There is this odd notion that the public sector employees are living off the largesse of the rest of us, i.e., the taxpayers, and that they have used their union power to somehow pull a fast one. This is false. As David Cay Johnston points out, the pension benefits that unionized workers get is not something that is a gift to them from us. It is essentially deferred compensation that was negotiated with employers. In other words, part of the wages they were entitled to was deferred until their retirement.
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Susie Madrak points out how the biggest corporations are avoiding paying any taxes while the federal and state governments are demanding that ordinary people pay more. She also highlights the movement USUncut that highlights the tax inequities and is based on a successful UK model.

In Alexandre Dumas’s novel The Count of Monte Cristo there is a scene were two men are being taken out for a public execution for crimes committed independently of each other. At the last minute, a pardon is received for one of the men. The other man, who had been resigned to his fate, becomes outraged and angrily demands to know why the other had been pardoned and not him, and insists that the other man must be executed as well and fights with his guards until he is killed.

On observing this scene, the Count notes the curious and deplorable psychology at work in humans where we seem to delight in dragging others down to our level, even if we do not benefit in any way by doing so. He tells his companions “Do you not see? that this human creature who is about to die is furious that his fellow-sufferer does not perish with him? and, were he able, he would rather tear him to pieces with his teeth and nails than let him enjoy the life he himself is about to be deprived of. Oh, man, man – race of crocodiles, how well do I recognize you there, and that at all times you are worthy of yourselves!”
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What is currently taking place in the US is a ruthless class war perpetrated by the oligarchy on everyone else. The pattern should be clear to anyone because the plan is being done at the federal level and repeated all across the nation at the state level: Cut taxes on the rich to create a budget ‘crisis’ and then use that to eliminate programs that benefit the poor and middle class. As a result we have cuts in wages and benefits, social services, education, regulatory agencies, and an all out war against labor unions, while the rich get richer.

One of the extraordinary features of contemporary American life is the willingness of so many people in the middle class to turn against their own class (and the poor) in the service of the oligarchy. The upper middle classes and many in the middle class support this assault because they do not realize that what the oligarchy is demanding of those below them in the socio-economic ladder is eventually going to destroy them too. Those professionals who smugly see themselves as people whose skills are so valuable that they can succeed on their own in the marketplace without the protection of collective bargaining and thus sneer at unionized workers as pampered and privileged and lazy, do not seem to realize that the reason they enjoy their privileged life and seeming autonomy is precisely because unionized workers laid down the foundation on which they could build their own careers.
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Matt Taibbi makes a point in an article in the latest issue of Rolling Stone whose title says it all: Why Isn’t Wall Street in Jail?. The article says that, “financial crooks brought down the world’s economy — but the feds are doing more to protect them than to prosecute them.” One of the sources for Taibbi’s story sum up the situation succinctly:

Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.

“Everything’s f—– up, and nobody goes to jail,” he said. “That’s your whole story right there. Hell, you don’t even have to write the rest of it. Just write that.”

I put down my notebook. “Just that?”

“That’s right,” he said, signaling to the waitress for the check. “Everything’s f—– up, and nobody goes to jail. You can end the piece right there.”

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world’s wealth — and nobody went to jail.

This immunity shows how deeply the White House and Congress are in cahoots with the financial sector to steal from all the rest of us.

Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What’s more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even “one dollar” just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick “The Gorilla” Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.

When a society creates a class of people who think they are above the law and immune from any consequences for their actions, that society is doomed. We already have the spectacle of people in the US who are not prosecuted for crimes committed in the so-called ‘war on terror’, even gross violations such as torture. As a result, its political leaders risk becoming international fugitives.

The immunity that major financial firms and individuals now feel they have as a result of the power they have over political leaders is going to result in further financial crises.

To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. “You put Lloyd Blankfein in pound-me-in-the-a– prison for one six-month term, and all this bullshit would stop, all over Wall Street,” says a former congressional aide. “That’s all it would take. Just once.”

But that hasn’t happened. Because the entire system set up to monitor and regulate Wall Street is f—– up.

The Taibbi piece is long but well worth reading for those interested in the state of the world economy. He describes how the financial sector is supposed to work to benefit the overall economy and how all the checks and balances have been grossly subverted to enable the looting.

In theory, it’s a well-oiled, tag-team affair: Billionaire Wall Street A—hole commits fraud, the NYSE catches on and tips off the SEC, the SEC works the case and delivers it to Justice, and Justice perp-walks the A–hole out of Nobu, into a Crown Victoria and off to 36 months of push-ups, license-plate making and Salisbury steak.

That’s the way it’s supposed to work. But a veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for protecting financial criminals. This institutional reality has absolutely nothing to do with politics or ideology — it takes place no matter who’s in office or which party’s in power.

Unless Americans become more aware of this and demand punishment for corporate crimes instead of obsessing about political trivialities, we are doomed.

The mental stumbling block, for most Americans, is that financial crimes don’t feel real; you don’t see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They’re crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let’s steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They’re attacking the very definition of property — which, after all, depends in part on a legal system that defends everyone’s claims of ownership equally. When that definition becomes tenuous or conditional — when the state simply gives up on the notion of justice — this whole American Dream thing recedes even further from reality.

The story Taibbi tells is an absorbing yet sickening one. He names names. If you had any doubts at all that the US is run by a corrupt oligarchy of financial and political insiders who have nothing but contempt for laws and the ordinary people who are ruined by their actions, this article should dispel them.

One of the ideas being floated around is to ‘means test’ Social Security benefits. i.e., to base benefits on income and wealth. Kevin Drum explains why this is already being done at some level by the way benefits are calculated and why it would be a pointless exercise to pursue any further.

Paul Krugman also makes an important point about keeping our language on benefits clear. Using the umbrella term ‘entitlements’ in budget debates is meaningless because the economics of Social Security is quite different from Medicaid and Medicare.

As discussions about the budget and the national debt take center stage, it is interesting to see to whom the US government actually owes money.

Contrary to popular belief, China is not our biggest creditor. 53% of the US debt is owed to Americans and American institutions, with China coming second with just 9.8%, Japan a close third with 9.6%, and the UK next with 5.1%. All the oil-exporting countries hold just 2.6% of the national debt.

The White House has released the president’s proposed budget for 2011-2012. Given that we still don’t have a budget for the 2010-2011 fiscal year that began on October 1, 2010 and are operating on continuing resolutions, it is not clear that this budget should be taken seriously.

But the New York Times has put together a very nice interactive graphic that breaks down the president’s proposals.

In yesterday’s post, I discussed the origins of the Federal Reserve System. In an interview, Jane D’Arista, who served as a staff economist for the Banking and Commerce Committees of the U.S. House of Representatives and as a principal analyst in the international division of the Congressional Budget Office, explains what is wrong with the current Fed system and how it came to be dominated by private banking interests.

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As every child learns in their social studies class, there are three branches of the US government, the executive, legislative, and the judiciary. But there is another quasi-government agency that operates behind a veil of secrecy and yet wields enormous influence over the US economy (and thus indirectly the world economy) and deserves to be considered as a fourth branch. This is the Federal Reserve system of the US, commonly referred to as the Fed.
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