We're All Socialists Now

Since we’re all socialists now why not take the Socialist Senator from Vermont’s bailout proposal and run with it. Makes a lot of sense to me:

By Senator Bernie Sanders

The current financial crisis facing our country has been caused by the extreme right-wing economic policies pursued by the Bush administration. These policies, which include huge tax breaks for the rich, unfettered free trade and the wholesale deregulation of commerce, have resulted in a massive redistribution of wealth from the middle class to the very wealthy.

The middle class has really been under assault. Since President Bush has been in office, nearly 6 million Americans have slipped into poverty, median family income for working Americans has declined by more than $2,000, more than 7 million Americans have lost their health insurance, over 4 million have lost their pensions, foreclosures are at an all time high, total consumer debt has more than doubled, and we have a national debt of over $9.7 trillion dollars.

Meanwhile, Paul Krugman basically says hell no to the bailout plan as proposed. Not to mention the fact, that as I have hitherto noted, it’s the most massive power grab by the executive branch ever. Congress, if it agrees to this bailout will have effectively dissolved itself and its powers.

The rest of Sander’s plan after the jump.

While the middle class collapses, the richest people in this country have made out like bandits and have not had it so good since the 1920s. The top 0.1 percent now earn more money than the bottom 50 percent of Americans, and the top 1 percent own more wealth than the bottom 90 percent. The wealthiest 400 people in our country saw their wealth increase by $670 billion while Bush has been president. In the midst of all of this, Bush lowered taxes on the very rich so that they are paying lower income tax rates than teachers, police officers or nurses.

Now, having mismanaged the economy for eight years as well as having lied about our situation by continually insisting, “The fundamentals of our economy are strong,” the Bush administration, six weeks before an election, wants the middle class of this country to spend many hundreds of billions on a bailout. The wealthiest people, who have benefited from Bush’s policies and are in the best position to pay, are being asked for no sacrifice at all. This is absurd. This is the most extreme example that I can recall of socialism for the rich and free enterprise for the poor.

In my view, we need to go forward in addressing this financial crisis by insisting on four basic principles:

(1) The people who can best afford to pay and the people who have benefited most from Bush’s economic policies are the people who should provide the funds for the bailout. It would be immoral to ask the middle class, the people whose standard of living has declined under Bush, to pay for this bailout while the rich, once again, avoid their responsibilities. Further, if the government is going to save companies from bankruptcy, the taxpayers of this country should be rewarded for assuming the risk by sharing in the gains that result from this government bailout.

Specifically, to pay for the bailout, which is estimated to cost up to $1 trillion, the government should:

a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue;

b) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; and

c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies’ stock goes up.

(2) There must be a major economic recovery package which puts Americans to work at decent wages. Among many other areas, we can create millions of jobs rebuilding our crumbling infrastructure and moving our country from fossil fuels to energy efficiency and sustainable energy. Further, we must protect working families from the difficult times they are experiencing. We must ensure that every child has health insurance and that every American has access to quality health and dental care, that families can send their children to college, that seniors are not allowed to go without heat in the winter, and that no American goes to bed hungry.

(3) Legislation must be passed which undoes the damage caused by excessive de-regulation. That means reinstalling the regulatory firewalls that were ripped down in 1999. That means re-regulating the energy markets so that we never again see the rampant speculation in oil that helped drive up prices. That means regulating or abolishing various financial instruments that have created the enormous shadow banking system that is at the heart of the collapse of AIG and the financial services meltdown.

(4) We must end the danger posed by companies that are “too big too fail,” that is, companies whose failure would cause systemic harm to the U.S. economy. If a company is too big to fail, it is too big to exist. We need to determine which companies fall in this category and then break them up. Right now, for example, the Bank of America, the nation’s largest depository institution, has absorbed Countrywide, the nation’s largest mortgage lender, and Merrill Lynch, the nation’s largest brokerage house. We should not be trying to solve the current financial crisis by creating even larger, more powerful institutions. Their failure could cause even more harm to the entire economy.

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Sean Paul Kelley

Traveler of the (real) Silk Road, scholar and historian, photographer and writer - founder of The Agonist.

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  • is right. The prior S&L bailout did not price the assets of the failed S&Ls. The S&Ls were just taken over by the regulators. Then the RTC sold them off for what could be gotten.

    But there was little public pricing of these companies because most were privately owned. This bailout looks to be very different. It is meant to shore up investor confidence in the public pricing of assets, notably the securities of the S&P financials. Thus these companies can’t take losses and the taxpayer must pay par or thereabouts for their bad assets if market values are to be sustained.

    Which is what Krugman points out.

    Now your senator from Vermont forgets that Fannie Mae was run by Democrats, Franklin Raines and Daniel Mudd. Jamie Gorelick was vice chairman from 1997 to 2003. Our pols are all screwing in the same bed.


