(MintPress) – “Arrogance I think has no end,” said Sen. Bernie Sanders (I-Vt.) when speaking about the actions of Wall Street in a recent Senate session. After absconding with billions of dollars, accepting the Troubled Assistance Relief Program (TARP) bailout loans and continuing a culture of greed and impunity, Wall Street bankers — the face of class warfare — are asking for more.
Earlier this week, Wall Street bankers and CEOs went to testify on Capitol Hill, calling for cuts to Medicare, Medicaid and other programs that are critical to the well being of American families still struggling to recover from the 2008 financial crisis.
Social programs are a moral imperative that help the long-term productive potential of Americans. Cuts of this kind would exacerbate income inequalities and poverty while doing little to actually reduce the national deficit. The lessons of austerity throughout Europe should serve as an ample reminder that attacking the working class will foment social chaos and is incapable of reforming the underlying neoliberal policies that endanger America’s future.
Testifying to greed
Before his trip to Washington, Goldman Sachs CEO Lloyd Blankfein discussed the need for Americans to “lower expectations,” in a recent CBS Interview. The absurd notion that working class families alone should finance economic recovery shows the length to which the criminal cartel running Wall Street will go to extend their personal fortunes.
This point was roundly condemned by Sen. Sanders, one of the few advocates for the working class left in Washington.
“I find it literally beyond comprehension that we have folks from Wall Street who received huge bailouts from the people of our country, from working families in our country because of the greed and the recklessness and illegal behavior which Wall Street did to drive us into this recession and now these very same people are coming here to Congress to lecture us and the American people about how we have to cut Social Security, Medicare and Medicaid,” said Sanders.
Fourteen CEOs, including Lloyd Blankfein, met with President Obama Wednesday to discuss the “fiscal cliff,” described by Blankfein as something akin to “World War II.”
Rather than suggesting logical reforms to the institutions that caused the 2008 crisis, Blankfein, who earned an astonishing $125 million in total compensation for the year 2007, suggested that the American middle class shoulder sole responsibility for reducing the national deficit by accepting tax increases and cuts to social programs.
“Does Mr. Blankfein and his other CEO friends on Wall Street really want us to balance the budget on the backs of disabled veterans?” added Sanders. The answer, unfortunately appears to be unequivocally, “Yes.”
While feigning a concern for the national debt, Blankfein and others are actually advocating the extension of corporate tax breaks and favorable policies that help Wall Street, not Main Street.
Standing at approximately $16 trillion, the national deficit is a serious issue that must be tackled in the near future. However, austerity will cripple the middle class, slash productivity and hinder the ability of the middle class, the driving force of the U.S. economy, to increase productivity and economic output going forward.
It may be easy to point fingers and vilify the faces of Wall Street greed and corruption. However, Blankfein and the collective criminal enterprise running the financial system exist merely as the worst externalities of neoliberalism.
If properly reformed, Wall Street can better reflect the populist democratic principles enshrined in the U.S. constitution and supported by millions of working families trying to survive in an increasingly difficult economy.
Accepting a progressive tax structure
The first, and arguably most important, reform that needs to take place is the implementation of a Wall Street and corporate tax to help generate revenue. By taxing transactions as some European markets do, runaway speculation can be cut down as to ensure more fiscally sound investments. Unregulated derivatives trading spelled the downfall of major banks and wiped out $11 billion in personal wealth.
Additionally, Warren Buffett, the billionaire investment guru, has already expressed his support for the elimination of Bush era tax cuts and the implementation of a more progressive tax code he calls, “The common sense tax plan.” Such a measure is in keeping with the fundamental issue of economic fairness and can provide a much needed injection of revenue into federal coffers. After decades of failed Reagan era policies that cut taxes for the wealthiest American, it is time to try a new approach.
The Securities and Exchange Commission (SEC) also needs to be empowered to regulate financial transactions through the reimplementation of the Volker Rule and through the revival of the Glass-Steagall Act. By increasingly regulatory oversight, white collar criminals can be properly prosecuted and the culture of greed and impunity can be curbed, bringing an end to the era of Las Vegas style, high risk investments that have become the modus operendi of investment firms.
Not only will these reforms restore a semblance of economic justice, they will help to solve the crisis of inequality, a phenomenon that prominent economists have identified as a long-term problem facing the U.S.
Nobel Prize winning economist Joseph Stiglitz identifies the crisis of inequality in a recent NPR interview, saying:
“It has consequences, it has consequences for our sense of identity, of what we are, but also what we might say narrow economic consequences. What it means is that if you make the mistake of choosing the wrong parents the likelihood is that you are not going to live up to your potential and we are in that sense wasting our most important assets, our human resources.”
Of all the advanced industrialized countries (OECD), Stiglitz identifies the U.S. as the “most unequal” in terms of the distribution of national wealth.
Indeed, this is consistent with what European financial officials have said about the need to change economic orientation of the U.S. “The changes that need to be made should benefit the depositors and businesses served by these financial institutions, rather than the institutions themselves,” said Straumur Investment Bank hf Chief Executive Officer Petur Einarsson in an interview.
Rather than trying to follow the direction of devastating EU austerity, U.S. policymakers would be better served to learn from the few successful reforms that have allowed Iceland to move out of economic crisis and into economic recovery.
Look to Iceland
Although the prescription for reform appears distant and unattainable given the corrupting influence of corporate and special interest money in politics, Americans can look to other countries where citizens have successfully mobilized and enacted some of these very reforms.
In the 2008 Icelandic banking crisis, unemployment jumped nine-fold and the economy saw an 80 percent plunge in the krona against the euro. After instituting a broad array of democratic reforms, the Icelandic economy has rebounded after the breakup of the large national banks.
With a relatively homogenous population of 319,000, Iceland enjoys a level of citizen mobility and flexibility that allowed for rapid systemic reforms in the financial sector. Such sudden reforms are unlikely in the U.S.
However, the best traditions of Icelandic citizen led activism endure as arguably the most important lesson to come out of the financial crisis. Birgitta Jónsdóttir, an Icelandic Member of Parliament elected in 2009, reflects on the successful changes her country made in a recent article, writing,
“One of the demands during the protests that followed – and that resulted in getting rid of the government, the central bank manager and the head of the financial authority – was that we would get to rewrite our constitution.”
Jónsdóttir continues, “Another demand was that we should have real democratic tools, such as being able to call directly for a national referendum and dissolve parliament.”
More importantly, these principles have been embodied by Iceland’s highest office. Ólafur Ragnar Grímsson, president of Iceland, commented on the success of the “people’s bailout,” saying, “The government bailed out the people and imprisoned the banksters — the opposite of what America and the rest of Europe did.”