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.

Labor unions are what gave us so many of the basic rights we take for granted. Sam Smith lists some of the things that the labor movement in the United States led the struggles for and are significantly the result of labor union organizing and action:

• The end of child labor
• The right of workers to negotiate with their employers over wages, benefits and working conditions
• The 8 hour work day and paid overtime
• Compensation for workers injured on the job.
• Unemployment insurance.
• A minimum wage
• Pensions
• Healthcare insurance
• Paid sick leave, vacations and holidays
• Elimination of job discrimination by ethnicity, color, religion, sex or national origin
• Family medical leave

People who have forgotten the long and often deadly struggle by unions for these things may think of the benefits we now have as somehow ‘natural’ that will remain even after unions are destroyed. But they are wrong. The oligarchy would like to return us to the days when management could demand any amount of work hours, eliminate workplace safety rules, cut salaries and benefits at will, and fire people for no cause.

Thus it has been heartening to see the solidarity amongst so many people in Wisconsin and Ohio who are demonstrating and occupying statehouses to show their opposition to these policies. We have seen some unions see through the divide-and-conquer strategy of the Wisconsin governor who sought to exempt the police and firefighters from his union-busting strategies. Those groups have joined the protestors, rightly recognizing that if the present assault on some unions succeeds, their unions might well be next.

In a weird way, the uprisings in the Middle East have helped their cause. Of course, we should not in any way compare the two kinds of protests since the people in the Middle East are actually risking their lives to overthrow decades-long repressive regimes. But what those other protests have done is make mass demonstrations seem heroic. If not for them, the American mainstream media, which is an arm of the oligarchy, would have been able to portray the labor protests in the US as ‘lawless’ and ‘undemocratic’.

It is extraordinary that the political and media class acts as if there is no choice to solve the budget problems other than to cut wages and services that benefit the poor and middle class. There is an obvious alternative: Raise taxes, with the amount of the hike rising rapidly with income. Yes, tax the rich.

The tax giveaways for the rich in the latest tax deal that Obama and his congressional pals agreed to in December are truly obscene. They have snuck in goodies to benefit the very rich in all kinds of places. As just one example, it is only rich people for whom it is worthwhile to itemize their deductions in Schedule A. Most people claim the standard deduction of $5,700 while the rich can claim very much more. But at least in the past, some limits on Schedule A deductions started to get phased in for those people with incomes over a high amount ($166,800 for married couples filing jointly in 2009). But this year even those limitations have been removed, even though the only people who benefit are those who do not need more money in the first place. No wonder we have budget deficits. If one needed to point to one symbol that clearly demonstrates that the rich are determined to contribute as little as possible to the government while squeezing as much as they can out of it, the elimination of the Schedule A limits is it.

What is extraordinary is that there will be some people (even those who are nowhere close to being wealthy) who protest my post, saying that the rich have ‘earned’ every cent they get and are thus ‘entitled’ to keep as much as they want and that the government is essentially ‘robbing’ them of the fruits of their labor by taxing them at all. They do not see that the entire system is rigged to create a self-perpetuating oligarchy.

Such people have essentially a feudal mentality, a serf-like admiration of the wealthy, and contempt for people in their own class. All that is missing is their willingness to bow down and touch their forelocks as the wealthy drive by in their limousines.

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.

[Read more…]

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.
[Read more…]

Recall all the speculation in housing that resulted in the crash that is currently causing large numbers of people to be foreclosed upon? That was due to mortgages being bundled together into huge slabs, sliced into small packages that were called SIVs (Structured or Special Investment Vehicles) and then traded like stock. (I did a series of posts explaining this debacle back in 2008 and the specific ones that dealt with this topic are #7 and #8.)

The result of this practice was that ownership of mortgages was diversified and it became unclear as to who the actual owner of any given property was, which enabled them to deny any responsibility for the upkeep of abandoned property as required by local ordinances. The blight on neighborhoods caused by this evasiveness was so bad that a Cleveland housing court judge got fed up and started levying penalties on whichever entity he could hold responsible.

But when it comes to selling off properties, the banks are not shy of claiming ownership. It turns out that banks, the very organizations that were instrumental in the crash, are now foreclosing on, and selling off, people’s property without proper documentation showing that they own the property. They decided they could just manufacture documents to show ownership.

Last fall, the banking industry’s foreclosure machine came under intense scrutiny with revelations that low-level employees called “robo signers” powered through hundreds of foreclosure affidavits a day without verifying a single sentence. At the time, analysts warned that the banks’ allegedly fraudulent document procedures could imperil their ability to prove that they owned the mortgages.

The Massachusetts State Supreme Court on Friday upheld a housing court judge’s ruling in that state that ordered a halt to two foreclosures unless the banks can properly documented their ownership. The history of that case can be read here.

To you and me, this would seem a perfectly reasonable requirement: you should not be able to sell something that you cannot prove that you own. But we live in a country in which banks have got used to thinking that normal rules don’t apply to them and these perfectly reasonable court rulings are being greeted with shock by the banking sector.

If this ruling is repeated in other states I wonder how long will it be before the banks demand of the Congressional and presidential clients that they pass special measures exempting them from the tedious business of carefully maintaining records that prove ownership?

Hans Rosling has a knack for making statistics come alive. (via Pharyngula)