  • probably isn’t too worried about absolving itself of its power, so long as it gets to keep its collective paycheck, health insurance, and campaign contributions…at least they haven’t seemed too worried about keeping/using their power over the last eight years.

  • zero faith in Washington to do the right thing.

    “Is not our first thought to go on the road? The road is our source, our vault of treasures, our wealth. Only on the road does the ‘traveller’ feel like himself, at home.”
    Ryszard Kapuscinski

  • It’s totalitarianism by whatever stripe.

    I joke about the United States going Communist under a Republican administration, but the truth is, we’re actually becoming a Fascist nation.

    The real debate isn’t left and right, it’s authoritarian vs libertarian and authoritarians are winning big time on both side of the aisle.

    I did inhale.

  • In my opinion, almost all of the new spying powers given to the various agencies to combat terrorism really has to do with domestic surveillance. Any Fascist nation needs a pervasive surveillance network in place, either via neighbors spying on each other or via more technological means.

  • There are smart, knowledgeable Agonistas who can fill you in on all the details of the meltdown.

    But, if you ask me, what happened is, there’s only a few short weeks left until the election and therefore only a very limited time for the present oval office gang to take one last run at cleaning out the larder.

  • He was among the very first to spot the rot that was spreading through capitalism in America. His Secrets of the Temple is a classic. He is right that this is an historic swindle, but I just don’t know whether it means the great mass of people will someday rise up and throw out both political parties, as he suggests could happen.

  • but really, any thought on this?

    Stupid question:

    As they sink with the anchor they have forged, the aristocrats are saying we must take on that anchor (give them $700 billion) or there will be no money for small business loans and etc. My question is –

    Why don’t we ignore those silly people, keep the $700 billion for ourselves and put that money into newly-created, regulated entities — we could call them community banks or something — and make it available to the economy?

  • We are at a turning point in American politics over this bailout because it will determine the future not only of America in profound ways, but also of the Democratic Party as it is presently constituted.

    If the Dems blow this one, it will have continuing repercussions that will in effect destroy them. And if they go along with this travesty, for whatever perceived reason or lame excuse, they will deserve what they get.

    Selling out the country constitutionally and even buying into an illegal war won’t matter as much as breaking the middle class economically and further impoverishing the already poor to save the rich and powerful from their own greed and hubris, due in part to the Dems’ failure to act in the best interests of the people on account of spinelessness, poverty of vision and, worst, the lack of principle — fatal flaws in politics.

    This will be the straw that breaks the camel’s back.

  • “You don’t have panic on Wall Street resulting in banks closing in Iowa City.”

    I’m in Iowa City right now and everything’s fine. This is a Wall Street and Washington panic; don’t let them tell anyone anything different.

    < "You don't have panic on Wall Street resulting in banks closing in Iowa City.">

    The crux of the problem is that the gazillion dollar derivative market is now shaking, threatening not only the world’s financiers and the wealthy whose wealth they “manage” but the entire (rotten) financial apparatus of global capitalism.

    The answer may have less to do with saving the insurance business, the housing market, or the Chinese investors clamoring for a bailout than with the greatest Ponzi scheme in history, one that is holding up the entire private global banking system. What had to be saved at all costs was not housing or the dollar but the financial derivatives industry; and the precipice from which it had to be saved was an “event of default” that could have collapsed a quadrillion dollar derivatives bubble, a collapse that could take the entire global banking system down with it.
    Web of Debt Blog

    BTW, the appetite for cash that this article describes is a classic symptom of runaway deflation, a characteristic of which is hoarding value.

  • Let’s not be railroaded into accepting an enormously expensive plan that doesn’t seem to address the real problem.

    First, the plan does nothing to address the lack of capital unless the Treasury overpays for assets. And if that’s the real plan, Congress has every right to balk. This is plan that rewards and condones irresponsible behavior instead of either punishing or fixing it. Not only is there no accountability, it actually punishes the innocent.

    But beyond that, there is absolutely no guarantee, and little reason to believe, that this plan is going to resolve the crisis. Meanwhile, if this plan is adopted and doesn’t work — it won’t — virtually all monetary and fiscal guns have been fired and Treasury of the Fed are out of ammo.

    What do we do next? Sacrifice our first-born?

  • They hold this power in their hands, not “us.” The Democratic congress people are supposed to be representing “us” and not “them.”

  • At best, the government will own the banking industry.

