’re called. And what this sets up are tripwires, planted by our government around the world, which some other party, a foreign country or small insurgencies in other countries, can step across and start the next war. So, the question I ask is, where is the next war? And that’s what I mean by the greatest threat. And that’s before I’ve gotten to nuclear deployments, which have a similar effect.
I know this is deeply offensive to most Americans. They don’t—either don’t know the facts of the situation, or they cannot believe that their own government is actually risking war by the way it’s running our so-called national defense. And I can’t say I would have said this twenty years ago, but now the Cold War is gone. All of the old reasons for why we’re doing these deployments evaporated fifteen years ago, and yet they’re still advancing.
I want to add that I think President Obama is opening the door a little bit with his rhetorical positions. He wants to move out of some of that stuff. Unfortunately, if you look at the reality, he’s not exactly withdrawing. In Afghanistan, we know the opposite is occurring, and Pakistan. I will mention also Africa. The Bush administration founded an AFRICOM, which is an African Command. What is that for? It’s to run US military operations, both public and clandestine, in Africa. What’s that about? Well, it’s allegedly about finding Muslims who are dangerous and taking them out. But it’s also about oil, because the focus is always in—seems to turn up in countries that have a lot of oil or at least potential.
And here’s the contest. China is in Africa, as well, for making oil contracts and so forth and so on. China goes with development capital and literally builds projects for poor countries in Africa and says, “We’ll help you with this and that in your society.” So it is literally the case, as I say in the book, China sends capital, the United States sends Green Berets.
Discussion: William Greider, Amy Goodman and Juan Gonzvez.
William Greider, veteran journalist with a career spanning more than four decades. He is national affairs correspondent for The Nation magazine and author of several books, including his latest, just released, Come Home, America: The Rise and Fall (and Redeeming Promise) of Our Country.
– from democracynow.org