    Return to the Greenback Dollar

    Two independent monetary systems have competed for dominance in the United States ever since we were a collection of colonies. In provincial America, paper money was issued by local governments. In England at the same time, paper banknotes were issued and lent privately by banks, headed by the Bank of England, the first private central bank. The major flaw in the private banking system was that the banks created the principal but not the interest necessary to pay back their loans, so more money was always owed back than was put into the money supply, requiring more loans to be taken out to cover the interest, spiraling the people into debt.The most effective and efficient of the American colonial systems was in Pennsylvania, where a publicly-owned bank issued paper money and lent it to farmers. The money returned to the government with interest, preventing inflation; and to keep enough money in the system to prevent the debt spiral of the private banking system, the government issued and spent a sum of money on public works as well. The Pennsylvania system worked so well that it completely funded the provincial government without taxes or inflation. Benjamin Franklin and others maintained that the chief reason for the American Revolution was that Parliament forbade the colonies from issuing their own money. Paper money issued by the Revolutionary government got the colonists through the war, but the British heavily counterfeited the Continental currency as a deliberate war tactic, and by the end of the war it had been inflated so much that it was nearly worthless. Fear of inflation led the Continental Congress to completely omit paper money from the Constitution, which does not say who can issue it or under what circumstances. The private banks filled the breach, and by 1913 the U.S. had the same private central banking system that England had. Ever since the dollar went off the gold standard in 1933, all of our money except coins and a few rare U.S. Notes has been created privately by banks (including the private Federal Reserve) and lent to the government and the people. Two centuries after the Revolution was fought, the pyramid scheme of lending 10 dollars and requiring 11 back has reached its mathematical limits. We are “all borrowed up” and the banking system is imploding. It is time we tried the system for which our forefathers fought and died: real, debt-free, publicly-issued U.S. money. This tack would not only not add to inflation but could actually reduce or eliminate it. Inflation results from an increase in “demand” (money) over “supply” (goods and services). Today inflation is caused by borrowing to repay debt: the money created into existence by banks goes to pay interest rather than to produce goods and services. If the government were to issue money and use it to pay for real goods and services (roads and bridges, sustainable energy development, health services, and the like), demand and supply would remain in balance and inflation would not result. The “Federal” Reserve is actually a privately-owned corporation that issues money and lends it to the government. A truly federal central bank would issue funds directly to the Treasury as debt-free U.S. Notes, or as “national credit.” This was done successfully in Australia and New Zealand during the 1930s and 1940s. A state-owned central bank funded public projects that put people back to work, at a time when most of the rest of the world was struggling with a depression brought on by a global shortage of bank-created money. Today we are facing the same sort of bank-created credit crisis, and it could be resolved in the same way.

    See also Michael Hudson’s many articles, for example, The Mathematical Economics of Compound Rates of Interest: A Four-Thousand Year Overview

  • David Sirota wrote “Our nation’s politics is divided not between Democrats and Republicans but between the People Party and the Money Party.” Michael Collins has written a 5-part article about the Money Party at “The Smirking Chimp”.
    1 The Money Party – The Essence of Our Political Troubles
    2 Why We Get Such Lousy Leaders and How to Get Rid of Them
    3 Big Lies that You Must Believe
    4 The Money Party to Citizens: Drop Dead!
    5 “Us versus Them” – The Money Party

    Unfortunately, while the Money Party owns the government, there really isn’t a People Party. Sirota names the leading members of the People Party in his article at http://www.huffingtonpost.com/david-sirota/the-people-party-vs-the-_b_35459.html Perhaps they should coalesce into a new party to promote our progressive policies and oppose the self-serving Money Party.


  • And the consulting contracts of Gen Oleg Kalugin (KGB, ret) and Marcus Wolfe (former head of the Stasi) would indicate both of the above comments to be frighteningly poignant. If memory serves me correctly, the Bush administration was going to appoint Wolfe head of DHS, but it caused a little too much of an uproar.

  • According to the Wall Street Journal (as summarized by TPM; I don’t subscribe to the Journal), Wall Street is telling its lobbyists to insist they will accept nothing but the whole enchilada: no limits on exec pay, no re-regulation, no help for homeowners, etc. What this tells you is that the gloom and doom scenarios, at least the very short term ones, are grossly exaggerated. If Wall Street really thought the whole financial system was going to collapse in a matter of days, it would be willing to compromise to get a bill. It’s a bluff. Of course, each day the Dems don’t cave the Dow will fall increasing the pressure, but Wall Street’s biggest players have a longer game in mind.

    I said a couple of years ago that the endgame for this was a concentration of residential real estate in corporate hands, as it is the last major form of wealth in the US not already in such hands. This is the first step, and the steeply-discounted resale, once individual properties are disentangled, is the second.

  • …to work as a consultant for DHS but they are quite likely only rumours (i.e., not based in fact). They wouldn’t even give the guy a visa to come to the US to promote his book – the notion that they’re going to suddenly use him as a consultant for something like this is a bit dubious. Kalugin is a lot more plausible in that sort of role.

    “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.” ~ Sir Ernest Benn

  • Doesn’t mean that they aren’t talking to these guys and many others behind the curtain. In fact, judging by developments that have “inconveniently” been made public, it looks like they are, or are very imaginative themselves.

    One wonders what else is going on behind the curtain. The Bush administration is known for its obsession with secrecy and the loyalty needed to maintain it.

  • Of course, each day the Dems don’t cave the Dow will fall increasing the pressure, but Wall Street’s biggest players have a longer game in mind.

    I suppose their longer game does not include the ordinary, middle (lower) class American people.

    “While not a Playboy reader, she invites a male acquaintance in for a quiet discussion of Chagall, Nietzsche, jazz, sex.” – not a Hugh Hefner quote

  • Kalugin is confirmed, those his contract was with the DoS security branch…at least initially. If the idea is to build a net of domestic surveillance, then a man like Wolfe is exactly who you’d want. I would like to think the best of my government; i would like to think that they would never do something like that. Unfortunately, events of the last eight years force me to consider the very worst possibilities as definite probabilities.

  • E pluribus hokum or
    When the gamblers bail out the casino

    By Spengler

    Why should American taxpayers give US Treasury Secretary “Hank” Paulson a blank check to bail out the shareholders of busted banks? Why should the Treasury turn itself into a toxic waste dump for their bad loans? Why not let other banks join the unlamented Brothers Lehman in bankruptcy court, and start a new bank with taxpayers’ money? Or have the Treasury pay interest on delinquent mortgages, and make them whole? Even better, why not let the Chinese, or the Saudis or other foreign investors take control of failed American banks? They’ve got the money, and they gladly would pay a premium for an inside seat at the American table.

    None of the above will occur. America will give between US$700-$800 billion to the Treasury to buy any bank assets it wants, on any terms, with no possible legal recourse. It is an invitation to abuse of power unparalleled in American history, in which ill-paid civil servants will set prices on the portfolios of the banking system with no oversight and no threat of legal penalty.

    Why are the voices raised in protest so shrill and few? Why will Americans fall on their fountain-pens for their bankers? If America is to adopt socialism, why not have socialism for the poor, rather than for the rich? Why should American households that earn $50,000 a year subsidize Goldman Sachs partners who earn $5 million a year?

    Believe it or not, there is a rational explanation, and quite in keeping with America’s national motto, E pluribus hokum. Part of the problem is that Wall Street, like the ethnic godfather in the old joke, has made America an offer it can’t understand. The collapsing the mortgage-backed securities market embodies a degree of complexity that mystifies the average policy wonk. But that is a lesser, superficial side of the story.

    Paulson’s dreadful scheme will become law, because Americans love their bankers. The bankers enable their collective gambling habit. Think of America as a town with one casino, in which the only economic activity is gambling. Most people lose, but the casino keeps lending them more money to play. Eventually, of course, the casino must go bankrupt. At this point, the townspeople people vote to tax themselves in order to bail out the casino. Collectively, the gamblers cannot help but lose; individually they nonetheless hope to win their way out of the hole.
    Americans are so deep in the hole that they might as well keep putting borrowed quarters into the one-armed bandit. They have hardly saved anything for the past 10 years. Instead, they counted on capital gains to replace the retirement savings they never put aside, first in tech stocks, then in houses. That hasn’t worked out. The S&P 500 Index of American equities today is worth what it was in 1997, after adjusting for inflation (and a pensioner who sells stock purchased in 1997 will pay a 20% capital gains tax on an illusory inflationary gain of 40%). Home prices doubled between 1997 and 2007 before falling by more than 20%, with no floor in sight.

    As it is, many of the baby boomers now on the verge of retirement will spend their declining years working at Wal-Mart or McDonalds rather than cruising the Caribbean. Some of them still have time to tighten their belts and save 10% of their income (by consuming 10% less), plus a good deal more to compensate for the missing savings of the 1990s.

    Altogether, they’d rather gamble, and if that requires a bailout of the house, they gladly will chip in to pay for it. After all, today’s baby boomers won’t pay for the bailout. The next generation of taxpayers will pay for Paulson’s $700-$800 billion. If that enables the present generation to keep borrowing rather than saving, it is no skin off their back. If home prices continue to collapse, the baby boomers will die in debt anyway, working at low-paying jobs until the day before their funerals.


  • Where, oh where, is America’s Vladimir Putin, who will drive out the oligarchs who have stolen the country’s treasure and debased its currency?


    I usually find Spengler rather tendentious but he hit this one out of the park.

  • He was an agent runner, not a CI specialist. Conversely, Kalugin was a CI specialist – why I found him a lot more plausible in the role.

    “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.” ~ Sir Ernest Benn

  • I recall, years ago, staying up all night to watch the assault on the Russian White House on CNN. Last night, watching CNN, I was wondering if this may be the capitalist version of the same thing.

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